Exhibit 10.3
Supplemental Agreement No. 20
to
Purchase Agreement No. 1810
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of January 11, 2002, by
and between THE BOEING COMPANY, a Delaware corporation with its principal
offices in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in Dallas, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810 dated
January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the Agreement);
WHEREAS, Buyer and Boeing have agreed to ***
WHEREAS, Buyer and Boeing have agreed on further business terms related
to the delivery of nineteen (19) Aircraft between November 2001 and April
2002.
WHEREAS, Buyer and Boeing have agreed on a further business term
related to 2000 Order Aircraft.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
_____________________________________________________________________________
***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.
P.A. No. 1810 SA-20-1
K/SWA
<Page>
1. The Table of Contents of the Agreement is deleted in its entirety and a
new Table of Contents is attached hereto and incorporated into the Agreement
by this reference.
2. Letter Agreement No. 6-1162-MSA-185R1 entitled "Delivery Change
Contractual Matters," is deleted in its entirety and replaced by a new Letter
Agreement No. 6-1162-MSA-185R2 which is attached hereto and is incorporated
into the Agreement by this reference.
3. Letter Agreement No. 6-1162- KJJ-054 entitled "Business Matters," is
deleted in its entirety and replaced by a new Letter Agreement No. 6-1162-
KJJ-054R1 which is attached hereto and is incorporated into the Agreement by
this reference.
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /s/ Michael S. Anderson By:/s/ Laura Wright
Its: Attorney-In-Fact Its: VP Finance & Treasurer
P.A. No. 1810 SA-20-2
K/SWA
<Table>
<Caption>
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale 1-1 SA-13
4. Delivery, Title and Risk
of Loss 2-1 SA-19
3. Price of Aircraft 3-1 SA-19
4. Taxes 4-1
5. Payment 5-1
6. Excusable Delay 6-1
7. Changes to the Detail
Specification 7-1 SA-1
8. Federal Aviation Requirements
and Certificates and Export
License 8-1
9. Representatives, Inspection,
Flights and Test Data 9-1
10. Assignment, Resale or Lease 10-1
11. Termination for Certain Events 11-1
12. Product Assurance; Disclaimer
and Release; Exclusion of
Liabilities; Customer Support;
Indemnification and Insurance 12-1
13. Buyer Furnished Equipment and
Spare Parts 13-1
13. Contractual Notices and
Requests 14-1
15. Miscellaneous 15-1
</Table>
P.A. No. 1810 i
K/SWA SA-20
<Page>
<Table>
<Caption>
TABLE OF CONTENTS
SA
Number
EXHIBITS
A Aircraft Configuration SA-13
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft SA-13
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
</Table>
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-2
<Page>
<Table>
<Caption>
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-932R2 Promotional Support SA-13
6-1162-RLL-933R11 Option Aircraft SA-18
6-1162-RLL-934R3 Disclosure of Confidential SA-14
Information
6-1162-RLL-935R1 Performance Guarantees SA-1
6-1162-RLL-936R4 Certain Contractual Matters SA-4
6-1162-RLL-937 Alternate Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R2 Other Matters SA-13
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights SA-6
6-1162-RLL-944 Airframe Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 737-3H4
Block Fuel Burn
6-1162-RLL-1855R3 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
</Table>
<Page>
P.A. No. 1810 iii
K/SWA SA-20
<Page>
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes SA-1
6-1162-RLL-2037 Reconciliation of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
6-1162-KJJ-054R1 Business Matters SA-20
6-1162-KJJ-055 Structural Matters SA-13
6-1162-KJJ-056 Noise and Emission Matters SA-13
6-1162-KJJ-057 Product Development Matters SA-13
6-1162-KJJ-058 Additional Substitution Rights SA-13
6-1162-KJJ-150 Flight Control Computer & Mode SA-14
Control Panel Spares Matter
6-1162-MSA-185R2 Delivery Change Contractual SA-20
Matters
</Table>
<Page>
P.A. No. 1810 iv
K/SWA SA-20
<Page>
6-1162-MSA-185R2
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-MSA-185R2 to
Purchase Agreement No. 1810 -
Delivery Change Contractual Matters
This Letter Agreement amends Purchase Agreement No. 1810 dated January 19,
1994 (the Agreement) between The Boeing Company (Boeing) and Southwest
Airlines Co. (Buyer) relating to Model 737-7H4 aircraft (the Aircraft).
As a result of the tragic events of September 11, 2001, and the resulting
uncertainties in the global aviation industry, Boeing and Buyer have agreed
to reschedule certain of Buyer's firm delivery commitments contained in the
Agreement.*** The purpose of this Letter Agreement is to detail the
contractual matters related to such arrangements.
All terms used herein and in the Agreement, and not defined herein, will have
the same meaning as in the Agreement.
P.A. No. 1810
K/SWA SA-20
Southwest Airlines Co.
6-1162-MSA-185R2 Page 2
1. ***
2. Expenses related to Delayed Delivery of the Six Rescheduled Aircraft.
2.1 ***
2.2 ***
2.3 ***
3. Aircraft Storage Credit Memorandum.
***
4. ***
5. Confidential Treatment.
Buyer understands that certain commercial and financial information
contained in this Letter Agreement 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 6-1162-RLL-934R1.
P.A. No. 1810
K/SWA SA-20
Southwest Airlines Co.
6-1162-MSA-185R2 Page 3
Very truly yours,
THE BOEING COMPANY
By /s/Michael S. Anderson
Its Attorney In Fact
ACCEPTED AND AGREED TO as of this
date:January 11, 2002
SOUTHWEST AIRLINES CO.
By /s/ Laura Wright
Its VP Finance & Treasurer
P.A. No. 1810
K/SWA SA-20
6-1162-KJJ-054R1
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-KJJ-054R1 to Purchase Agreement No.
1810 - Business Matters
This Letter Agreement amends Purchase Agreement No. 1810 dated January 19,
1994 (the Agreement) between The Boeing Company (Boeing) and Southwest
Airlines Co. (Buyer) relating to the sale by Boeing and the purchase by Buyer
of ninety-four (94) additional Model 737-7H4 Block "T" Aircraft, and Letter
Agreement 6-1162-RLL-933R9, dated even date herewith, entitled "Option
Aircraft", to the extent it relates to the sale by Boeing and the purchase by
Buyer of twenty-five (25) Block "U" additional Model 737-7H4 aircraft (the
Option Aircraft) and one hundred seventy-one (171) Block "V" Rollover Option
Aircraft (the Rollover Option Aircraft). Such total of two hundred ninety
(290) aircraft are referred herein as the "2000 Order Aircraft."
For the purposes of clarification, the terms of the following Letter
Agreements do not apply to the 2000 Order Aircraft described above:
6-1161-RLL-936, as amended, "Certain Contractual Matters"
6-1162-RLL-1855, as amended, "Additional Contractual Matters"
All terms used herein and in the Agreement, and not defined herein, will have
the same meaning as in the Agreement.
*** 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.
P.A. No. 1810 SA-20
Southwest Airlines Co.
6-1162-KJJ-054R1 Page 2
1. ***
2. ***
3. ***
4. ***
5. ***
6. ***
7. ***
8. ***
9. ***
10. ***
11. ***
12. ***
P.A. No. 1810 SA-20
Southwest Airlines Co.
6-1162-KJJ-054R1 Page 3
13. Confidential Treatment.
Buyer understands that certain commercial and financial information contained
in this Letter Agreement 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 prior written consent of Boeing
disclose this Letter Agreement, except as provided in Letter Agreement 6-
1162-RLL-934, as amended.
Very truly yours,
THE BOEING COMPANY
By /s/Michael S. Anderson
Its Attorney-in-Fact
ACCEPTED AND AGREED TO as of this
Date: January 11, 2002
SOUTHWEST AIRLINES CO.
By Laura Wright
Its VP Finance & Treasurer
P.A. No. 1810 SA-20
Supplemental Agreement No. 21
To
Purchase Agreement No. 1810
Between
THE BOEING COMPANY
And
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of March 4, 2002, by and
between THE BOEING COMPANY, a Delaware corporation with its principal offices
in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in Dallas, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810 dated
January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the Agreement);
WHEREAS, Buyer has agreed to exercise the option to purchase two (2)
Block O Option Aircraft and to accelerate delivery of these Option Aircraft
from June 2006 (1) and August 2006 (1) to two (2) December 2002 firm Aircraft
(designated as Block I Aircraft);
WHEREAS, Buyer and Boeing have previously agreed to a schedule
deceleration (Supplemental Agreement 18 and 19), ***;
WHEREAS, Buyer and Boeing agree***;
WHEREAS, Boeing has agreed***.
***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.
P.A. No. 1810 SA-21-1
K/SWA
<Page>
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. The Table of Contents of the Agreement is deleted in its entirety and
a new Table of Contents is attached hereto and incorporated into the
Agreement by this reference.
2. Article 2, entitled "Delivery, Title and Risk of Loss," is deleted in
its entirety and replaced by a new Article 2. Such new pages 2-1, 2-2, 2-3
and 2-4 are attached hereto and incorporated into the Agreement by this
reference.
3. Article 3, entitled "Price of Aircraft", is deleted in its entirety
and replaced by a new Article 3. Such new pages 3-1, 3-2, 3-3, 3-4, 3-5 and
3-6 are attached hereto and incorporated into the Agreement by this
reference.
4. Letter Agreement No. 6-1162-RLL-933R11 entitled "Option Aircraft," is
deleted in its entirety and replaced by a new Letter Agreement
No. 6-1162-RLL-933R12 which is attached hereto and is incorporated into the
Agreement by this reference.
5. Letter Agreement No. 6-1162-MSA-185R2 entitled "Delivery Change
Contractual Matters," is deleted in its entirety and replaced by a new Letter
Agreement No. 6-1162-MSA-185R3 which is attached hereto and is incorporated
into the Agreement by this reference.
