6-1162-RLL-933R9
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Xxxxxx, Xxxxx 00000
Subject: Letter Agreement No. 6-1162-RLL-933R9 to
Purchase Agreement No. 1810 - Option Aircraft
This Letter Agreement amends Purchase Agreement
No. 1810 dated as of January 19, 1994 (the Agreement)
between The Boeing Company (Boeing) and Southwest
Airlines Co. (Buyer) relating to Model 737-7H4 aircraft
(Aircraft).
All terms used and not defined herein will have the
same meaning as in the Agreement.
In consideration of the purchase by Buyer of the
Aircraft, Boeing hereby agrees to manufacture and sell
to Buyer and Buyer shall have the option to purchase
(Option or Options) eighty-seven (87) additional
Model 737-7H4 aircraft as described in paragraph 1 of
Attachment A hereto (Option Aircraft) and two hundred
seventeen (217) Model 737-7H4 Rollover Option Aircraft
(Rollover Option Aircraft), subject to the terms and
conditions set forth below.
*** Pursuant to 17 CFR, 240.24b-2, confidential
information has been omitted and has been filed
separately with the Securities and Exchange
Commission pursuant to a Confidential Treatment
Application filed with the Commission.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer
during or before the months set forth in the following
schedule:
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
March 2003 Three (3) M
April 2003 Two (2) M
July 2003 Four (4) M
October 2003 Four (4) M
January 2004 Four (4) N
March 2004 One (1) N
April 2004 One (1) N
August 2004 Two (2) N
September 2004 Three (3) N
October 2004 Two (2) N
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
January 2005 Four (4) O
March 2005 Four (4) O
April 2005 Two (2) O
July 2005 Four (4) O
October 2005 Four (4) O
January 2006 Four (4) P
March 2006 Four (4) P
April 2006 Two (2) P
July 2006 Four (4) P
October 2006 Four (4) P
January 2008 Two (2) U
February 2008 Three(3) U
March 2008 Two (2) U
April 2008 Two (2) U
May 2008 Two (2) U
June 2008 Two (2) U
July 2008 Two (2) U
August 2008 Two (2) U
September 2008 Two (2) U
October 2008 Two (2) U
November 2008 Two (2) U
December 2008 Two (2) U
2. Delivery of Rollover Option Aircraft.
2.1 The Rollover Option Aircraft will be
delivered to Buyer during or before the years set forth
in the following schedule:
Option
Year of Number of Aircraft
Delivery Option Aircraft Block
2007 Twenty (20) Q
2008 Twenty (20) R
2009 Six (6) S
2009-2012 One hundred seventy one V
(171)
2.2 The two hundred seventeen (217) Rollover
Option Aircraft may be converted into Option Aircraft
or firm Aircraft, from time to time, in any of the
following ways:
2.2.1 Buyer can exercise any Option for
an Option Aircraft described in Article 1 above, and
will be offered the right to convert one Rollover
Option Aircraft into an Option Aircraft for each Option
exercised.
2.2.2 If Buyer elects not to exercise an
Option, Buyer may convert one Rollover Option Aircraft
to an Option Aircraft; otherwise, one Rollover Option
Aircraft will be deleted for each Option not exercised
by Buyer.
2.2.3 Buyer may convert Rollover Option
Aircraft directly to firm Aircraft. When Buyer
converts one or more Rollover Option Aircraft to firm
Aircraft, Buyer will be offered the right to convert
one Rollover Option Aircraft into an Option Aircraft
for each converted Rollover Option Aircraft.
2.3 Buyer may not convert Rollover Option
Aircraft to Option Aircraft except in accordance with
Article 2.2 above.
2.4 Base Price Adjustments for Rollover
Option Aircraft which are converted to Option Aircraft
or firm Aircraft shall be in accordance with Article
2.2.5 of Attachment A to this Letter Agreement.
