EX-8 10 ex10_8.txt EXHIBIT 10.8 Exhibit 10.8 Supplemental Agreement No. 25 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 December 21, 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) and; WHEREAS, Boeing ***and; WHEREAS, Boeing and Buyer have agreed to accelerate Block T Aircraft, one (1) in June 2004 and one (1) in July 2004 to become two (2) in January 2004 and; WHEREAS, Boeing and Buyer have agreed to slide two (2) Block T Aircraft from July 2004 to one (1) each in September 2004 and October 2004 and; ***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-25-1 K/SWA WHEREAS, Boeing and Buyer have agreed to slide Block M Option Aircraft, three (3) in March 2004 and two (2) in April 2004 to become one (1) September 2004, two (2) November 2004 and two (2) December 2004. 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-933R15 entitled "Option Aircraft," is deleted in its entirety and replaced by a new Letter Agreement No. 6-1162- RLL-933R16 which is attached hereto and is incorporated into the Agreement by this reference. NOTE - Buyer now has six (6) 'banked' Rollover OptionAircraft 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-933R16. 5. Letter Agreement No. 6-1162-KJJ-055 entitled "Structural Matters," is deleted in its entirety and replaced by a new Letter Agreement No. 6-1162-KJJ -055R1 which is attached hereto and is incorporated into the Agreement by this reference. 6. 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. P.A. No. 1810 SA-25-2 K/SWA 7. Boeing will provide Buyer *** 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: VP Finance & Treasurer P.A. No. 1810 iii K/SWA SA-25
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-25 3. Price of Aircraft 3-1 SA-25 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
P.A. No. 1810 iv K/SWA SA-25
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
LETTER AGREEMENTS 1810-1 Waiver of Aircraft Demonstration Flight P.A. No. 1810 ii K/SWA SA-25
TABLE OF CONTENTS CON'T SA Number RESTRICTED LETTER AGREEMENTS 6-1162-RLL-932R2 Promotional Support SA-13 6-1162-RLL-933R16 Option Aircraft SA-25 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
P.A. No. 1810 iii K/SWA SA-25
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-055R1 Structural Matters SA-25 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
P.A. No. 1810 iv K/SWA SA-25 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:
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) December 2002 Two (2) May 2003 One (1) June 2003 Two (2) July 2003 One (1) September 2003 Two (2) October 2003 Two (2) P.A. No. 1810 2-1 K/SWA SA-25 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) January 2004 Two (2) May 2004 One (1) June 2004 Three (3) July 2004 One (1) August 2004 Two (2) September 2004 Three (3) October 2004 One (1) November 2004 One (1) P.A. No. 1810 2-2 K/SWA SA-25 December 2004 One (1) 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)
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-25 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-25 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:
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
P.A. No. 1810 K/SWA SA-25 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: Month and Year of Advance Payment Base Scheduled Delivery Price per Aircraft Block A Aircraft*** November 1997 October 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-25 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-25 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 January 2004 May 2004 P.A. No. 1810 3-4 K/SWA SA-25 June 2004 July 2004 August 2004 September 2004 October 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 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 P.A. No. 1810 3-5 K/SWA SA-25 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-25 6-1162-RLL-933R16 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Letter Agreement No. 6-1162-RLL-933R16 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:
Number of Option Month and Year Option Aircraft of Delivery Aircraft Block June 2004 Two (2) M July 2004 Two (2) M September 2004 One (1) M October 2004 Four (4) M November 2004 Two (2) M December 2004 Two (2) M
P.A. No. 1810 K/SWA SA-25 Southwest Airlines Co. 6-1162-RLL-933R16 Page 2
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
P.A. No. 1810 K/SWA SA-25 Southwest Airlines Co. 6-1162-RLL-933R16 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 forthin the following schedule:
Option Year of Number of Aircraft Delivery Option Aircraft Block 2007 Twenty (20) Q 2008 Twenty (20) R 2009 Six (6) S 2009-2012 One hundred seventy one V (171)
2.2 The two hundred seventeen (217) Rollover Option Aircraft may be converted into Option Aircraft or firm Aircraft, from time to time, in any of the following ways: 2.2.1 Buyer can exercise any Option for an Option Aircraft described in Article 1 above, and will be offered the right to convert one Rollover Option Aircraft into an Option Aircraft for each Option exercised. 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. P.A. No. 1810 K/SWA SA-25 Southwest Airlines Co. 6-1162-RLL-933R16 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 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-25 Southwest Airlines Co. 6-1162-RLL-933R16 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). Month and Year Advance Payment Base of Delivery Price per Option Aircraft Block M Aircraft*** June 2004 October 2004 July 2004 September 2004 November 2004 December 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 P.A. No. 1810 K/SWA SA-25 Southwest Airlines Co. 6-1162-RLL-933R16 Page 6 June 2006 July 2006 August 2006 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 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-25 Southwest Airlines Co. 6-1162-RLL-933R16 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 K/SWA SA-25 Southwest Airlines Co. 6-1162-RLL-933R16 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-25 Southwest Airlines Co. 6-1162-RLL-933R16 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-25 Southwest Airlines Co. 6-1162-RLL-933R16 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:December 21, 2002 SOUTHWEST AIRLINES CO. By /s/ Laura Wright Its VP Finance & Treasurer Attachments P.A. No. 1810 K/SWA SA-25 Attachment A to 6-1162-RLL-933R16 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-25 Attachment A to 6-1162-RLL-933R16 Page 2 2. Price Description 2.1 Price Elements Per Aircraft