6. The actual Advance Payment requirements for the two (2)added Block I
firm Aircraft for December 2002 delivery are ***
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /s/ Michael S. Anderson By:/s/ Laura Wright
Its: Attorney-In-Fact Its: Vice President -
Finance & Treasurer
P.A. No. 1810 SA-21-2
K/SWA
<Page>
<Table>
<Caption>
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale..................1-1 SA-13
2. Delivery, Title and Risk of Loss........2-1 SA-21
3. Price of Aircraft.......................3-1 SA-21
4. Taxes...................................4-1
5. Payment.................................5-1
5. Excusable Delay.........................6-1
7. Changes to the Detail Specification.....7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License.........8-1
9. Representatives, Inspection, Flights
and Test Data...........................9-1
10. Assignment, Resale or Lease............10-1
11. Termination for Certain Events.........11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification and
Insurance..............................12-1
13. Buyer Furnished Equipment and
Spare Parts............................13-1
14. Contractual Notices and Requests.......14-1
15. Miscellaneous..........................15-1
</Table>
<Page>
P.A. No. 1810 i
K/SWA SA-21
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
EXHIBITS
A Aircraft Configuration SA-13
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to Economic Fluctuations
- Aircraft SA-13
E Buyer Furnished Equipment Provisions Document
F Defined Terms Document
</Table>
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
<Page>
P.A. No. 1810 ii
K/SWA SA-21
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-932R2 Promotional Support SA-13
6-1162-RLL-933R12 Option Aircraft SA-21
6-1162-RLL-934R3 Disclosure of Confidential Information SA-14
6-1162-RLL-935R1 Performance Guarantees SA-1
6-1162-RLL-936R4 Certain Contractual Matters SA-4
6-1162-RLL-937 Alternate Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R2 Other Matters SA-13
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights SA-6
6-1162-RLL-944 Airframe Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 737-3H4
Block Fuel Burn
6-1162-RLL-1855R3 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program Field Test SA-1
6-1162-RLL-1858R1 Escalation Matters SA-4
</Table>
<Page>
P.A. No. 1810 iii
K/SWA SA-21
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-203 Amortization of Costs for Customer SA-1
Unique Changes
6-1162-RLL-2037 Reconciliation of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
6-1162-KJJ-054 Business Matters SA-13
6-1162-KJJ-055 Structural Matters SA-13
6-1162-KJJ-056 Noise and Emission Matters SA-13
6-1162-KJJ-057 Product Development Matters SA-13
6-1162-KJJ-058 Additional Substitution Rights SA-13
6-1162-KJJ-150 Flight Control Computer & Mode SA-14
Control Panel Spares Matter
6-1162-MSA-185R3 Delivery Change Contractual Matters SA-21
</Table>
<Page>
P.A. No. 1810 iv
K/SWA SA-21
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
<Table>
<Caption>
Month and Year
of Delivery Quantity of Aircraft
Block E Aircraft
December 2000 Two (2)
January 2001 One (1)
February 2001 One (1)
March 2001 Two (2)
June 2001 Three (3)
September 2001 Three (1)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
Block G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
July 1999 One (1)
August 1999 One (1)
September 1999 Two (2)
October 1999 One (1)
March 2000 One (1)
April 2000 Two (2)
September 2000 One (1)
October 2000 Two (2)
March 2001 Two (2)
April 2001 One (1)
October 2001 Three (3)
Block I Aircraft
November 2001 Two (2)
December 2001 One (1)
January 2002 One (1)
March 2002 Four (4)
April 2002 Two (2)
<Page>
P.A. No. 1810 2-1
K/SWA SA-21
December 2002 Two (2)
May 2003 One (1)
June 2003 Two (2)
July 2003 One (1)
September 2003 Two (2)
October 2003 Two (2)
Block J Aircraft
November 2003 Two (2)
February 2004 Two (2)
March 2004 One (1)
Block K Aircraft
March 2004 One (1)
April 2004 Three (3)
May 2004 One (1)
Block L Aircraft
October 1999 One (1)
November 1999 Two (2)
December 1999 One (1)
June 2000 Three (3)
July 2000 Three (3)
September 2000 One (1)
October 2000 One (1)
November 2000 Four (4)
December 2000 One (1)
January 2001 One (1)
February 2001 One (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
July 2003 One (1)
August 2003 Two (2)
Block T Aircraft
November 2001 One (1)
February 2002 One (1)
May 2004 One (1)
June 2004 Four (4)
July 2004 Four (4)
August 2004 Two (2)
September 2004 Two (2)
November 2004 One (1)
December 2004 One (1)
January 2005 Five (5)
February 2005 Two (2)
March 2005 One (1)
April 2005 Two (2)
<Page>
P.A. No. 1810 2-2
K/SWA SA-21
May 2005 One (1)
June 2005 Three (3)
July 2005 Two (2)
August 2005 One (1)
September 2005 Two (2)
October 2005 One (1)
November 2005 Two (2)
December 2005 Two (2)
February 2006 Four (4)
May 2006 Three (3)
June 2006 Four (4)
July 2006 One (1)
August 2006 Three (3)
September 2006 Three (3)
November 2006 Two (2)
December 2006 Two (2)
January 2007 Two (2)
February 2007 Three (3)
March 2007 Two (2)
April 2007 Two (2)
May 2007 Two (2)
June 2007 Two (2)
July 2007 Two (2)
August 2007 Two (2)
September 2007 Two (2)
October 2007 Two (2)
November 2007 Two (2)
December 2007 Two (2)
January 2008 One (1)
February 2008 One (1)
March 2008 One (1)
April 2008 One (1)
May 2008 One (1)
June 2008 One (1)
</Table>
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of
the Target Delivery Date of the Aircraft approximately 30 days prior to the
scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days
notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer
will reimburse Boeing for all costs incurred by Boeing as a result of such
delay, including amounts for storage, insurance, Taxes, preservation or
protection of the Aircraft and interest on payments due.
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
<Page>
P.A. No. 1810 2-3
K/SWA SA-21
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Bill of Sale. Upon delivery of an Aircraft Boeing will deliver to
Buyer a bill of sale conveying good title to such Aircraft, free of all
liens, claims, charges and encumbrances of every kind whatsoever, and such
other appropriate documents of title as Buyer may reasonably request.
<Page>
P.A. No. 1810 2-4
K/SWA SA-21
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in Exhibit
A which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price
excluding the price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft
Price and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the
Aircraft Basic Price (Base Aircraft and Special Features) as calculated
Pursuant to Exhibit D or Exhibit D-1 as applicable.
3.1.5 Aircraft Price is the total amount Buyer is to pay for
the Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price for Block A through L Aircraft, is
expressed in July 1992 dollars; the Aircraft Basic Price for Block T
Aircraft, is expressed in July 1999 dollars; as set forth below:
<Table>
<Caption>
Base Special Aircraft
Aircraft Price Features Basic Price
Block A, B, C,
D & E Aircraft *** $*** $***
Block F & G
Aircraft *** *** ***
Block H
Aircraft *** *** ***
Block I
Aircraft *** *** ***
Block J
Aircraft *** *** ***
Block K
Aircraft *** *** ***
Block L
Aircraft *** *** ***
Block T
Aircraft *** *** ***
</Table>
<Page>
P.A. No. 1810 3-1
K/SWA SA-21
3.3 Aircraft Price. The Aircraft Price will be established at the time
of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is *** for the Block A, B,
C, D and E Aircraft, *** for the Block F and G Aircraft, ***for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft; ***for the Block T
Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic Price,
as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft) for Aircraft Block A
through L, and in Exhibit D-1 (Price Adjustments Due to Economic Fluctuations
- - Aircraft) for Aircraft Block T; plus
3.3.3 other price adjustments made pursuant to
this Agreement or other written agreements executed by Boeing and
Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment purposes,
the following estimated delivery prices of the Aircraft (Advance Payment Base
Price) have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this Agreement.
The Advance Payment Base Price of each Aircraft is set forth below:
<Table>
<Caption>
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
Block A Aircraft***
October 1997
November 1997
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
<Page>
P.A. No. 1810 3-2
K/SWA SA-21
Block C Aircraft***
February 1999
May 1999
July 1999
August 1999
September 1999
Block D Aircraft***
November 1999
December 1999
January 2000
March 2000
July 2000
August 2000
Block E Aircraft***
December 2000
January 2001
February 2001
March 2001
June 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
July 1999
August 1999
September 1999
October 1999
March 2000
April 2000
September 2000
October 2000
March 2001
April 2001
October 2001
Block I Aircraft***
<Page>
P.A. No. 1810 3-3
K/SWA SA-21
November 2001
December 2001
January 2002
March 2002
April 2002
December 2002
May 2003
June 2003
July 2003
September 2003
October 2003
Block J Aircraft***
November 2003
February 2004
March 2004
Block K Aircraft***
March 2004
April 2004
May 2004
Block L Aircraft***
October 1999
November 1999
December 1999
June 2000
July 2000
September 2000
October 2000
November 2000
December 2000
January 2001
February 2001
July 2001
September 2001
October 2001
July 2003
August 2003
Block T Aircraft***
November 2001
February 2002
May 2004
June 2004
July 2004
August 2004
September 2004
November 2004
<Page>
P.A. No. 1810 3-4
K/SWA SA-21
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
February 2006
May 2006
June 2006
July 2006
August 2006
September 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
</Table>
<Page>
P.A. No. 1810 3-5
K/SWA SA-21
3.4.2. Adjustment of Advance Payment Base Prices - Long-Lead Aircraft.
For Aircraft scheduled for delivery 36 months or more after the date of this
Agreement, the Advance Payment Base Prices appearing in Article 3.4.1 will be
used to determine the amount of the first advance payment to be made by Buyer on
the Aircraft. No later than 25 months before the scheduled month of delivery of
each affected Aircraft, Boeing will increase or decrease the Advance Payment
Base Price of such Aircraft as required to reflect the effects of (i) any
adjustments in the Aircraft Basic Price pursuant to this Agreement and (ii) the
then-current forecasted escalation factors used by Boeing. Boeing will provide
the adjusted Advance Payment Base Prices for each affected Aircraft to Buyer,
and the advance payment schedule will be considered amended to substitute such
adjusted Advance Payment Base Prices.