2.5 The delivery month offered by Boeing to
Buyer for any Option or firm Aircraft resulting from a
conversion of a Rollover Option Aircraft will be at
least 24 months from the corresponding Option exercise
date or firm order.
2.6 Upon conversion of a Rollover Option
Aircraft into an Option Aircraft, Buyer shall wire
transfer the Deposit of *** to Boeing and Boeing and
Buyer shall agree on a delivery position for that
aircraft. Section 1 of this Letter Agreement will be
amended accordingly. In the event Buyer thereafter
exercises its right to purchase such Option Aircraft,
application of the Deposit will be in accordance with
Article 4.1 herein. If the conversion is a Rollover
Option Aircraft to a firm Aircraft, Buyer shall wire
transfer any advance payments due under the Agreement.
2.7 Buyer and Boeing will consult on a
frequent basis to keep each other informed as to
Buyer's fleet plans and Boeing's production plans in
order to accommodate to the greatest extent reasonably
possible each party's needs in managing the delivery
schedule for the Rollover Option Aircraft. Boeing
acknowledges Buyer's need for delivery positions in the
2007-2012 time frame, as well as the possibility of a
need for delivery positions in earlier years and will
use its best reasonable efforts to meet Buyer's needs.
3. Price.
3.1 The advance payment base prices of the
Option Aircraft set forth below and in paragraph 2.1 of
Attachment A represent the estimated delivery prices of
the Option Aircraft. The Option Aircraft pricing
elements and associated pricing terms and conditions
are given in Attachment A.
3.2 Price and escalation provisions for Model
737-7H4 aircraft delivering after 2004 are not
currently available. The estimated Advance Payment
Base Prices shown in paragraph 3.3 below and in
paragraph 2.1 of Attachment A are based on currently
available price and escalation provisions. As price
and escalation provisions become available for
Model 737-7H4 aircraft delivering after 2004, such
price and escalation provisions will be appropriately
applied to the applicable Option Aircraft.
For additional information relating to price and
escalation provisions applicable to Option Aircraft
delivering after 2004 refer to paragraphs 2.2 and 3.2
of Attachment A.
3.3 The Advance Payment Base Prices of the
Option Aircraft indicated below do include an amount
for special features in addition to those specifically
described in Attachment A but do not include any amount
for items of Buyer Furnished Equipment (BFE). An
estimate for typical special features is *** per
Aircraft (expressed in 1992 STE dollars) and for BFE is
*** per Aircraft (expressed in delivery year dollars).
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
* Block M Aircraft
March 2003 ***
April 2003 ***
July 2003 ***
October 0000 ***
Xxxxx X Aircraft
January 2004 ***
March 2004 ***
April 2004 ***
August 2004 ***
September 2004 ***
October 2004 ***
Block O Aircraft
January 2005 ***
March 2005 ***
April 2005 ***
July 2005 ***
October 2005 ***
Block P Aircraft
January 2006 ***
March 2006 ***
April 2006 ***
July 2006 ***
October 2006 ***
Block U Aircraft
January 2008 ***
February 2008 ***
March 2008 ***
April 2008 ***
May 2008 ***
June 2008 ***
July 2008 ***
August 2008 ***
September 2008 ***
October 2008 ***
November 2008 ***
December 2008 ***
3.4 The Option Aircraft purchase price will
be the applicable basic price thereof at the time of
Option Aircraft delivery adjusted in accordance with
Boeing's Aircraft escalation provisions contained in
the definitive agreement to purchase the Option
Aircraft. The purchase price will include the price
for Seller Purchased Equipment (SPE) if Buyer has
elected to change Buyer Furnished Equipment (BFE)
to SPE.