1 2 3 AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3 BLOCK M June 2004 *** *** *** *** July 2004 *** *** *** *** September 2004 *** *** *** *** October 2004 *** *** *** *** November 2004 *** *** *** *** December 2004 *** *** *** *** BLOCK N February 2005 *** *** *** *** March 2005 *** *** *** *** April 2005 *** *** *** *** May 2005 *** *** *** *** June 2005 *** *** *** *** July 2005 *** *** *** *** August 2005 *** *** *** *** September 2005 *** *** *** *** October 2005 *** *** *** *** November 2005 *** *** *** *** December 2005 *** *** *** *** BLOCK O January 2006 *** *** *** *** March 2006 *** *** *** *** April 2006 *** *** *** *** May 2006 *** *** *** *** June 2006 *** *** *** *** July 2006 *** *** *** *** August 2006 *** *** *** *** October 2006 *** *** *** *** November 2006 *** *** *** *** December 2006 *** *** *** ***
P.A. No. 1810 K/SWA SA-25 Attachment A to 6-1162-RLL-933R16 Page 3
AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3 BLOCK P April 2007 *** *** *** *** May 2007 *** *** *** *** June 2007 *** *** *** *** July 2007 *** *** *** *** August 2007 *** *** *** *** September 2007 *** *** *** *** October 2007 *** *** *** *** November 2007 *** *** *** *** December 2007 *** *** *** ***
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 *** *** *** ***
2.2 PriceAdjustments 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-25 Attachment A to 6-1162-RLL-933R16 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 P.A. No. 1810 K/SWA SA-25 Attachment A to 6-1162-RLL-933R16 Page 5 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-25 6-1162-KJJ-055R1 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Letter Agreement No. 6-1162-KJJ-055R1 to Purchase Agreement No. 1810 - Structural Matters Reference: Purchase Agreement No. 1099 Purchase Agreement No. 1405 Purchase Agreement No. 1510 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). All terms used herein and in the Agreement, and not defined herein, will have the same meaning as in the Agreement. 1. *** 2. *** 3. *** P.A. No. 1810 SA-25 Southwest Airlines Co. 6-1162-KJJ-055R1 Page 2 4. 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/ J.A. McGarvey_____________ Its _Attorney in Fact____________ ACCEPTED AND AGREED TO as of this Date: December 21, 2002 SOUTHWEST AIRLINES CO. By _/s/ Laura Wright______________ Its _VP Finance & Treasurer______ P.A. No. 1810 SA-25 Attachment B-*** Boeing Model 737-300 Aircraft *** *** Attachment B to Letter Agreement 6-1162-KJJ-055R1 SA-25 P.A. No. 1810 Attachment C-*** Boeing Model 737-500 Aircraft *** *** Attachment C to Letter Agreement 6-1162-KJJ-055R1 SA-25 P.A. No. 1810 Supplemental Agreement No. 26 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 February 26 , 2003, 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) and; WHEREAS, Buyer has agreed to exercise two (2) June 2004 Block M Option Aircraft (as Block K Aircraft) and; WHEREAS, Buyer has agreed to accelerate a Block L Option Aircraft from April 2003 to March 2003; 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-26-1 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-933R16 entitled "Option Aircraft," is deleted in its entirety and replaced by a new Letter Agreement No. 6-1162- RLL-933R17 which is attached hereto and is incorporated into the Agreement by this reference. NOTE - Buyer now has eight (8) 'banked' Rollover Option Aircraft as a result of the option exercises covered by Supplemental Agreement No. 21, 23, 24 and 26 that may be converted to Option Aircraft at a future date subject to the terms of Letter Agreement No. 6-1162-RLL-933R17. 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-four(244) Model 737-7H4 Aircraft, seventy-nine (79) 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 February 2003 are: *** for the June 2004 aircraft *** for the June 2004 aircraft *** for the March 2003 aircraft *** Total Buyer will pay the *** directly to Boeing upon execution of this agreement. P.A. No. 1810 SA-26-2 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:_VP Finance & Treasurer P.A. No. 1810 SA-26-3 K/SWA
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-26 3. Price of Aircraft 3-1 SA-26 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
P.A. No. 1810 I K/SWA SA-26
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
LETTER AGREEMENTS 1810-1 Waiver of Aircraft Demonstration Flight P.A. No. 1810 ii K/SWA SA-26
TABLE OF CONTENTS CON'T SA Number RESTRICTED LETTER AGREEMENTS 6-1162-RLL-932R2 Promotional Support SA-13 6-1162-RLL-933R17 Option Aircraft SA-26 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
P.A. No. 1810 iii K/SWA SA-26
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-055R1 Structural Matters SA-25 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
P.A. No. 1810 iv K/SWA SA-26 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:
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-26 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) June 2004 Two (2) 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 Two (2) July 2003 One (1) August 2003 Two (2) Block T Aircraft November 2001 One (1) February 2002 One (1) January 2004 Two (2) May 2004 One (1) June 2004 Three (3) July 2004 One (1) August 2004 Two (2) September 2004 Three (3) October 2004 One (1) P.A. No. 1810 2-2 K/SWA SA-26 November 2004 One (1) December 2004 One (1) 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)
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 P.A. No. 1810 2-3 K/SWA SA-26 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. 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-26 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:
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