<Page>
P.A. No. 1810 3-6
K/SWA SA-21
6-1162-RLL-933R12
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-RLL-933R12 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-five (85) 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.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the
months set forth in the following schedule:
<Table>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
March 2004 Three (3) M
April 2004 Two (2) M
June 2004 Two (2) M
July 2004 Two (2) M
October 2004 Four (4) M
</Table>
<Page>
P.A. No. 1810
K/SWA SA-21
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6-1162-RLL-933R12 Page 2
<Table>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
February 2005 One (1) N
March 2005 Four (4) N
April 2005 Two (2) N
May 2005 One (1) N
June 2005 One (1) N
July 2005 Two (2) N
August 2005 Two (2) N
September 2005 Three (3) N
October 2005 Two (2) N
November 2005 One (1) N
December 2005 One (1) N
January 2006 Two (2) O
March 2006 Four (4) O
April 2006 Two (2) O
May 2006 Two (2) O
June 2006 One (1) O
July 2006 Two (2) O
August 2006 One (1) O
October 2006 One (1) O
November 2006 Two (2) O
December 2006 One (1) O
April 2007 One (1) P
May 2007 One (1) P
June 2007 One (1) P
July 2007 One (1) P
August 2007 One (1) P
September 2007 One (1) P
October 2007 One (1) P
November 2007 One (1) P
December 2007 One (1) 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
</Table>
P.A. No. 1810
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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:
<Table>
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)
</Table>
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.
Buyer can elect to convert such Rollover Option Aircraft into an Option
Aircraft at any time after converting an Option Aircraft to a firm Aircraft
subject to the requirements of Article 2.5.
2.2.2 If Buyer elects not to exercise an Option, at the same time of
not exercising such 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
Buyer can elect to convert such Rollover Option Aircraft to Option Aircraft at
any time after converting Rollover Option to firm Aircraft subject to the
requirements of Article 2.5.
<Page>
P.A. No. 1810
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Southwest Airlines Co.
6-1162-RLL-933R12 Page 4
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
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 5
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).
<Table>
<Caption>
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
Block M Aircraft***
March 2004
April 2004
June 2004
July 2000
October 2004
Block N Aircraft***
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
Block O Aircraft***
January 2006
March 2006
April 2006
May 2006
June 2006
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 6
July 2006
August 2006
October 2006
November 2006
December 2006
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 7
Block P Aircraft***
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
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
</Table>
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.
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 8
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 sixteen (16) 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, with interest, to Buyer. The
interest rate for calculation of the interest associated with such refund is
the rate of two percent (2%) below the Citibank base rate in effect from time
to time during the period the Option deposit is held by Boeing.
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.
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 9
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
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-RLL-933R12 Page 10
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/ Michael S. Anderson
Its Attorney In Law_
ACCEPTED AND AGREED TO this
date:March 4 , 2002
SOUTHWEST AIRLINES CO.
By /s/ Laura Wright
Its Vice President Finance & Treasurer
Attachments
P.A. No. 1810
K/SWA SA-21
Attachment A to
6-1162-RLL-933R12
Page 1
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.
P.A. No. 1810
K/SWA SA-21
Attachment A to
6-1162-RLL-933R12
Page 2
2. Price Description
2.1 Price Elements Per Aircraft
1 2 3
<Table>
<Caption>
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 2004 *** *** *** ***
April 2004 *** *** *** ***
June 2004 *** *** *** ***
July 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK N
February 2005 *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
May 2005 *** *** *** ***
June 2005 *** *** *** ***
July 2005 *** *** *** ***
August 2005 *** *** *** ***
September 2005 *** *** *** ***
October 2005 *** *** *** ***
November 2005 *** *** *** ***
December 2005 *** *** *** ***
BLOCK O
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
May 2006 *** *** *** ***
June 2006 *** *** *** ***
July 2006 *** *** *** ***
August 2006 *** *** *** ***
October 2006 *** *** *** ***
November 2006 *** *** *** ***
December 2006 *** *** *** ***
</Table>
P.A. No. 1810
K/SWA SA-21
Attachment A to
6-1162-RLL-933R12
Page 3
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK P
April 2007 *** *** *** ***
May 2007 *** *** *** ***
June 2007 *** *** *** ***
July 2007 *** *** *** ***
August 2007 *** *** *** ***
September 2007 *** *** *** ***
October 2007 *** *** *** ***
November 2007 *** *** *** ***
December 2007 *** *** *** ***
</Table>
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3
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 *** *** *** ***
</Table>
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.
P.A. No. 1810
K/SWA SA-21
Attachment A to
6-1162-RLL-933R12
Page 4
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 Option Aircraft delivering in 2003 is *** (July 1992 STE),
for Option Aircraft 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
P.A. No. 1810
K/SWA SA-21
Attachment A to
6-1162-RLL-933R12
Page 5
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.
P.A. No. 1810
K/SWA SA-21
6-1162-MSA-185R3
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-MSA-185R3 to
Purchase Agreement No. 1810 -
Delivery Change Contractual Matters
This Letter Agreement amends Purchase Agreement No. 1810 dated January 19,
1994 (the Agreement) between The Boeing Company (Boeing) and Southwest
Airlines Co. (Buyer) relating to Model 737-7H4 aircraft (the Aircraft).
As a result of the tragic events of September 11, 2001, and the resulting
uncertainties in the global aviation industry, Boeing and Buyer have agreed
to reschedule certain of Buyer's firm delivery commitments contained in the
Agreement..*** The purpose of this Letter Agreement is to detail the
contractual matters related to such arrangements.
All terms used herein and in the Agreement, and not defined herein, will have
the same meaning as in the Agreement.
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-MSA-185R3 Page 2
1. ***
2. Expenses related to Delayed Delivery of the Six Rescheduled Aircraft.
2.1 ***
2.2 ***
P.A. No. 1810
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Southwest Airlines Co.
6-1162-MSA-185R3 Page 3
2.3 ***
3. Aircraft Storage Credit Memorandum.
***
4. Aircraft Delivery Credit Memorandum.
***
P.A. No. 1810
K/SWA SA-21
Southwest Airlines Co.
6-1162-MSA-185R3 Page 4
5. Confidential Treatment.
Buyer understands that certain commercial and financial information
contained in this Letter Agreement 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 6-1162-RLL-934R1.
Very truly yours,
THE BOEING COMPANY
By /s/ Michael S. Anderson
Its Attorney In Fact
ACCEPTED AND AGREED TO as of this
date: March 4, 2002
SOUTHWEST AIRLINES CO.
By /s/ Laura Wright
Its Vice President Finance & Treasurer
P.A. No. 1810
K/SWA SA-21
Supplemental Agreement No. 22
to
Purchase Agreement No. 1810
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of March 19, 2002, by and
between THE BOEING COMPANY, a Delaware corporation with its principal offices
in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in Dallas, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810
dated January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the
Agreement);
WHEREAS, Buyer has agreed to accelerate two (2) Block J Aircraft from
February 2004 to one (1) November 2002 and one (1) December 2002;
WHEREAS, Buyer has agreed to accelerate two (2) Block O Option Aircraft
from March 2006 (1) and November 2006 (1) to two (2) Block W Option Aircraft
December 2003;
WHEREAS, Buyer and Boeing have previously agreed to a schedule
deceleration (Supplemental Agreements 18 and 19),***;
WHEREAS, Buyer and Boeing agree***;
*** 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.
P.A. No. 1810 SA-22-1
K/SWA
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. The Table of Contents of the Agreement is deleted in its entirety and a
new Table of Contents is attached hereto and incorporated into the Agreement
by this reference.
2. Article 2, entitled "Delivery, Title and Risk of Loss," is deleted in its
entirety and replaced by a new Article 2. Such new pages 2-1, 2-2, 2-3
and 2-4 are attached hereto and incorporated into the Agreement by this
reference.
3. Article 3, entitled "Price of Aircraft", is deleted in its entirety and
replaced by a new Article 3. Such new pages 3-1, 3-2, 3-3, 3-4, 3-5 and 3-6
are attached hereto and incorporated into the Agreement by this reference.
4. Letter Agreement No. 6-1162-RLL-933R12 entitled "Option Aircraft," is
deleted in its entirety and replaced by a new Letter Agreement No. 6-1162-
RLL-933R13 which is attached hereto and is incorporated into the Agreement by
this reference.
NOTE - Buyer has two (2) 'banked' Rollover Option Aircraft as a result of
the option exercises covered by Supplemental Agreement No. 21 that may be
converted to Option Aircraft at a future date subject to the terms of
Letter Agreement No. 6-1162-RLL-933R13.
5. All references in the Letter Agreements associated with Purchase
Agreement No. 1810 shall be deemed to refer to the purchase by Buyer of two
hundred thirty-eight (238) Model 737-7H4 Aircraft, eighty-five (85) Model
737-7H4 Option Aircraft and two hundred seventeen (217) Model 737-7H4
Rollover Option Aircraft, to the extent such reference is not specifically
addressed herein.