4. Option Aircraft Payment.
4.1 In consideration of the granting of the
Options as set forth herein, on or before the date
Boeing and Buyer enter into a definitive agreement to
purchase the Aircraft, Buyer will pay a deposit to
Boeing of *** for each Option Aircraft (Deposit). In
the event Buyer exercises its Options herein, the
amount of the Deposit will be credited against the
first advance payment due for such Option Aircraft
pursuant to the advance payment schedule set forth in
paragraph 3 of Attachment A. The Deposits for the
Option Aircraft will be refunded to Buyer, without
interest, if the parties do not enter into a definitive
Agreement for the Aircraft.
In the event that, after the parties enter into a
definitive agreement to purchase the Aircraft, Buyer
does not exercise its Options to purchase the Option
Aircraft pursuant to the terms and conditions set forth
herein, Boeing will be entitled to retain the Deposits
for the Option Aircraft except as provided in paragraph
6 herein.
4.2 Advance payments in the amount of 30% of
the advance payment base price will be payable on the
Option Aircraft in accordance with paragraph 3 of
Attachment A. The remainder of the Option Aircraft
purchase price is due at the time of delivery of the
Option Aircraft.
5. Option Exercise.
5.1 To exercise its Option, Buyer will give
written or telegraphic notice thereof to Boeing on or
before *** months prior to the first day of the
delivery month of each Option Aircraft.
In such notice Buyer will select the Option Model type,
and the applicable delivery positions.
5.2 It is understood and agreed that Boeing
may accelerate the Option exercise dates specified
above if Boeing must make production decisions which
are dependent on Buyer's decision to buy the Option
Aircraft. If Boeing elects to accelerate the Option
exercise dates, Boeing will do so by giving written or
telegraphic notice thereof to Buyer. Such notice will
specify the revised Option exercise dates, which will
not be earlier than 30 days after the date of
transmittal of such notice, and the Option Aircraft
delivery positions affected by such revision. If Buyer
fails to exercise its Option for any Option Aircraft
affected by such revised dates, the Deposit applicable
to such Option Aircraft will be promptly refunded, ***
6. Contract Terms.
It is understood that Boeing and Buyer will use
their best efforts to enter into a definitive agreement
for the Option Aircraft within thirty (30) days after
Buyer exercises an Option to purchase Option Aircraft
pursuant to paragraph 5 covering the detailed terms and
conditions for the sale of such Option Aircraft.
Such definitive agreement will include the terms and
conditions contained herein together with the terms and
conditions, not inconsistent herewith, contained in
Boeing's then-current standard form of purchase
agreement for the sale of Model 737-700 aircraft in
effect as of the date of Option exercise and such
additional terms and conditions as may be mutually
agreed upon. In the event the parties have not entered
into such an agreement within the time period
contemplated herein, either party may, exercisable by
written or telegraphic notice given to the other within
thirty (30) days after such period, terminate the
purchase of such Option Aircraft.
7. Termination of Option to Purchase.
Either Boeing or Buyer may terminate the Options
to purchase an Option Aircraft if any of the following
events are not accomplished by the respective dates
contemplated in this letter agreement, or in the
Agreement, as the case may be:
(i) termination of the purchase of the
Aircraft under the Agreement for any reason;
(ii) payment by Buyer of the Deposit with
respect to an Option Aircraft pursuant to paragraph 4.1
herein;
(iii) exercise of an Option to purchase an
Option Aircraft pursuant to the terms hereof.
Any termination of an Option to purchase by Boeing
which is based on the termination of the purchase of
Aircraft under the Agreement will be on a one-for-one
basis, for each Aircraft so terminated.
Any cancellation of an Option to purchase which is
based on failure to make the required Deposit or to
exercise the Option to purchase shall only apply to the
Option Aircraft so canceled.
Termination of an Option to purchase provided by this
letter agreement will be caused by either party giving
written notice to the other within 10 days after the
applicable date. Upon receipt of such notice, all
rights and obligations of the parties with respect to
an Option Aircraft for which the Option to purchase has
been terminate will thereupon terminate.