P.A. No. 1810 3-1 K/SWA SA-26 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: 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-26 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*** November 2001 P.A. No. 1810 3-3 K/SWA SA-26 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 June 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 July 2003 August 2003 Block T Aircraft*** November 2001 January 2004 February 2002 May 2004 June 2004 July 2004 P.A. No. 1810 3-4 K/SWA SA-26 August 2004 September 2004 October 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 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 P.A. No. 1810 3-5 K/SWA SA-26 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-26 6-1162-RLL-933R17 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Letter Agreement No. 6-1162-RLL-933R17 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:
Number of Option Month and Year Option Aircraft of Delivery Aircraft Block July 2004 Two (2) M September 2004 One (1) M October 2004 Four (4) M November 2004 Two (2) M December 2004 Two (2) M P.A. No. 1810 K/SWA SA-26 Southwest Airlines Co. 6-1162-Rll-933R17 Page 2 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
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:
Number of Option Year of Option Aircraft Delivery Aircraft Block 2007 Twenty (20) Q 2008 Twenty (20) R 2009 Six (6) S 2009-2012 One hundred seventy one V (171)
2.2 The two hundred seventeen (217) Rollover Option Aircraft may be converted into Option Aircraft or firm Aircraft, from time to time, in any of the following ways: 2.2.1 Buyer can exercise any Option for an Option Aircraft described in Article 1 above, and will be offered the right to convert one Rollover Option Aircraft into an Option Aircraft for each Option exercised. 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. P.A. No. 1810 K/SWA SA-26 Southwest Airlines Co. 6-1162-RLL-933R17 Page 3 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 2006 are not currently available. The estimated Advance Payment Base Prices shown in paragraph 3.3 below and in paragraph 2.1 of P.A. No. 1810 K/SWA SA-26 Southwest Airlines Co. 6-1162-RLL-933R17 Page 4 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. 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). Month and Year Advance Payment Base of Delivery Price per Option Aircraft Block M Aircraft*** July 2004 September 2004 October 2004 November 2004 December 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-26 Southwest Airlines Co. 6-1162-RLL-933R17 Page 6 July 2006 August 2006 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 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 P.A. No. 1810 K/SWA SA-26 Southwest Airlines Co. 6-1162-RLL-933R17 Page 7 set forth in paragraph 3 of Attachment A. The Deposits for the Option Aircraft will be refunded to Buyer, without interest, if the parties do not enter into a definitive Agreement for the Aircraft. In the event that, after the parties enter into a definitive agreement to purchase the Aircraft, Buyer does not exercise its Options to purchase the Option Aircraft pursuant to the terms and conditions set forth herein, Boeing will be entitled to retain the Deposits for the Option Aircraft except as provided in paragraph 6 herein. 4.2 Advance payments in the amount of 30% of the advance payment base price will be payable on the Option Aircraft in accordance with paragraph 3 of Attachment A. The remainder of the Option Aircraft purchase price is due at the time of delivery of the Option Aircraft. 5. Option Exercise. 5.1 To exercise its Option, Buyer will give written or telegraphic notice thereof to Boeing on or before 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-26 Southwest Airlines Co. 6-1162-RLL-933R17 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-26 Southwest Airlines Co. 6-1162-RLL-933R17 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-26 Southwest Airlines Co. 6-1162-RLL-933R17 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:February 26, 2003 SOUTHWEST AIRLINES CO. By /s/ Laura Wright Its V.P. Finance & Treasurer Attachments P.A. No. 1810 K/SWA SA-26 Attachment A to 6-1162-RLL-933R17 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-26 Attachment A to 6-1162-RLL-933R17 Page 2 2. Price Description 2.1 Price Elements Per Aircraft
1 2 3 AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3 BLOCK M June 2004 *** *** *** *** July 2004 *** *** *** *** September 2004 *** *** *** *** October 2004 *** *** *** *** November 2004 *** *** *** *** December 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 *** *** *** ***
P.A. No. 1810 K/SWA SA-26 Attachment A to 6-1162-RLL-933R17 Page 3
AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3 BLOCK P April 2007 *** *** *** *** May 2007 *** *** *** *** June 2007 *** *** *** *** July 2007 *** *** *** *** August 2007 *** *** *** *** September 2007 *** *** *** *** October 2007 *** *** *** *** November 2007 *** *** *** *** December 2007 *** *** *** ***
AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1999$) 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 *** *** *** ***
2.2 Price Adjustments For Option Aircraft Delivering From January 2007 through December 2012. P.A. No. 1810 K/SWA SA-26 Attachment A to 6-1162-RLL-933R17 Page 4 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. 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. If all BFE except developmental avionics is converted to SPE, Boeing will waive the 10% fee. P.A. No. 1810 K/SWA SA-26 Attachment A to 6-1162-RLL-933R17 Page 5 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. Supplemental Agreement No. 27 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 27, 2003, 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) and; WHEREAS, Buyer has agreed to exercise two (2) July 2004 Block M Option Aircraft (as Block K Aircraft) and; WHEREAS, Boeing and Buyer have agreed to revise the language of the third "WHEREAS" found in Supplemental Agreement 26 dated February 26, 2003; NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Agreement as follows: 1. Revise the language of the third "WHEREAS" found in Supplemental Agreement 26 dated February 26, 2003 by deleting the word Option such that the phrase reads: "WHEREAS, Buyer has agreed to accelerate a Block L Aircraft from April 2003 to March 2003. ***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-27-1 K/SWA 2. 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. 3. 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. 4. 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. 