6. Advance Payments already made by Buyer for the two (2) accelerated Block
J Aircraft totals ***. With the acceleration to November 2002 (1) and December
2002 (1) of these aircraft, the Advance Payment requirement balances
are as follows:
***
P.A. No. 1810 SA-22-2
K/SWA
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: Michael S. Anderson By: Laura Wright
Its: Attorney-In-Fact Its:VP Finance & Treasurer
P.A. No. 1810 SA-22-3
K/SWA
<Table>
Caption>
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale 1-1 SA-13
2. Delivery, Title and Risk
of Loss 2-1 SA-22
3. Price of Aircraft 3-1 SA-22
4. Taxes 4-1
5. Payment 5-1
6. Excusable Delay 6-1
7. Changes to the Detail
Specification 7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License 8-1
9. Representatives, Inspection,
Flights and Test Data 9-1
10. Assignment, Resale or Lease 10-1
11. Termination for Certain Events 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance 12-1
13. Buyer Furnished Equipment and
Spare Parts 13-1
14. Contractual Notices and Requests 14-1
15. Miscellaneous 15-1
</Table>
P.A. No. 1810 i
K/SWA SA-22
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
EXHIBITS
A Aircraft Configuration SA-13
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft SA-13
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
</Table>
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-22
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-932R2 Promotional Support SA-13
6-1162-RLL-933R13 Option Aircraft SA-22
6-1162-RLL-934R3 Disclosure of Confidential SA-14
Information
6-1162-RLL-935R1 Performance Guarantees SA-1
6-1162-RLL-936R4 Certain Contractual Matters SA-4
6-1162-RLL-937 Alternate Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R2 Other Matters SA-13
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights SA-6
6-1162-RLL-944 Airframe Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 737-3H4
Block Fuel Burn
6-1162-RLL-1855R3 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
</Table>
P.A. No. 1810 iii
K/SWA SA-22
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes SA-1
6-1162-RLL-2037 Reconciliation of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
6-1162-KJJ-054 Business Matters SA-13
6-1162-KJJ-055 Structural Matters SA-13
6-1162-KJJ-056 Noise and Emission Matters SA-13
6-1162-KJJ-057 Product Development Matters SA-13
6-1162-KJJ-058 Additional Substitution Rights SA-13
6-1162-KJJ-150 Flight Control Computer & Mode SA-14
Control Panel Spares Matter
6-1162-MSA-185R3 Delivery Change Contractual SA-21
Matters
</Table>
P.A. No. 1810 iv
K/SWA SA-22
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by Boeing,
assembled and ready for flight and Buyer will accept delivery of the Aircraft,
in accordance with the following schedule:
<Table>
<Caption>
Month and Year
of Delivery Quantity of Aircraft
Block E Aircraft
December 2000 Two (2)
January 2001 One (1)
February 2001 One (1)
March 2001 Two (2)
June 2001 Three (3)
September 2001 Three (1)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
Block G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
July 1999 One (1)
August 1999 One (1)
September 1999 Two (2)
October 1999 One (1)
March 2000 One (1)
April 2000 Two (2)
September 2000 One (1)
October 2000 Two (2)
March 2001 Two (2)
April 2001 One (1)
October 2001 Three (3)
Block I Aircraft
November 2001 Two (2)
December 2001 One (1)
January 2002 One (1)
March 2002 Four (4)
April 2002 Two (2)
P.A. No. 1810 2-1
K/SWA SA-22
December 2002 Two (2)
May 2003 One (1)
June 2003 Two (2)
July 2003 One (1)
September 2003 Two (2)
October 2003 Two (2)
Block J Aircraft
November 2002 One (1)
December 2002 One (1)
November 2003 Two (2)
March 2004 One (1)
Block K Aircraft
March 2004 One (1)
April 2004 Three (3)
May 2004 One (1)
Block L Aircraft
October 1999 One (1)
November 1999 Two (2)
December 1999 One (1)
June 2000 Three (3)
July 2000 Three (3)
September 2000 One (1)
October 2000 One (1)
November 2000 Four (4)
December 2000 One (1)
January 2001 One (1)
February 2001 One (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
July 2003 One (1)
August 2003 Two (2)
Block T Aircraft
November 2001 One (1)
February 2002 One (1)
May 2004 One (1)
June 2004 Four (4)
July 2004 Four (4)
August 2004 Two (2)
September 2004 Two (2)
November 2004 One (1)
December 2004 One (1)
January 2005 Five (5)
February 2005 Two (2)
March 2005 One (1)
P.A. No. 1810 2-2
K/SWA SA-22
April 2005 Two (2)
May 2005 One (1)
June 2005 Three (3)
July 2005 Two (2)
August 2005 One (1)
September 2005 Two (2)
October 2005 One (1)
November 2005 Two (2)
December 2005 Two (2)
February 2006 Four (4)
May 2006 Three (3)
June 2006 Four (4)
July 2006 One (1)
August 2006 Three (3)
September 2006 Three (3)
November 2006 Two (2)
December 2006 Two (2)
January 2007 Two (2)
February 2007 Three (3)
March 2007 Two (2)
April 2007 Two (2)
May 2007 Two (2)
June 2007 Two (2)
July 2007 Two (2)
August 2007 Two (2)
September 2007 Two (2)
October 2007 Two (2)
November 2007 Two (2)
December 2007 Two (2)
January 2008 One (1)
February 2008 One (1)
March 2008 One (1)
April 2008 One (1)
May 2008 One (1)
June 2008 One (1)
</Table>
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of
the Target Delivery Date of the Aircraft approximately 30 days prior to the
scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days'
notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer
will reimburse Boeing for all costs incurred by Boeing as a result of such
delay, including amounts for storage, insurance, Taxes, preservation or
protection of the Aircraft and interest on payments due.
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
P.A. No. 1810 2-3
K/SWA SA-22
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Bill of Sale. Upon delivery of an Aircraft Boeing will deliver to Buyer a
bill of sale conveying good title to such Aircraft, free of all liens, claims,
charges and encumbrances of every kind whatsoever, and such other appropriate
documents of title as Buyer may reasonably request.
P.A. No. 1810 2-4
K/SWA SA-22
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in Exhibit A
which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price excluding the
price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft Price
and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the Aircraft
Basic Price (Base Aircraft and Special Features) as calculated pursuant to
Exhibit D or Exhibit D-1 as applicable.
3.1.5 Aircraft Price is the total amount Buyer is to pay for the
Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price for Block A through L Aircraft, is
expressed in July 1992 dollars; the Aircraft Basic Price for Block T Aircraft,
is expressed in July 1999 dollars; as set forth below:
<Table>
<Caption>
Base Special Aircraft
Aircraft Price Features Basic Price
Block A, B, C,
D & E Aircraft *** *** ***
Block F & G
Aircraft *** *** ***
Block H
Aircraft *** *** ***
Block I
Aircraft *** *** ***
Block J
Aircraft *** *** ***
Block K
Aircraft *** *** ***
Block L
Aircraft $*** *** ***
Block T
Aircraft *** *** ***
</Table>
P.A. No. 1810 3-1
K/SWA SA-22
3.2 Aircraft Price. The Aircraft Price will be established at the time
of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is *** for the Block A, B, C,
D and E Aircraft, *** for the Block F and G Aircraft, *** for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft; *** for the Block T
Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic Price,
as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft) for Aircraft Block A
through L, and in Exhibit D-1 (Price Adjustments Due to Economic Fluctuations -
Aircraft) for Aircraft Block T; plus
3.3.3 other price adjustments made pursuant to this Agreement or
other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment purposes,
the following estimated delivery prices of the Aircraft (Advance Payment Base
Price)have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this Agreement.
The Advance Payment Base Price of each Aircraft is set forth below:
<Table>
<Caption>
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
Block A Aircraft***
October 1997
November 1997
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
P.A. No. 1810 3-2
K/SWA SA-22
Block C Aircraft***
February 1999
May 1999
July 1999
August 1999
September 1999
Block D Aircraft***
November 1999
December 1999
January 2000
March 2000
July 2000
August 2000
Block E Aircraft***
December 2000
January 2001
February 2001
March 2001
June 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
July 1999
August 1999
September 1999
October 1999
March 2000
April 2000
September 2000
October 2000
March 2001
April 2001
October 2001
Block I Aircraft***
P.A. No. 1810 3-3
K/SWA SA-22
November 2001
December 2001
January 2002
March 2002
April 2002
December 2002
May 2003
June 2003
July 2003
September 2003
October 2003
Block J Aircraft***
November 2002
December 2002
November 2003
March 2004
Block K Aircraft***
March 2004
April 2004
May 2004
Block L Aircraft***
October 1999
November 1999
December 1999
June 2000
July 2000
September 2000
October 2000
November 2000
December 2000
January 2001
February 2001
July 2001
September 2001
October 2001
July 2003
August 2003
Block T Aircraft***
November 2001
February 2002
May 2004
June 2004
July 2004
August 2004
September 2004
P.A. No. 1810 3-4
K/SWA SA-22
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
February 2006
May 2006
June 2006
July 2006
August 2006
September 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
</Table>
P.A. No. 1810 3-5
K/SWA SA-22
3.4.2 Adjustment of Advance Payment Base Prices Long-Lead Aircraft. For
Aircraft scheduled for delivery 36 months or more after the date of this
Agreement, the Advance Payment Base Prices appearing in Article 3.4.1 will be
used to determine the amount of the first advance payment to be made by
Buyer on the Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or decrease the
Advance Payment Base Price of such Aircraft as required to reflect the effects
of (i) any adjustments in the Aircraft Basic Price pursuant to this Agreement
and (ii) the then-current forecasted escalation factors used by Boeing. Boeing
will provide the adjusted Advance Payment Base Prices for each affected
Aircraft to Buyer, and the advance payment schedule will be considered amended
to substitute such adjusted Advance Payment Base Prices.