If termination is result of a revision of an Option
exercise date by Boeing pursuant to paragraph 5.2,
Boeing will promptly refund to Buyer, with interest,
any payments received from Buyer, including the
Deposit, with respect to the Option Aircraft for which
the Option is terminated. If termination is for any
other reason, Boeing will promptly refund to Buyer,
without interest, any payments received from Buyer with
respect to the affected Option Aircraft, except the
Deposit, which Buyer may apply to any model Boeing
aircraft purchased by Buyer from Boeing at a future
date.
8. Confidential Treatment. Buyer understands that
certain commercial and financial information contained
in this Letter Agreement including any attachments
hereto is considered by Boeing as confidential. Buyer
agrees that it will treat this Letter Agreement and the
information contained herein as confidential and will
not, without the prior written consent of Boeing,
disclose this Letter Agreement or any information
contained herein to any other person or entity except
as provided in Letter Agreement No. 6-1162-RLL-934, as
amended.
Very truly yours,
THE BOEING COMPANY
By /s/ Xxxx Xxxxxxx
Its Attorney-in-Fact
President
Commercial Airplanes Group
ACCEPTED AND AGREED TO as of this
date: June 22, 0000
XXXXXXXXX XXXXXXXX CO.
By /s/ Xxxx Xxxxxxxx
Its CEO
Attachments
Model 737-7H4 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft is
described by Boeing Detail Specification D6-38808-1, Dated
October 30 ,1996 and for Block "U" Option Aircraft by Boeing
Detail Specification D6-38808-1, Rev. A, Dated February 24,
1998.
1.2 Changes. The Detail Specification will be
revised to include:
(1) Changes applicable to the basic Model
737-700 aircraft which are developed by Boeing between the
date of the Detail Specification and the signing of a
definitive agreement to purchase the Option Aircraft.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard
Certificate of Airworthiness.
(4) To provide sufficient Option Aircraft
manufacturing and procurement lead time it is necessary for
Boeing and Buyer to reach final agreement on the Option
Aircraft configuration, including BFE/SPE vendor selection
fifteen (15) months prior to delivery of each Option
Aircraft. If such items are not resolved by the indicated
dates, Boeing reserves the right to amend this letter
agreement:
(i) to adjust the scheduled delivery
of the Option Aircraft to a later time period and,
(ii) to make such other changes as
are appropriate and consistent with the revised Option
Aircraft deliveries.
1.3 Effect of Changes. Changes to the Detail
Specification incorporated pursuant to the provisions of the
clauses above will include the effects of such changes upon
Option Aircraft weight, balance, design and performance.
Performance guarantees for the Option Aircraft which are
mutually acceptable to the parties will be included in the
definitive agreement for the Option Aircraft.
2. Price Description
2.1 Price Elements Per Aircraft
1 2 3
AIRCRAFT & ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK M
March 2003 *** *** *** ***
April 2003 *** *** *** ***
July 2003 *** *** *** ***
October 2003 *** *** *** ***
BLOCK N
January 2004 *** *** *** ***
March 2004 *** *** *** ***
April 2004 *** *** *** ***
August 2004 *** *** *** ***
September 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK O
January 2005 *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
July 2005 *** *** *** ***
October 2005 *** *** *** ***
BLOCK P
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
July 2006 *** *** *** ***
October 2006 *** *** *** ***
BLOCK U
January 2008 *** *** *** ***
February 2008 *** *** *** ***
March 2008 *** *** *** ***
April 2008 *** *** *** ***
May 2008 *** *** *** ***
June 2008 *** *** *** ***
July 2008 *** *** *** ***
August 2008 *** *** *** ***
September 2008 *** *** *** ***
October 2008 *** *** *** ***
November 2008 *** *** *** ***
December 2008 *** *** *** ***
2. Price Description. (Continued)
2.2 Price Adjustments For Option Aircraft
Delivering From January 2005 through December 2012.
2.2.1 Special Features. The price for
Special Features incorporated in the Option Aircraft Detail
Specification will be adjusted to Boeing's then-current
prices for such features as of the date of execution of the
definitive agreement for the Option Aircraft.