5. Letter Agreement No. 6-1162-RLL-933R17 entitled "Option Aircraft," is deleted in its entirety and replaced by a new Letter Agreement No. 6-1162- RLL-933R18 which is attached hereto and is incorporated into the Agreement by this reference. NOTE - Buyer now has ten (10) 'banked' Rollover Option Aircraft as a result of the option exercises covered by Supplemental Agreement No. 21, 23, 24, 26 and 27 that may be converted to Option Aircraft at a future date subject to the terms of Letter Agreement No. 6-1162-RLL-933R18. 6. 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-four(246) Model 737-7H4 Aircraft, seventy-seven (77) 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. 7. The Advance Payments due upon signing assuming execution of this Supplemental Agreement in March 2003 are: *** for the July 2004 aircraft *** for the July 2004 aircraft *** Total Buyer will pay the *** directly to Boeing upon execution of this agreement. P.A. No. 1810 SA-27-2 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: V.P. Finance & Treasurer P.A. No. 1810 SA-27-3 K/SWA
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-27 3. Price of Aircraft........................ 3-1 SA-27 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
P.A. No. 1810 i K/SWA SA-27
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 LETTER AGREEMENTS 1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii K/SWA SA-27
TABLE OF CONTENTS CON'T SA Number RESTRICTED LETTER AGREEMENTS 6-1162-RLL-932R2 Promotional Support SA-13 6-1162-RLL-933R18 Option Aircraft SA-27 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
P.A. No. 1810 iii K/SWA SA-27
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-055R1 Structural Matters SA-25 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
P.A. No. 1810 iv K/SWA SA-27 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:
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) P.A. No. 1810 2-1 K/SWA SA-27 April 2002 Two (2) 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) June 2004 Two (2) July 2004 Two (2) 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 Two (2) July 2003 One (1) August 2003 Two (2) Block T Aircraft November 2001 One (1) February 2002 One (1) January 2004 Two (2) May 2004 One (1) June 2004 Three (3) July 2004 One (1) August 2004 Two (2) September 2004 Three (3) P.A. No. 1810 2-2 K/SWA SA-27 October 2004 One (1) November 2004 One (1) December 2004 One (1) 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)
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-27 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-27 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:
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
P.A. No. 1810 3-1 K/SWA SA-27 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: 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 Block C Aircraft*** P.A. No. 1810 3-2 K/SWA SA-27 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*** November 2001 December 2001 P.A. No. 1810 3-3 K/SWA SA-27 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 June 2004 July 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 July 2003 August 2003 Block T Aircraft*** November 2001 February 2002 January 2004 May 2004 June 2004 July 2004 August 2004 P.A. No. 1810 3-4 K/SWA SA-27 September 2004 October 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 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 P.A. No. 1810 3-5 K/SWA SA-27 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-27 6-1162-RLL-933R18 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Letter Agreement No. 6-1162-RLL-933R18 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) seventy-seven (77) 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:
Number of Option Month and Year Option Aircraft of Delivery Aircraft Block September 2004 One (1) M October 2004 Four (4) M November 2004 Two (2) M December 2004 Two (2) M P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 Page 2 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
P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 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:
Option Year of Number of Aircraft Delivery Option Aircraft Block 2007 Twenty (20) Q 2008 Twenty (20) R 2009 Six (6) S 2009-2012 One hundred seventy one V (171)
2.2 The two hundred seventeen (217) Rollover Option Aircraft may be converted into Option Aircraft or firm Aircraft, from time to time, in any of the following ways: 2.2.1 Buyer can exercise any Option for an Option Aircraft described in Article 1 above, and will be offered the right to convert one Rollover Option Aircraft into an Option Aircraft for each Option exercised. 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. P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 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 2006 are not currently available. The estimated Advance Payment Base Prices shown in paragraph 3.3 below and in paragraph 2.1 of P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 Page 5 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. 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 (expresssed in 1992 STE dollars) and for BFE is *** per Aircraft (expressed in delivery year dollars). Month and Year Advance Payment Base of Delivery Price per Option Aircraft Block M Aircraft*** September 2004 October 2004 November 2004 December 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 P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 Page 6 August 2006 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 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 P.A. No. 1810 K/SWA SA-27 Southwest Airlines Co. 6-1162-RLL-933R18 Page 7 3 of Attachment A. The Deposits for the Option Aircraft will be refunded to Buyer, without interest, if the parties do not enter into a definitive Agreement for the Aircraft. In the event that, after the parties enter into a definitive agreement to purchase the Aircraft, Buyer does not exercise its Options to purchase the Option Aircraft pursuant to the terms and conditions set forth herein, Boeing will be entitled to retain the Deposits for the Option Aiircraft 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-27 Southwest Airlines Co. 6-1162-RLL-933R18 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 7737-700 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-27 Southwest Airlines Co. 6-1162-RLL-933R18 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-27 Southwest Airlines Co. 6-1162-RLL-933R18 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:March 27, 2003 SOUTHWEST AIRLINES CO. By /s/ Laura Wright Its V.P. Finance & Treasurer Attachments Attachment A to 6-1162-RLL-933R18 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-27 Attachment A to 6-1162-RLL-933R18 Page 2 2. Price Description 2.1 Price Elements Per Aircraft