P.A. No. 1810 3-6
K/SWA SA-22
6-1162-RLL-933R13
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-RLL-933R13 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-five (85) 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.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the
months set forth in the following schedule:
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
December 2003 Two (2) W
March 2004 Three (3) M
April 2004 Two (2) M
June 2004 Two (2) M
July 2004 Two (2) M
October 2004 Four (4) M
</Table>
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 2
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
February 2005 One (1) N
March 2005 Four (4) N
April 2005 Two (2) N
May 2005 One (1) N
June 2005 One (1) N
July 2005 Two (2) N
August 2005 Two (2) N
September 2005 Three (3) N
October 2005 Two (2) N
November 2005 One (1) N
December 2005 One (1) N
January 2006 Two (2) O
March 2006 Three (3) O
April 2006 Two (2) O
May 2006 Two (2) O
June 2006 One (1) O
July 2006 Two (2) O
August 2006 One (1) O
October 2006 One (1) O
November 2006 One (1) O
December 2006 One (1) O
April 2007 One (1) P
May 2007 One (1) P
June 2007 One (1) P
July 2007 One (1) P
August 2007 One (1) P
September 2007 One (1) P
October 2007 One (1) P
November 2007 One (1) P
December 2007 One (1) 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
</Table>
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 3
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:
<Table>
<Caption>
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)
</Table>
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. Buyer can
elect to convert such Rollover Option Aircraft into an Option Aircraft at any
time after converting an Option Aircraft to a firm Aircraft subject to the
requirements of Article 2.5.
2.2.2 If Buyer elects not to exercise an Option, at the same time of
not exercising such 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.
Buyer can elect to convert such Rollover Option Aircraft to Option Aircraft
at any time after converting Rollover Option to firm Aircraft subject to the
requirements of Article 2.5.
2.3 Buyer may not convert Rollover Option Aircraft to Option Aircraft
except in accordance with Article 2.2 above.
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 4
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 2006 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 2006, such price and escalation provisions will be
appropriately applied to the applicable Option Aircraft.
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 5
For additional information relating to price and escalation provisions
applicable to Option Aircraft delivering after 2006 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).
<Table>
<Caption>
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
Block W Aircraft***
December 2003
Block M Aircraft***
March 2004
April 2004
June 2004
July 2004
October 2004
Block N Aircraft***
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
Block O Aircraft***
January 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 6
October 2006
November 2006
December 2006
Block P Aircraft***
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
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
</Table>
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
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 7
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 sixteen (16) 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, with interest, to Buyer. The interest rate for
calculation of the interest associated with such refund is the rate of two
percent (2%) below the Citibank base rate in effect from time to time during the
period the Option deposit is held by Boeing.
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 8
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
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 9
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.
P.A. No. 1810
K/SWA SA-22
Southwest Airlines Co.
6-1162-RLL-933R13 Page 10
Very truly yours,
THE BOEING COMPANY
By/s/ Michael S. Anderson
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
date:March 19, 2002
SOUTHWEST AIRLINES CO.
By Laura Wright
Its VP Finance & Treasurer
Attachments
P.A. No. 1810
K/SWA SA-22
Attachment A to
6-1162-RLL-933R13
Page 1
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.
P.A. No. 1810
K/SWA SA-22
Attachment A to
6-1162-RLL-933R13
Page 2
2. Price Description
2.1 Price Elements Per Aircraft
<Table>
<Caption>
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 W
December 2003 *** *** *** ***
BLOCK M
March 2004 *** *** *** ***
April 2004 *** *** *** ***
June 2004 *** *** *** ***
July 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK N
February 2005 *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
May 2005 *** *** *** ***
June 2005 *** *** *** ***
July 2005 *** *** *** ***
August 2005 *** *** *** ***
September 2005 *** *** *** ***
October 2005 *** *** *** ***
November 2005 *** *** *** ***
December 2005 *** *** *** ***
BLOCK O
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
May 2006 *** *** *** ***
June 2006 *** *** *** ***
July 2006 *** *** *** ***
August 2006 *** *** *** ***
October 2006 *** *** *** ***
November 2006 *** *** *** ***
December 2006 *** *** *** ***
</Table>
P.A. No. 1810
K/SWA SA-22
Attachment A to
6-1162-RLL-933R13
Page 3
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK P
April 2007 *** *** *** ***
May 2007 *** *** *** ***
June 2007 *** *** *** ***
July 2007 *** *** *** ***
August 2007 *** *** *** ***
September 2007 *** *** *** ***
October 2007 *** *** *** ***
November 2007 *** *** *** ***
December 2007 *** *** *** ***
</Table>
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3
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 *** *** *** ***
</Table>
2.2 Price Adjustments For Option Aircraft Delivering From January 2007
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 2006, see paragraph 2.2.6 below.
P.A. No. 1810
K/SWA SA-22
Attachment A to
6-1162-RLL-933R13
Page 4
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
Option Aircraft delivering in 2003 is *** (July 1992 STE), for Option Aircraft
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 2007
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.
P.A. No. 1810
K/SWA SA-22
Attachment A to
6-1162-RLL-933R13
Page 5
3.1 Buyer will pay to Boeing advance payments for the Option Aircraft
on the dates and in the amounts determined below.
<Table>
<Caption>
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%
</Table>
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.
P.A. No. 1810
K/SWA SA-22
Page: 2
Supplemental Agreement No. 23
to
Purchase Agreement No. 1810
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of July 25, 2002, by and
between THE BOEING COMPANY, a Delaware corporation with its principal offices
in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in Dallas, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810
dated January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the
Agreement);
WHEREAS, Buyer has agreed to exercise two (2) Block N Option Aircraft
(as Block L Aircraft) and to accelerate these aircraft from July and August
2005 to March and April 2003;
WHEREAS, Boeing has***;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. The Table of Contents of the Agreement is deleted in its entirety and a
new Table of Contents is attached hereto and incorporated into the Agreement
by this reference.
*** 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.
P.A. No. 1810 SA-23-1
K/SWA
2. Article 2, entitled "Delivery, Title and Risk of Loss," is deleted in
its entirety and replaced by a new Article 2. Such new pages 2-1, 2-2, 2-3
and 2-4 are attached hereto and incorporated into the Agreement by this
reference.
3. Article 3, entitled "Price of Aircraft", is deleted in its entirety and
replaced by a new Article 3. Such new pages 3-1, 3-2, 3-3, 3-4, 3-5 and 3-6
are attached hereto and incorporated into the Agreement by this reference.
4. Letter Agreement No. 6-1162-RLL-933R13 entitled "Option Aircraft," is
deleted in its entirety and replaced by a new Letter Agreement No. 6-1162
- -RLL-933R14 which is attached hereto and is incorporated into the Agreement
by this reference. NOTE - Buyer now has four (4) 'banked' Rollover Option
Aircraft as a result of the option exercises covered by Supplemental
Agreement No. 21 and 23 that may be converted to Option Aircraft at a future
date subject to the terms of Letter Agreement No. 6-1162-RLL-933R14.
5. All references in the Letter Agreements associated with Purchase
Agreement No. 1810 shall be deemed to refer to the purchase by Buyer of two
hundred forty (240) Model 737-7H4 Aircraft, eighty-three (83) Model 737-7H4
Option Aircraft and two hundred seventeen (217) Model 737-7H4 Rollover Option
Aircraft, to the extent such reference is not specifically addressed herein.