2.2.2 Escalation Adjustments. For escalation
provisions applicable to Option Aircraft delivering after
2004, see paragraph 2.2.6 below.
2.2.3 Base Price Adjustments for FAA Changes.
The Aircraft Basic Price of the Option Aircraft will be
adjusted for any FAA mandated changes incorporated into the
Aircraft.
2.2.4 Price Adjustments for Changes. Boeing
may adjust the Aircraft Basic Price and the Advance Payment
Base Price for any changes mutually agreed upon subsequent
to the date that Buyer and Boeing enter into a definitive
agreement for the Option Aircraft.
2.2.5 Base Price Adjustments. The Aircraft
Basic Price of the Option Aircraft will be adjusted to
Boeing's then-current prices as of the date of execution of
the definitive agreement for the Option Aircraft in
accordance with the agreement reached below. The Aircraft
Basic Price starting point for Options delivering in 2003
is *** (July 1992 STE), for Options delivering in 2004 is
*** (July 1992 STE), for Options delivering in 2005 through
2009 is *** (July 1992 STE) and for Block "U" Option
Aircraft is *** (July 1999 STE). Such Aircraft Basic Price
may increase in accordance with paragraphs 2.2.1, 2.2.2,
2.2.3 and 2.2.4. For any other changes to the Aircraft
Basic Price, Boeing may increase the Aircraft Basic Price by
a maximum of *** (July 1992 STE) for Aircraft delivering in
2005; by a maximum of *** (July 1992 STE) per year or
portion thereof starting in January 2006 through 2009. For
Block "U" Option Aircraft Boeing may increase the Aircraft
Basic Price by a maximum of *** (July 1999 STE) per year or
portion thereof starting in January 2008.
2.2.6 Prices for Long Lead Time Aircraft.
Boeing has not established escalation provisions for Model
737-700 aircraft for delivery 2005 and after. Such
escalation provisions (i) will be incorporated into the
Option Aircraft definitive agreement when such information
is available and (ii) will be the then-current escalation
provisions applicable to the same model aircraft and engines
delivering in the same time period as the Option Aircraft.
The resulting revisions to the definitive agreement will
include but not be limited to, adjustment of the Aircraft
Basic Price of the Option Aircraft, the Advance Payment Base
Price, the Aircraft escalation provisions and the advance
payment amounts due on the Option Aircraft.
2.2.7 BFE to SPE. An estimate of the total
price for items of Buyer Furnished Equipment (BFE) changed
to Seller Purchased Equipment (SPE) pursuant to the
Configuration Specification is included in the Option
Aircraft price build-up. The purchase price of the Option
Aircraft will be adjusted by the price charged to Boeing for
such items plus 10% of such price. If all BFE except
developmental avionics is converted to SPE, Boeing will
waive the 10% fee.
3. Advance Payment Schedules, Prices and Adjustments.
3.1 Buyer will pay to Boeing advance payments for
the Option Aircraft on the dates and in the amounts
determined below.
Amount Due per Aircraft
(Percentage times
Due Date of Payment Advance Payment Base Price)
Deposit *** (if applicable)
18 months prior to the first 15% (less the
day of the scheduled delivery Deposit if any)
month of the Aircraft
12 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
9 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
6 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
Total 30%
Any advance payments that would be past due as of the date
of signing the definitive purchase agreement for the Option
Aircraft in accordance with the above schedule are due and
payable on such date.
3.2 Option Aircraft advance payment base prices
will be increased or decreased, as appropriate, at the time
of signing of the definitive purchase agreement for the
Option Aircraft, using the then-current forecasted aircraft
escalation factors used by Boeing, to determine the amount
of the advance payments to be made by Buyer on the Option
Aircraft.
Southwest Airlines Co.
6-1162-RLL-933R9
P.A. No. 1810
K/SWA