1 2 3 AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1999$) ESCALATION SHARING 1 + 2 + 3 BLOCK M September 2004 *** *** *** *** October 2004 *** *** *** *** November 2004 *** *** *** *** December 2004 *** *** *** *** BLOCK N February 2005 *** *** *** *** March 2005 *** *** *** *** April 2005 *** *** *** *** May 2005 *** *** *** *** June 2005 *** *** *** *** July 2005 *** *** *** *** August 2005 *** *** *** *** September 2005 *** *** *** *** October 2005 *** *** *** *** November 2005 *** *** *** *** December 2005 *** *** *** *** BLOCK O January 2006 *** *** *** *** March 2006 *** *** *** *** April 2006 *** *** *** *** May 2006 *** *** *** *** June 2006 *** *** *** *** July 2006 *** *** *** *** August 2006 *** *** *** *** October 2006 *** *** *** *** November 2006 *** *** *** *** December 2006 *** *** *** ***
AIRCRAFT & ADV. PMT. AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE DELIVERY FEATURES PRICE ESTIMATED ESCALATION (ELEMENTS) MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3 P.A. No. 1810 K/SWA SA-27 Attachment A to 6-1162-RLL-933R18 Page 3 BLOCK P April 2007 *** *** *** *** May 2007 *** *** *** *** June 2007 *** *** *** *** July 2007 *** *** *** *** August 2007 *** *** *** *** September 2007 *** *** *** *** October 2007 *** *** *** *** November 2007 *** *** *** *** December 2007 *** *** *** ***
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 *** *** *** ***
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-27 Attachment A to 6-1162-RLL-933R18 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 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. If all BFE except developmental avionics is converted to SPE, Boeing will waive the 10% fee. P.A. No. 1810 K/SWA SA-27 Attachment A to 6-1162-RLL-933R18 Page 5 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-27 Supplemental Agreement No. 28 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 June 6, 2003, 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) and; WHEREAS, Buyer has agreed to exercise one (1) September 2004 Block M Option Aircraft (as Block K Aircraft) and; WHEREAS, Buyer has agreed to accelerate Block I Aircraft, one (1) September 2003 to August 2003 and two (2) October 2003 to September 2003 and; 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-28-1 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-933R18 entitled "Option Aircraft," is deleted in its entirety and replaced by a new Letter Agreement No. 6-1162- RLL-933R19 which is attached hereto and is incorporated into the Agreement by this reference. NOTE - Buyer now has eleven (11) 'banked' Rollover Option Aircraft as a result of the option exercises covered by Supplemental Agreement No. 21, 23, 24, 26, 27 and 28 that may be converted to Option Aircraft at a future date subject to the terms of Letter Agreement No. 6-1162-RLL-933R19. 5. The Agreement is amended by adding Table 1 and Table 2 to the Agreement, attached hereto and incorporated herein by this reference. 6. 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-four(247) Model 737-7H4 Aircraft, seventy-six (76) 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. 7. The Advance Payments due upon signing assuming execution of this Supplemental Agreement in May 2003 are: ***for the September 2004 aircraft Buyer will pay the *** directly to Boeing upon execution of this agreement. 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. P.A. No.1810 SA-28-2 K/SWA THE BOEING COMPANY SOUTHWEST AIRLINES CO. By: /s/ J. A. McGarvey By: /s/ Laura Wright Its: Attorney-In-Fact Its:_V.P. Finance & Treasurer P.A. No.1810 SA-28-3 K/SWA
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-28 3. Price of Aircraft 3-1 SA-28 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
P.A. No. 1810 i K/SWA SA-28
TABLE OF CONTENTS CON'T SA Number TABLE 1. Aircraft Information Table SA-28 2. Option Aircraft Information Table SA-28 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 LETTER AGREEMENTS 1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii K/SWA SA-28
TABLE OF CONTENTS CON'T SA Number RESTRICTED LETTER AGREEMENTS 6-1162-RLL-932R2 Promotional Support SA-13 6-1162-RLL-933R19 Option Aircraft SA-28 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
P.A. No. 1810 iii K/SWA SA-28
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 Basic Price SA-1 6-1162-RLL-2073 Maintenance Training Matters SA-1 6-1162-KJJ-054 Business Matters SA-13 6-1162-KJJ-055R1 Structural Matters SA-25 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
P.A. No. 1810 iv K/SWA SA-28 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 schedule contained in Table 1. 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. 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 2-1 K/SWA SA-28 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 in Table 1 of the Agreement. 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. P.A. No. 1810 3-1 K/SWA SA-28 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 in Table 1. 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 Table 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 3-2 K/SWA SA-28 6-1162-RLL-933R19 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Letter Agreement No. 6-1162-RLL-933R19 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) the additional Model 737-7H4 aircraft as described in paragraph 1 of Attachment A hereto and listed in Table 2 of the Agreement(Option Aircraft) and Model 737-7H4 Rollover Option Aircraft summarized in Table 2 of the Agreement (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 Table 2 of the Agreement. 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 Table 2 of the Agreement. 