6. The Advance Payments due upon signing assuming execution of this
Supplemental Agreement in July 2002 are:***
***
P.A. No. 1810 SA-23-2
K/SWA
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /s/ J. A. McGarvey By Deborah Ackerman
Its: Attorney-In-Fact Its:VP-General Counsel
P.A. No. 1810 SA-23-3
K/SWA
<Table>
<Caption>
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale 1-1 SA-13
2. Delivery, Title and Risk
of Loss 2-1 SA-23
3. Price of Aircraft 3-1 SA-23
4. Taxes 4-1
5. Payment 5-1
6. Excusable Delay 6-1
7. Changes to the Detail
Specification 7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License 8-1
9. Representatives, Inspection,
Flights and Test Data 9-1
10. Assignment, Resale or Lease 10-1
11. Termination for Certain Events 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance 12-1
13. Buyer Furnished Equipment and
Spare Parts 13-1
14. Contractual Notices and Requests 14-1
15. Miscellaneous 15-1
</Table>
P.A. No. 1810 i
K/SWA SA-23
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
EXHIBITS
A Aircraft Configuration SA-13
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft SA-13
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
</Table>
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-23
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-932R2 Promotional Support SA-13
6-1162-RLL-933R14 Option Aircraft SA-23
6-1162-RLL-934R3 Disclosure of Confidential SA-14
Information
6-1162-RLL-935R1 Performance Guarantees SA-1
6-1162-RLL-936R4 Certain Contractual Matters SA-4
6-1162-RLL-937 Alternate Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R2 Other Matters SA-13
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights SA-6
6-1162-RLL-944 Airframe Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 737-3H4
Block Fuel Burn
6-1162-RLL-1855R3 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
</Table>
P.A. No. 1810 iii
K/SWA SA-23
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes SA-1
6-1162-RLL-2037 Reconciliation of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
6-1162-KJJ-054 Business Matters SA-13
6-1162-KJJ-055 Structural Matters SA-13
6-1162-KJJ-056 Noise and Emission Matters SA-13
6-1162-KJJ-057 Product Development Matters SA-13
6-1162-KJJ-058 Additional Substitution Rights SA-13
6-1162-KJJ-150 Flight Control Computer & Mode SA-14
Control Panel Spares Matter
6-1162-MSA-185R3 Delivery Change Contractual SA-21
Matters
</Table>
P.A. No. 1810 iv
K/SWA SA-23
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
<Table>
<Caption>
Month and Year
of Delivery Quantity of Aircraft
Block E Aircraft
December 2000 Two (2)
January 2001 One (1)
February 2001 One (1)
March 2001 Two (2)
June 2001 Three (3)
September 2001 Three (1)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
Block G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
July 1999 One (1)
August 1999 One (1)
September 1999 Two (2)
October 1999 One (1)
March 2000 One (1)
April 2000 Two (2)
September 2000 One (1)
October 2000 Two (2)
March 2001 Two (2)
April 2001 One (1)
October 2001 Three (3)
Block I Aircraft
November 2001 Two (2)
December 2001 One (1)
January 2002 One (1)
March 2002 Four (4)
April 2002 Two (2)
P.A. No. 1810 2-1
K/SWA SA-23
December 2002 Two (2)
May 2003 One (1)
June 2003 Two (2)
July 2003 One (1)
September 2003 Two (2)
October 2003 Two (2)
Block J Aircraft
November 2002 One (1)
December 2002 One (1)
November 2003 Two (2)
March 2004 One (1)
Block K Aircraft
March 2004 One (1)
April 2004 Three (3)
May 2004 One (1)
Block L Aircraft
October 1999 One (1)
November 1999 Two (2)
December 1999 One (1)
June 2000 Three (3)
July 2000 Three (3)
September 2000 One (1)
October 2000 One (1)
November 2000 Four (4)
December 2000 One (1)
January 2001 One (1)
February 2001 One (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
March 2003 One (1)
April 2003 One (1)
July 2003 One (1)
August 2003 Two (2)
Block T Aircraft
November 2001 One (1)
February 2002 One (1)
May 2004 One (1)
June 2004 Four (4)
July 2004 Four (4)
August 2004 Two (2)
September 2004 Two (2)
November 2004 One (1)
December 2004 One (1)
January 2005 Five (5)
P.A. No. 1810 2-2
K/SWA SA-23
February 2005 Two (2)
March 2005 One (1)
April 2005 Two (2)
May 2005 One (1)
June 2005 Three (3)
July 2005 Two (2)
August 2005 One (1)
September 2005 Two (2)
October 2005 One (1)
November 2005 Two (2)
December 2005 Two (2)
February 2006 Four (4)
May 2006 Three (3)
June 2006 Four (4)
July 2006 One (1)
August 2006 Three (3)
September 2006 Three (3)
November 2006 Two (2)
December 2006 Two (2)
January 2007 Two (2)
February 2007 Three (3)
March 2007 Two (2)
April 2007 Two (2)
May 2007 Two (2)
June 2007 Two (2)
July 2007 Two (2)
August 2007 Two (2)
September 2007 Two (2)
October 2007 Two (2)
November 2007 Two (2)
December 2007 Two (2)
January 2008 One (1)
February 2008 One (1)
March 2008 One (1)
April 2008 One (1)
May 2008 One (1)
June 2008 One (1)
</Table>
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of the
Target Delivery Date of the Aircraft approximately 30 days prior to the
scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days'
notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer
will reimburse Boeing for all costs incurred by Boeing as a result of such
delay, including amounts for storage, insurance, Taxes, preservation or
protection of the Aircraft and interest on payments due.
P.A. No. 1810 2-3
K/SWA SA-23
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Bill of Sale. Upon delivery of an Aircraft Boeing will deliver
to Buyer a bill of sale conveying good title to such Aircraft, free of all
liens, claims, charges and encumbrances of every kind whatsoever, and such
other appropriate documents of title as Buyer may reasonably request.
P.A. No. 1810 2-4
K/SWA SA-23
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in Exhibit A
which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price excluding
the price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft
Price and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the Aircraft
Basic Price (Base Aircraft and Special Features) as calculated pursuant to
Exhibit D or Exhibit D-1 as applicable.
3.1.5 Aircraft Price is the total amount Buyer is to pay for the
Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price for Block A through L Aircraft, is
expressed in July 1992 dollars; the Aircraft Basic Price for Block T
Aircraft, is expressed in July 1999 dollars; as set forth below:
<Table>
<Caption>
Base Special Aircraft
Aircraft Price Features Basic Price
Block A, B, C,
D & E Aircraft *** *** ***
Block F & G
Aircraft *** *** ***
Block H
Aircraft *** *** ***
Block I
Aircraft *** *** ***
Block J
Aircraft *** *** ***
Block K
Aircraft *** *** ***
Block L
Aircraft *** *** ***
Block T
Aircraft *** *** ***
</Table>
P.A. No. 1810 3-1
K/SWA SA-23
3.3 Aircraft Price. The Aircraft Price will be established at the
time of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is ***for the Block A, B,
C, D and E Aircraft, *** for the Block F and G Aircraft, ***for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft ***for the Block T
Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic
Price, as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft) for Aircraft Block A
through L, and in Exhibit D-1 (Price Adjustments Due to Economic Fluctuations -
Aircraft) for Aircraft Block T; plus
3.3.3 other price adjustments made pursuant to this Agreement or
other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment purposes,
the following estimated delivery prices of the Aircraft (Advance Payment Base
Price) have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this Agreement.
The Advance Payment Base Price of each Aircraft is set forth below:
<Table>
<Caption>
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
Block A Aircraft***
October 1997
November 1997
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
P.A. No. 1810 3-2
K/SWA SA-23
Block C Aircraft***
February 1999
May 1999
July 1999
August 1999
September 1999
Block D Aircraft***
November 1999
December 1999
January 2000
March 2000
July 2000
August 2000
Block E Aircraft***
December 2000
January 2001
February 2001
March 2001
June 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
July 1999
August 1999
September 1999
October 1999
March 2000
April 2000
September 2000
October 2000
March 2001
April 2001
October 2001
Block I Aircraft***
P.A. No. 1810 3-3
K/SWA SA-23
November 2001
December 2001
January 2002
March 2002
April 2002
December 2002
May 2003
June 2003
July 2003
September 2003
October 2003
Block J Aircraft***
November 2002
December 2002
November 2003
March 2004
Block K Aircraft***
March 2004
April 2004
May 2004
Block L Aircraft***
October 1999
November 1999
December 1999
June 2000
July 2000
September 2000
October 2000
November 2000
December 2000
January 2001
February 2001
July 2001
September 2001
October 2001
March 2003
April 2003
July 2003
August 2003
Block T Aircraft***
November 2001
February 2002
May 2004
June 2004
July 2004
P.A. No. 1810 3-4
K/SWA SA-23
August 2004
September 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
February 2006
May 2006
June 2006
July 2006
August 2006
September 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
</Table>
P.A. No. 1810 3-5
K/SWA SA-23
3.4.2 Adjustment of Advance Payment Base Prices - Long-Lead Aircraft.
For Aircraft scheduled for delivery 36 months or more after the date of this
Agreement, the Advance Payment Base Prices appearing in Article 3.4.1 will be
used to determine the amount of the first advance payment to be made by Buyer
on the Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or decrease the
Advance Payment Base Price of such Aircraft as required to reflect the
effects of (i) any adjustments in the Aircraft Basic Price pursuant to this
Agreement and (ii) the then-current forecasted escalation factors used by
Boeing. Boeing will provide the adjusted Advance Payment Base Prices for
each affected Aircraft to Buyer, and the advance payment schedule will be
considered amended to substitute such adjusted Advance Payment Base Prices.
P.A. No. 1810 3-6
K/SWA SA-23
6-1162-RLL-933R14
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-RLL-933R14 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-three (83) 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.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the
months set forth in the following schedule:
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
December 2003 Two (2) W
March 2004 Three (3) M
April 2004 Two (2) M
June 2004 Two (2) M
July 2004 Two (2) M
October 2004 Four (4) M
</Table>
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 2
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
February 2005 One (1) N
March 2005 Four (4) N
April 2005 Two (2) N
May 2005 One (1) N
June 2005 One (1) N
July 2005 One (1) N
August 2005 One (1) N
September 2005 Three (3) N
October 2005 Two (2) N
November 2005 One (1) N
December 2005 One (1) N
January 2006 Two (2) O
March 2006 Three (3) O
April 2006 Two (2) O
May 2006 Two (2) O
June 2006 One (1) O
July 2006 Two (2) O
August 2006 One (1) O
October 2006 One (1) O
November 2006 One (1) O
December 2006 One (1) O
April 2007 One (1) P
May 2007 One (1) P
June 2007 One (1) P
July 2007 One (1) P
August 2007 One (1) P
September 2007 One (1) P
October 2007 One (1) P
November 2007 One (1) P
December 2007 One (1) 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
</Table>
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 3
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:
<Table>
<Caption>
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)
</Table>
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.
Buyer can elect to convert such Rollover Option Aircraft into an Option
Aircraft at any time after converting an Option Aircraft to a firm Aircraft
subject to the requirements of Article 2.5.
2.2.2 If Buyer elects not to exercise an Option, at the same
time of not exercising such 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.
Buyer can elect to convert such Rollover Option Aircraft to Option Aircraft
at any time after converting Rollover Option to firm Aircraft
subject to the requirements of Article 2.5.
2.3 Buyer may not convert Rollover Option Aircraft to Option Aircraft
except in accordance with Article 2.2 above.
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 4
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 2006 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 2006, such price and escalation provisions
will be appropriately applied to the applicable Option Aircraft.
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 5
For additional information relating to price and escalation provisions
applicable to Option Aircraft delivering after 2006 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).
<Table>
<Caption>
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
Block W Aircraft***
December 2003
Block M Aircraft***
March 2004
April 2004
June 2004
July 2004
October 2004
Block N Aircraft***
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
Block O Aircraft***
January 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 6
October 2006
November 2006
December 2006
Block P Aircraft***
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
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
</Table>
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
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 7
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 sixteen (16) 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, with interest,
to Buyer. The interest rate for calculation of the interest associated with
such refund is the rate of two percent (2%) below the Citibank base rate in
effect from time to time during the period the Option deposit is held by
Boeing.
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 8
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.
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 9
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.
P.A. No. 1810
K/SWA SA-23
Southwest Airlines Co.