2.2 The 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 P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 2 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. 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 resuulting 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. P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 3 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. 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) or *** per Aircraft (expressed in 1999 STE dollars) and for BFE is *** per Aircraft (expressed in delivery year dollars). Table 2 in the Agreement lists the Advance Payment Base Price per Option Aircraft. 3.4 The Option Aircraft purchase price will be the applicable basic price thereof at the time of Option Aircraft delivery adjusted in accordance P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 4 with Boeing's Aircraft escalation provisions contained in the definitive agreement to purchase the Option Aircraft. The purchase price will include the price for Seller Purchased Equipment (SPE) if Buyer has elected to change Buyer Furnished Equipment (BFE) to SPE. 4. Option Aircraft Payment. 4.1 In consideration of the granting of the Options as set forth herein, on or before the date Boeing and Buyer enter into a definitive agreement to purchase the Aircraft, Buyer will pay a deposit to Boeing of *** for each Option Aircraft (Deposit). In the event Buyer exercises its Options herein, the amount of the Deposit will be credited against the first advance payment due for such Option Aircraft pursuant to the advance payment schedule set forth in paragraph 3 of Attachment A. The Deposits for the Option Aircraft will be refunded to Buyer, without interest, if the parties do not enter into a definitive Agreement for the Aircraft. In the event that, after the parties enter into a definitive agreement to purchase the Aircraft, Buyer does not exercise its Options to purchase the Option Aircraft pursuant to the terms and conditions set forth herein, Boeing will be entitled to retain the Deposits for the Option Aircraft except as provided in paragraph 6 herein. 4.2 Advance payments in the amount of 30% of the advance payment base price will be payable on the Option Aircraft in accordance with paragraph 3 of Attachment A. The remainder of the Option Aircraft purchase price is due at the time of delivery of the Option Aircraft. 5. Option Exercise. 5.1 To exercise its Option, Buyer will give written or telegraphic notice thereof to Boeing on or before 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. Table 2 of the Agreement lists the Option Exercise dates. 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 P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 5 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 definittive 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; P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 6 (iii) exercise of an Option to purchase an Option Aircraft pursuant to the terms hereof. Any termination of an Option to purchase by Boeing which is based on the termination of the purchase of Aircraft under the Agreement will be on a one- for-one basis, for each Aircraft so terminated. Any cancellation of an Option to purchase which is based on failure to make the required Deposit or to exercise the Option to purchase shall only apply to the Option Aircraft so canceled. Termination of an Option to purchase provided by this letter agreement will be caused by either party giving written notice to the other within 10 days after the applicable date. Upon receipt of such notice, all rights and obligations of the parties with respect to an Option Aircraft for which the Option to purchase has been terminate will thereupon terminate. If termination is result of a revision of an Option exercise date by Boeing pursuant to paragraph 5.2, Boeing will promptly refund to Buyer, with interest, any payments received from Buyer, including the Deposit, with respect to the Option Aircraft for which the Option is terminated. If termination is for any other reason, Boeing will promptly refund to Buyer, without interest, any payments received from Buyer with respect to the affected Option Aircraft, except the Deposit, which Buyer may apply to any model Boeing aircraft purchased by Buyer from Boeing at a future date. P.A. No. 1810 K/SWA SA-28 Southwest Airlines Co. 6-1162-RLL-933R19 Page 7 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:June 6, 2003 SOUTHWEST AIRLINES CO. By /s/ Laura Wright Its V.P. Finance & Treasurer Attachments P.A. No. 1810 K/SWA SA-28 Attachment to 6-1162-RLL-933R19 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-28 Attachment to 6-1162-RLL-933R19 Page 2 2. Price Description 2.1 Price Elements Per Aircraft. The Aircraft Basic Price detailed in Table 2 of the Agreement is added to the Estimated Escalation and Estimated Escalation Sharing to determine the Advance Payment Base Price of the Option Aircraft (also listed in Table 2 of the Agreement). At the signing of this Letter Agreement, the Estimated Escalation Sharing is zero for all Option Aircraft. 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. 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 $38,900 (July 1999 STE) per year or portion thereof starting in January 2008. P.A. No. 1810 K/SWA SA-28 Attachment to 6-1162-RLL-933R19 Page 3 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. P.A. No. 1810 K/SWA SA-28 Attachment to 6-1162-RLL-933R19 Page 4 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. Table 1 to Purchase Agreement No. 1810 Aircraft Information Table
Base Aircraft Special Aircraft Basic Base Price Features Price Year Dollars Block A, B, C, D & E *** *** *** July 1992 Aircraft Block F & G Aircraft *** *** *** July 1992 Block H Aircraft *** *** *** July 1992 Block I Aircraft *** *** *** July 1992 Block J Aircraft *** *** *** July 1992 Block K Aircraft *** *** *** July 1992 Block L Aircraft *** *** *** July 1992 Block T Aircraft *** *** *** July 1999
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Dec-2000 2 E *** Jan-2001 1 E *** Feb-2001 1 E *** Mar-2001 2 E *** Jun-2001 3 E *** Sep-2001 3 E *** Oct-1998 1 F *** Nov-1998 2 F *** Dec-1998 2 F *** Mar-1999 2 G *** Jun-1999 2 H *** Jul-1999 1 H *** Aug-1999 1 H *** Sep-1999 2 H *** Oct-1999 1 H *** Mar-2000 1 H *** Apr-2000 2 H *** Sep-2000 1 H *** Oct-2000 2 H *** Mar-2001 2 H *** Apr-2001 1 H *** Oct-2001 3 H *** Nov-2001 2 I *** Dec-2001 1 I *** Jan-2002 1 I *** Mar-2002 4 I *** Apr-2002 2 I *** Dec-2002 2 I *** May-2003 1 I ***
SWA Page 1 SA-28 Table 1 to Purchase Agreement No. 1810 Aircraft Information Table
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Jun-2003 2 I *** Jul-2003 1 I *** Aug-2003 1 I *** Sep-2003 3 I *** Nov-2002 1 J *** Dec-2002 1 J *** Nov-2003 2 J *** Dec-2003 2 J *** Mar-2004 1 I *** Mar-2004 1 K *** Apr-2004 3 K *** May-2004 1 K *** Jun-2004 2 K *** Jul-2004 2 K *** Sep-2004 1 K *** Oct-1999 1 L *** Nov-1999 2 L *** Dec-1999 1 L *** Jun-2000 3 L *** Jul-2000 3 L *** Sep-2000 1 L *** Oct-2000 1 L *** Nov-2000 4 L *** Dec-2000 1 L *** Jan-2001 1 L *** Feb-2001 1 L *** Jul-2001 1 L *** Sep-2001 1 L *** Oct-2001 1 L *** Mar-2003 2 L *** Jul-2003 1 L *** Aug-2003 2 L *** Nov-2001 1 T *** Feb-2002 1 T *** Jan-2004 2 T *** May-2004 1 T *** Jun-2004 3 T *** Jul-2004 1 T *** Aug-2004 2 T *** Sep-2004 3 T *** Oct-2004 1 T *** Nov-2004 1 T *** Dec-2004 1 T *** Jan-2005 5 T *** Feb-2005 2 T *** Mar-2005 1 T *** Apr-2005 2 T *** May-2005 1 T ***
SWA Page 2 SA-28 Table 1 to Purchase Agreement No. 1810 Aircraft Information Table
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Jun-2005 3 T *** Jul-2005 2 T *** Aug-2005 1 T *** Sep-2005 2 T *** Oct-2005 1 T *** Nov-2005 2 T *** Dec-2005 2 T *** Feb-2006 4 T *** May-2006 3 T *** Jun-2006 4 T *** Jul-2006 1 T *** Aug-2006 3 T *** Sep-2006 3 T *** Nov-2006 2 T *** Dec-2006 2 T *** Jan-2007 2 T *** Feb-2007 3 T *** Mar-2007 2 T *** Apr-2007 2 T *** May-2007 2 T *** Jun-2007 2 T *** Jul-2007 2 T *** Aug-2007 2 T *** Sep-2007 2 T *** Oct-2007 2 T *** Nov-2007 2 T *** Dec-2007 2 T *** Jan-2008 1 T *** Feb-2008 1 T *** Mar-2008 1 T *** Apr-2008 1 T *** May-2008 1 T *** Jun-2008 1 T ***
SWA Page 3 SA-28 Table 2 to Purchase Agreement No. 1810 (Letter Agreement No. 6-112-RLL-933R19) Option Aircraft Information Table Price Description of Option Aircraft:
Base Aircraft Special Aircraft Basic Base Year Price Features Price Dollars Block M Option *** *** *** July 1992 Aircraft Block N Option *** *** *** July 1992 Aircraft Block O Option *** *** *** July 1992 Aircraft Block P Option *** *** *** July 1992 Aircraft Block U Option *** *** *** July 1999 Aircraft
Delivery of Rollover Option Aircraft:
Year of Number of Option Aircraft Block Delivery Option Aircraft 2007 Twenty (20) Q 2008 Twenty (20) R 2009 Six (6) S 2009- One Hundred V 2012 Seventy-One (171)
Aircraft Number of Option Adv Payment Base Delivery Option Aircraft Price Per Mo. & Yr. Aircraft Block Option Aircraft Option Exercise Oct-2004 4 M *** June 1, 2003 Nov-2004 2 M *** July 1, 2003 Dec-2004 2 M *** August 1, 2003 Feb-2005 1 N *** October 1, 2003 Mar-2005 4 N *** November 1, 2003 Apr-2005 2 N *** December 1, 2003 May-2005 1 N *** January 1, 2004 Jun-2005 1 N *** February 1, 2004 Jul-2005 1 N *** March 1, 2004 Aug-2005 1 N *** April 1, 2004 Sep-2005 3 N *** May 1, 2004 Oct-2005 2 N *** June 1, 2004 Nov-2005 1 N *** July 1, 2004
SWA Page 1 SA-28 Table 2 to Purchase Agreement No. 1810 (Letter Agreement No. 6-112-RLL-933R19) Option Aircraft Information Table
Aircraft Number of Option Adv Payment Base Delivery Option Aircraft Price Per Mo. & Yr. Aircraft Block Option Aircraft Option Exercise Dec-2005 1 N *** August 1, 2004 Jan-2006 2 O *** September 1, 2004 Mar-2006 3 O *** November 1, 2004 Apr-2006 2 O *** December 1, 2004 May-2006 2 O *** January 1, 2005 Jun-2006 1 O *** February 1, 2005 Jul-2006 2 O *** March 1, 2005 Aug-2006 1 O *** April 1, 2005 Oct-2006 1 O *** June 1, 2005 Nov-2006 1 O *** July 1, 2005 Dec-2006 1 O *** August 1, 2005 Apr-2007 1 P *** December 1, 2005 May-2007 1 P *** January 1, 2006 Jun-2007 1 P *** February 1, 2006 Jul-2007 1 P *** March 1, 2006 Aug-2007 1 P *** April 1, 2006 Sep-2007 1 P *** May 1, 2006 Oct-2007 1 P *** June 1, 2006 Nov-2007 1 P *** July 1, 2006 Dec-2007 1 P *** August 1, 2006 Jan-2008 2 U *** September 1, 2006 Feb-2008 3 U *** October 1, 2006 Mar-2008 2 U *** November 1, 2006 Apr-2008 2 U *** December 1, 2006 May-2008 2 U *** January 1, 2007 Jun-2008 2 U *** February 1, 2007 Jul-2008 2 U *** March 1, 2007 Aug-2008 2 U *** April 1, 2007 Sep-2008 2 U *** May 1, 2007 Oct-2008 2 U *** June 1, 2007 Nov-2008 2 U *** July 1, 2007 Dec-2008 2 U *** August 1, 2007
SWA Page 2 SA-28 Supplemental Agreement No. 29 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 June 30, 2003, 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) and; WHEREAS, Buyer has agreed to exercise the following Option Aircraft in the following delivery positions as the following blocks and;
Quantity Option Aircraft Exercised Delivery Delivery Block Four (4) October 2004 October 2004 K Two (2) November 2004 November 2004 T Two (2) December 2004 December 2004 T One (1) March 2005 April 2004 T One (1) July 2005 April 2004 T Two (2) September 2005 June 2004 T One (1) October 2005 June 2004 T One (1) December 2005 July 2004 T
***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-29-1 K/SWA WHEREAS, Buyer has agreed to accelerate Block T Aircraft, one (1) November 2005 to February 2004 and one (1) December 2005 to April 2004 and; WHEREAS, Boeing and Buyer have agreed to convert all remaining Block M, N, O, and P Option Aircraft to Block U type pricing and escalation and similarly for all Rollover Option Aircraft and; 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. Table 1 is deleted in its entirety and replaced by a new Table 1 which is attached hereto and is incorporated into the Agreement by this reference. 3. Table 2 is deleted in its entirety and replaced by a new Table 2 which is attached hereto and is incorporated into the Agreement by this reference. NOTE - Buyer now has twenty-five (25) 'banked' Rollover Option Aircraft as a result of the option exercises covered by Supplemental Agreement No. 21, 23, 24, 26, 27, 28 and 29 that may be converted to Option Aircraft at a future date subject to the terms of Letter Agreement No. 6-1162-RLL-933R19. 4. Letter Agreement No. 6-1162-JMG-669 entitled "Special Matters," is attached hereto and is hereby incorporated into the Agreement by this reference. 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 sixty-one (261) Model 737-7H4 Aircraft, sixty-two (62) Model 737-7H4 Option Aircraft andd 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 June 2003 are: *** for the October 2004 aircraft *** for the April 2004 aircraft *** for the June 2004 aircraft *** for the July 2004 aircraft *** for the November 2004 aircraft P.A. No. 1810 SA-29-2 K/SWA *** for the December 2004 aircraft *** Total Buyer will pay the *** directly to Boeing upon execution of this agreement. P.A. No. 1810 SA-29-3 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/ Michael S. Anderson By: /s/ Deborah Ackerman Its: Attorney-In-Fact Its: VP-General Counsel P.A. No. 1810 SA-29-4 K/SWA
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-28 3. Price of Aircraft 3-1 SA-28 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