6-1162-RLL-933R14 Page 10
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/J. A. McGarvey
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
date:July 25, 2002
SOUTHWEST AIRLINES CO.
By /s/ Deborah Ackerman
Its VP-General Counsel
Attachments
P.A. No. 1810
K/SWA SA-23
Attachment A to
6-1162-RLL-933R14
Page 1
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.
P.A. No. 1810
K/SWA SA-23
Attachment A to
6-1162-RLL-933R14
Page 2
2. Price Description
2.1 Price Elements Per Aircraft
<Table>
<Caption>
1 2 3
AIRCRAFT & ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK W
December 2003 *** *** *** ***
BLOCK M
March 2004 *** *** *** ***
April 2004 *** *** *** ***
June 2004 *** *** *** ***
July 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK N
February 2005 *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
May 2005 *** *** *** ***
June 2005 *** *** *** ***
July 2005 *** *** *** ***
August 2005 *** *** *** ***
September 2005 *** *** *** ***
October 2005 *** *** *** ***
November 2005 *** *** *** ***
December 2005 *** *** *** ***
BLOCK O
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
May 2006 *** *** *** ***
June 2006 *** *** *** ***
July 2006 *** *** *** ***
August 2006 *** *** *** ***
October 2006 *** *** *** ***
November 2006 *** *** *** ***
December 2006 *** *** *** ***
</Table>
P.A. No. 1810
K/SWA SA-23
Attachment A to
6-1162-RLL-933R14
Page 3
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK P
April 2007 *** *** *** ***
May 2007 *** *** *** ***
June 2007 *** *** *** ***
July 2007 *** *** *** ***
August 2007 *** *** *** ***
September 2007 *** *** *** ***
October 2007 *** *** *** ***
November 2007 *** *** *** ***
December 2007 *** *** *** ***
</Table>
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3
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 *** *** *** ***
</Table>
2.2 Price Adjustments For Option Aircraft Delivering From January
2007 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.
P.A. No. 1810
K/SWA SA-23
Attachment A to
6-1162-RLL-933R14
Page 4
2.2.2 Escalation Adjustments. For escalation provisions
applicable to Option Aircraft delivering after 2006, 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 Option Aircraft delivering in 2003 is *** (July 1992 STE),
for Option Aircraft delivering in 2004 is *** (July 1992 STE), for Optionss
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
2007 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.
P.A. No. 1810
K/SWA SA-23
Attachment A to
6-1162-RLL-933R14
Page 5
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.
<Table>
<Caption>
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%
</Table>
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.
P.A. No. 1810
K/SWA SA-23
Supplemental Agreement No. 24
to
Purchase Agreement No. 1810
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of August 13,2002, by and
between THE BOEING COMPANY, a Delaware corporation with its principal offices
in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in Dallas, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810 dated
January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the Agreement);
WHEREAS, Buyer has agreed to exercise two (2) December 2003 Block W
Option Aircraft (as Block J Aircraft);
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree to amend the Agreement as follows:
1. The Table of Contents of the Agreement is deleted in its entirety and a
new Table of Contents is attached hereto and incorporated into the Agreement by
this reference.
2. Article 2, entitled "Delivery, Title and Risk of Loss," is deleted in its
entirety and replaced by a new Article 2. Such new pages 2-1, 2-2, 2-3 and 2-4
are attached hereto and incorporated into the Agreement by this reference.
***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.
P.A. No. 1810 SA-24-1
K/SWA
3. Article 3, entitled "Price of Aircraft", is deleted in its entirety and
replaced by a new Article 3. Such new pages 3-1, 3-2, 3-3, 3-4, 3-5 and 3-6
are attached hereto and incorporated into the Agreement by this reference.
4. Letter Agreement No. 6-1162-RLL-933R14 entitled "Option Aircraft," is
deleted in its entirety and replaced by a new Letter Agreement No. 6-1162-RLL-
933R15 which is attached hereto and is incorporated into the Agreement by this
reference.
NOTE - Buyer now has six (6) 'banked' Rollover Option Aircraft as a result
of the option exercises covered by Supplemental Agreement No. 21, 23, and 24
that may be converted to Option Aircraft at a future date subject to the
terms of Letter Agreement No. 6-1162-RLL-933R15.
5. All references in the Letter Agreements associated with Purchase Agreement
No. 1810 shall be deemed to refer to the purchase by Buyer of two hundred
forty-two(242) Model 737-7H4 Aircraft, eighty-one (81) Model 737-7H4 Option
Aircraft and two hundred seventeen (217) Model 737-7H4 Rollover Option
Aircraft, to the extent such reference is not specifically addressed herein.
6. The Advance Payments due upon signing assuming execution of this
Supplemental Agreement in August 2002 are: ***
P.A. No. 1810 SA-24-2
K/SWA
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /s/ J. A. McGarvey By:/s/ Laura Wright
Its: Attorney-In-Fact Its:/s/VP Finance & Treasurer
P.A. No. 1810 SA-24-3
K/SWA
<Table>
<Caption>
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale 1-1 SA-13
2. Delivery, Title and Risk of Loss...2-1 SA-24
3. Price of Aircraft 3-1 SA-24
4. Taxes 4-1
5. Payment 5-1
6. Excusable Delay 6-1
7. Changes to the Detail
Specification 7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License 8-1
9. Representatives, Inspection,
Flights and Test Data 9-1
10. Assignment, Resale or Lease 10-1
11. Termination for Certain Events 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance 12-1
13. Buyer Furnished Equipment and
Spare Parts 13-1
14. Contractual Notices and Requests 14-1
15. Miscellaneous 15-1
</Table>
P.A. No. 1810 i
K/SWA SA-24
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
EXHIBITS
A Aircraft Configuration SA-13
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to Economic
Fluctuations - Aircraft SA-13
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
</Table>
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-24
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-932R2 Promotional Support SA-13
6-1162-RLL-933R15 Option Aircraft SA-24
6-1162-RLL-934R3 Disclosure of Confidential SA-14
Information
6-1162-RLL-935R1 Performance Guarantees SA-1
6-1162-RLL-936R4 Certain Contractual Matters SA-4
6-1162-RLL-937 Alternate Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R2 Other Matters SA-13
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights SA-6
6-1162-RLL-944 Airframe Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 737-3H4
Block Fuel Burn
6-1162-RLL-1855R3 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
</Table>
P.A. No. 1810 iii
K/SWA SA-24
<Table>
<Caption>
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes SA-1
6-1162-RLL-2037 Reconciliation of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters A-1
6-1162-KJJ-054 Business Matters SA-13
6-1162-KJJ-055 Structural Matters SA-13
6-1162-KJJ-056 Noise and Emission Matters SA-13
6-1162-KJJ-057 Product Development Matters SA-13
6-1162-KJJ-058 Additional Substitution Rights SA-13
6-1162-KJJ-150 Flight Control Computer & Mode SA-14
Control Panel Spares Matter
6-1162-MSA-185R3 Delivery Change Contractual SA-21
Matters
</Table>
P.A. No. 1810 iv
K/SWA SA-24
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
<Table>
<Caption>
Month and Year
of Delivery Quantity of Aircraft
Block E Aircraft
December 2000 Two (2)
January 2001 One (1)
February 2001 One (1)
March 2001 Two (2)
June 2001 Three (3)
September 2001 Three (1)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
Block G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
July 1999 One (1)
August 1999 One (1)
September 1999 Two (2)
October 1999 One (1)
March 2000 One (1)
April 2000 Two (2)
September 2000 One (1)
October 2000 Two (2)
March 2001 Two (2)
April 2001 One (1)
October 2001 Three (3)
Block I Aircraft
November 2001 Two (2)
December 2001 One (1)
January 2002 One (1)
March 2002 Four (4)
April 2002 Two (2)
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December 2002 Two (2)
May 2003 One (1)
June 2003 Two (2)
July 2003 One (1)
September 2003 Two (2)
October 2003 Two (2)
Block J Aircraft
November 2002 One (1)
December 2002 One (1)
November 2003 Two (2)
December 2003 Two (2)
March 2004 One (1)
Block K Aircraft
March 2004 One (1)
April 2004 Three (3)
May 2004 One (1)
Block L Aircraft
October 1999 One (1)
November 1999 Two (2)
December 1999 One (1)
June 2000 Three (3)
July 2000 Three (3)
September 2000 One (1)
October 2000 One (1)
November 2000 Four (4)
December 2000 One (1)
January 2001 One (1)
February 2001 One (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
March 2003 One (1)
April 2003 One (1)
July 2003 One (1)
August 2003 Two (2)
Block T Aircraft
November 2001 One (1)
February 2002 One (1)
May 2004 One (1)
June 2004 Four (4)
July 2004 Four (4)
August 2004 Two (2)
September 2004 Two (2)
November 2004 One (1)
December 2004 One (1)
P.A. No. 1810 2-2
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January 2005 Five (5)
February 2005 Two (2)
March 2005 One (1)
April 2005 Two (2)
May 2005 One (1)
June 2005 Three (3)
July 2005 Two (2)
August 2005 One (1)
September 2005 Two (2)
October 2005 One (1)
November 2005 Two (2)
December 2005 Two (2)
February 2006 Four (4)
May 2006 Three (3)
June 2006 Four (4)
July 2006 One (1)
August 2006 Three (3)
September 2006 Three (3)
November 2006 Two (2)
December 2006 Two (2)
January 2007 Two (2)
February 2007 Three (3)
March 2007 Two (2)
April 2007 Two (2)
May 2007 Two (2)
June 2007 Two (2)
July 2007 Two (2)
August 2007 Two (2)
September 2007 Two (2)
October 2007 Two (2)
November 2007 Two (2)
December 2007 Two (2)
January 2008 One (1)
February 2008 One (1)
March 2008 One (1)
April 2008 One (1)
May 2008 One (1)
June 2008 One (1)
</Table>
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of the
Target Delivery Date of the Aircraft approximately 30 days prior to the
scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days'
notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer
will reimburse Boeing for all costs incurred by Boeing as a result of such
delay, including amounts for storage, insurance, Taxes, preservation or
protection of the Aircraft and interest on payments due.
P.A. No. 1810 2-3
K/SWA SA-24
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Bill of Sale. Upon delivery of an Aircraft Boeing will deliver to
Buyer a bill of sale conveying good title to such Aircraft, free of all liens,
claims, charges and encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably request.
P.A. No. 1810 2-4
K/SWA SA-24
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in Exhibit A
which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price excluding the
price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft Price
and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the Aircraft
Basic Price (Base Aircraft and Special Features) as calculated pursuant to
Exhibit D or Exhibit D-1 as applicable.
3.1.5 Aircraft Price is the total amount Buyer is to pay for the
Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price for Block A through L Aircraft, is expressed
in July 1992 dollars; the Aircraft Basic Price for Block T Aircraft, is
expressed in July 1999 dollars; as set forth below:
<Table>
<Caption>
Base Special Aircraft
Aircraft Price Features Basic Price
Block A, B, C,
D & E Aircraft *** *** ***
Block F & G
Aircraft *** *** ***
Block H
Aircraft *** *** ***
Block I
Aircraft *** *** ***
Block J
Aircraft *** *** ***
Block K
Aircraft *** *** ***
Block L
Aircraft *** *** ***
Block T
Aircraft *** *** ***
</Table>
P.A. No. 1810 3-1
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3.3 Aircraft Price. The Aircraft Price will be established at the time
of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is *** for the Block A, B, C,
D and E Aircraft, *** for the Block F and G Aircraft, *** for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft; ***for the Block T
Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic Price,
as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft) for Aircraft Block A
through L, and in Exhibit D-1 (Price Adjustments Due to Economic Fluctuations -
Aircraft) for Aircraft Block T; plus
3.3.3 other price adjustments made pursuant to this Agreement or
other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment purposes, the
following estimated delivery prices of the Aircraft (Advance Payment Base
Price) have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this Agreement.
The Advance Payment Base Price of each Aircraft is set forth below:
<Table>
<Caption>
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
Block A Aircraft***
October 1997
November 1997
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
P.A. No. 1810 3-2
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Block C Aircraft***
February 1999
May 1999
July 1999
August 1999
September 1999
Block D Aircraft***
November 1999
December 1999
January 2000
March 2000
July 2000
August 2000
Block E Aircraft***
December 2000
January 2001
February 2001
March 2001
June 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
July 1999
August 1999
September 1999
October 1999
March 2000
April 2000
September 2000
October 2000
March 2001
April 2001
October 2001
Block I Aircraft***
P.A. No. 1810 3-3
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November 2001
December 2001
January 2002
March 2002
April 2002
December 2002
May 2003
June 2003
July 2003
September 2003
October 2003
Block J Aircraft***
November 2002
December 2002
November 2003
December 2003
March 2004
Block K Aircraft***
March 2004
April 2004
May 2004
Block L Aircraft***
October 1999
November 1999
December 1999
June 2000
July 2000
September 2000
October 2000
November 2000
December 2000
January 2001
February 2001
July 2001
September 2001
October 2001
March 2003
April 2003
July 2003
August 2003
Block T Aircraft***
November 2001
February 2002
May 2004
June 2004
P.A. No. 1810 3-4
K/SWA SA-24
July 2004
August 2004
September 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
February 2006
May 2006
June 2006
July 2006
August 2006
September 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
</Table>
3.4.2 Adjustment of Advance Payment Base Prices - Long-Lead Aircraft.
For Aircraft scheduled for delivery 36 months or more after the date of this
Agreement, the Advance Payment Base Prices appearing in Article 3.4.1 will be
used to determine the amount of the first advance payment to be made by Buyer
on the Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or decrease the
Advance Payment Base Price of such
P.A. No. 1810 3-5
K/SWA SA-24
Aircraft as required to reflect the effects of (i) any adjustments in the
Aircraft Basic Price pursuant to this Agreement and (ii) the then-current
forecasted escalation factors used by Boeing. Boeing will provide the
adjusted Advance Payment Base Prices for each affected Aircraft to Buyer, and
the advance payment schedule will be considered amended to substitute such
adjusted Advance Payment Base Prices.
P.A. No. 1810 3-6
K/SWA SA-24
6-1162-RLL-933R15
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Dallas, Texas 75235
Subject: Letter Agreement No. 6-1162-RLL-933R15 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-one (81) 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.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the months
set forth in the following schedule:
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
March 2004 Three (3) M
April 2004 Two (2) M
June 2004 Two (2) M
July 2004 Two (2) M
October 2004 Four (4) M
</Table>
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 2
<Table>
<Caption>
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
February 2005 One (1) N
March 2005 Four (4) N
April 2005 Two (2) N
May 2005 One (1) N
June 2005 One (1) N
July 2005 One (1) N
August 2005 One (1) N
September 2005 Three (3) N
October 2005 Two (2) N
November 2005 One (1) N
December 2005 One (1) N
January 2006 Two (2) O
March 2006 Three (3) O
April 2006 Two (2) O
May 2006 Two (2) O
June 2006 One (1) O
July 2006 Two (2) O
August 2006 One (1) O
October 2006 One (1) O
November 2006 One (1) O
December 2006 One (1) O
April 2007 One (1) P
May 2007 One (1) P
June 2007 One (1) P
July 2007 One (1) P
August 2007 One (1) P
September 2007 One (1) P
October 2007 One (1) P
November 2007 One (1) P
December 2007 One (1) 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
</Table>
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 3
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:
<Table>
<Caption>
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)
</Table>
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. Buyer can
elect to convert such Rollover Option Aircraft into an Option Aircraft at any
time after converting an Option Aircraft to a firm Aircraft subject to the
requirements of Article 2.5.
2.2.2 If Buyer elects not to exercise an Option, at the same time of
not exercising such 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.
Buyer can elect to convert such Rollover Option Aircraft to Option Aircraft at
any time after converting Rollover Option to firm Aircraft subject to the
requirements of Article 2.5.
2.3 Buyer may not convert Rollover Option Aircraft to Option Aircraft
except in accordance with Article 2.2 above.
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 4
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 2006 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 2006, such price and escalation provisions will be appropriately applied
to the applicable Option Aircraft.
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 5
For additional information relating to price and escalation provisions
applicable to Option Aircraft delivering after 2006 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).
<Table>
<Caption>
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
Block M Aircraft***
March 2004
April 2004
June 2004
July 2004
October 2004
Block N Aircraft***
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
Block O Aircraft***
January 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
October 2006
November 2006
December 2006
P.A. No. 1810
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Southwest Airlines Co.
6-1162-RLL-933R15 Page 6
Block P Aircraft***
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
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
</Table>
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.
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 7
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 sixteen (16) 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, with interest, to Buyer.
The interest rate for calculation of the interest associated with such refund
is the rate of two percent (2%) below the Citibank base rate in effect from
time to time during the period the Option deposit is held by Boeing.
P.A. No. 1810
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Southwest Airlines Co.
6-1162-RLL-933R15 Page 8
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.
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 9
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.
P.A. No. 1810
K/SWA SA-24
Southwest Airlines Co.
6-1162-RLL-933R15 Page 10
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/ J. A. McGarvey
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date August 13, 2002
SOUTHWEST AIRLINES CO.
By /s/ Laura Wright
Its VP Finance & Treasurer
Attachments
P.A. No. 1810
K/SWA SA-24
Attachment A to
6-1162-RLL-933R15
Page 1
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.
P.A. No. 1810
K/SWA SA-24
Attachment A to
6-1162-RLL-933R15
Page 2
2. Price Description
2.1 Price Elements Per Aircraft
<Table>
<Caption>
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 2004 *** *** *** ***
April 2004 *** *** *** ***
June 2004 *** *** *** ***
July 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK N
February 2005 *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
May 2005 *** *** *** ***
June 2005 *** *** *** ***
July 2005 *** *** *** ***
August 2005 *** *** *** ***
September 2005 *** *** *** ***
October 2005 *** *** *** ***
November 2005 *** *** *** ***
December 2005 *** *** *** ***
BLOCK O
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
May 2006 *** *** *** ***
June 2006 *** *** *** ***
July 2006 *** *** *** ***
August 2006 *** *** *** ***
October 2006 *** *** *** ***
November 2006 *** *** *** ***
December 2006 *** *** *** ***
</Table>
P.A. No. 1810
K/SWA SA-24
Attachment A to
6-1162-RLL-933R15
Page 3
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
BLOCK P
April 2007 *** *** *** ***
May 2007 *** *** *** ***
June 2007 *** *** *** ***
July 2007 *** *** *** ***
August 2007 *** *** *** ***
September 2007 *** *** *** ***
October 2007 *** *** *** ***
November 2007 *** *** *** ***
December 2007 *** *** *** ***
</Table>
<Table>
<Caption>
AIRCRAFT &
ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS)
MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3
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 *** *** *** ***
</Table>
2.2 Price Adjustments For Option Aircraft Delivering From January 2007
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 2006, see paragraph 2.2.6 below.
P.A. No. 1810
K/SWA SA-24
Attachment A to
6-1162-RLL-933R15
Page 4
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 Option Aircraft delivering in 2003 is *** (July 1992 STE),
for Option Aircraft 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 2007 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.
P.A. No. 1810
K/SWA SA-24
Attachment A to
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3.1 Buyer will pay to Boeing advance payments for the Option Aircraft
on the dates and in the amounts determined below.
<Table>
<Caption>
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%
</Table>
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.
P.A. No. 1810
K/SWA SA-24