P.A. No. 1810 i SA-29 K/SWA TABLE OF CONTENTS Page SA Number Number
TABLE 1. Aircraft Information Table SA-29 2. Option Aircraft Information Table SA-29 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 LETTER AGREEMENTS 1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii SA-29 K/SWA
TABLE OF CONTENTS Page SA Number Number RESTRICTED LETTER AGREEMENTS 6-1162-RLL-932R2 Promotional Support SA-13 6-1162-RLL-933R19 Option Aircraft SA-28 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
P.A. No. 1810 iii SA-29 K/SWA
TABLE OF CONTENTS Page SA Number 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-055R1 Structural Matters SA-25 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 6-1162-JMG-669 Special Matters SA-29
P.A. No. 1810 iv SA-29 K/SWA Table 1 to Purchase Agreement No. 1810 Aircraft Information Table
Base Aircraft Special Aircraft Basic Base Price Features Price Year Dollars Block A, B, C, D & E *** *** *** July 1992 Aircraft Block F & G Aircraft *** *** *** July 1992 Block H Aircraft *** *** *** July 1992 Block I Aircraft *** *** *** July 1992 Block J Aircraft *** *** *** July 1992 Block K Aircraft *** *** *** July 1992 Block L Aircraft *** *** *** July 1992 Block T Aircraft *** *** *** July 1999
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Dec-2000 2 E *** Jan-2001 1 E *** Feb-2001 1 E *** Mar-2001 2 E *** Jun-2001 3 E *** Sep-2001 3 E *** Oct-1998 1 F *** Nov-1998 2 F *** Dec-1998 2 F *** Mar-1999 2 G *** Jun-1999 2 H *** Jul-1999 1 H *** Aug-1999 1 H *** Sep-1999 2 H *** Oct-1999 1 H *** Mar-2000 1 H *** Apr-2000 2 H *** Sep-2000 1 H *** Oct-2000 2 H *** Mar-2001 2 H ***
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Oct-2001 3 H *** Nov-2001 2 I *** Dec-2001 1 I *** Jan-2002 1 I *** Mar-2002 4 I *** Apr-2002 2 I *** Dec-2002 2 I *** May-2003 1 I *** Jun-2003 2 I *** Jul-2003 1 I *** Aug-2003 1 I *** Sep-2003 3 I *** Nov-2002 1 J *** Dec-2002 1 J *** Nov-2003 2 J *** Dec-2003 2 J *** Mar-2004 1 I *** Mar-2004 1 K *** Apr-2004 3 K *** May-2004 1 K *** Jun-2004 2 K *** Jul-2004 2 K *** Sep-2004 1 K *** Oct 2004 4 K *** Oct-1999 1 L *** Nov-1999 2 L *** Dec-1999 1 L *** Jun-2000 3 L *** Jul-2000 3 L *** Sep-2000 1 L *** Oct-2000 1 L *** Nov-2000 4 L *** Dec-2000 1 L *** Jan-2001 1 L *** Feb-2001 1 L *** Jul-2001 1 L *** Sep-2001 1 L *** Oct-2001 1 L *** Mar-2003 2 L ***
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Jul-2003 1 L *** Aug-2003 2 L *** Nov-2001 1 T *** Feb-2002 1 T *** Jan-2004 2 T *** Feb-2004 1 T *** Apr-2004 3 T *** May-2004 1 T *** Jun-2004 3 T *** Jul-2004 1 T *** Aug-2004 2 T *** Sep-2004 3 T *** Oct-2004 1 T *** Nov-2004 1 T *** Dec-2004 1 T *** Jan-2005 5 T *** Feb-2005 2 T *** Mar-2005 1 T *** Apr-2005 2 T *** May-2005 1 T *** Jun-2005 3 T *** Jul-2005 2 T *** Aug-2005 1 T *** Sep-2005 2 T *** Oct-2005 1 T *** Nov-2005 2 T *** Dec-2005 2 T *** Feb-2006 4 T *** May-2006 3 T *** Jun-2006 4 T *** Jul-2006 1 T *** Aug-2006 3 T *** Sep-2006 3 T *** Nov-2006 2 T *** Dec-2006 2 T *** Jan-2007 2 T *** Feb-2007 3 T *** Mar-2007 2 T *** Apr-2007 2 T ***
Escalation Estimate Delivery Number of Aircraft Adv Payment Base Date Aircraft Block Price Per A/P Jul-2007 2 T *** Aug-2007 2 T *** Sep-2007 2 T *** Oct-2007 2 T *** Nov-2007 2 T *** Dec-2007 2 T *** Jan-2008 1 T *** Feb-2008 1 T *** Mar-2008 1 T *** Apr-2008 1 T *** May-2008 1 T *** Jun-2008 1 T ***
Table 2 to Purchase Agreement No. 1810 (Letter Agreement No. 6-1162-RLL-933R19) Option Aircraft Information Table Price Desctiption of Option Aircraft: Base Aircraft Special Aircraft Basic Base Year Price Features Price Dollars Block U Option *** *** *** July 1999 Aircraft
Delivery of Rollover Option Aircraft:
Year of Number of Option Aircraft Block Delivery Option Aircraft 2007 Twenty (20) Q 2008 Twenty (20) R 2009 Six (6) S 2009- One Hundred V 2012 Seventy-One (171) Remaining Option Aircraft: 62
Aircraft Number of Option Adv Payment Base Delivery Option Aircraft Price Per Mo. & Yr. Aircraft Block Option Aircraft Option Exercise Feb-2005 1 U *** October 1, 2003 Mar-2005 3 U *** November 1, 2003 Apr-2005 2 U *** December 1, 2003 May-2005 1 U *** January 1, 2004 Jun-2005 1 U *** February 1, 2004 Aug-2005 1 U *** April 1, 2004 Sep-2005 1 U *** May 1, 2004 Oct-2005 1 U *** June 1, 2004 Nov-2005 1 U *** July 1, 2004 Jan-2006 2 U *** September 1, 2004 Mar-2006 3 U *** November 1, 2004 Apr-2006 2 U *** December 1, 2004 May-2006 2 U *** January 1, 2005 Jun-2006 1 U *** February 1, 2005 Jul-2006 2 U *** March 1, 2005
Aircraft Number of Option Adv Payment Base Delivery Option Aircraft Price Per Mo. & Yr. Aircraft Block Option Aircraft Option Exercise Nov-2006 1 U *** July 1, 2005 Dec-2006 1 U *** August 1, 2005 Apr-2007 1 U *** December 1, 2005 May-2007 1 U *** January 1, 2006 Jun-2007 1 U *** February 1, 2006 Jul-2007 1 U *** March 1, 2006 Aug-2007 1 U *** April 1, 2006 Sep-2007 1 U *** May 1, 2006 Oct-2007 1 U *** June 1, 2006 Nov-2007 1 U *** July 1, 2006 Dec-2007 1 U *** August 1, 2006 Jan-2008 2 U *** September 1, 2006 Feb-2008 3 U *** October 1, 2006 Mar-2008 2 U *** November 1, 2006 Apr-2008 2 U *** December 1, 2006 May-2008 2 U *** January 1, 2007 Jun-2008 2 U *** February 1, 2007 Jul-2008 2 U *** March 1, 2007 Aug-2008 2 U *** April 1, 2007 Sep-2008 2 U *** May 1, 2007 Oct-2008 2 U *** June 1, 2007 Nov-2008 2 U *** July 1, 2007 Dec-2008 2 U *** August 1, 2007
6-1162-JMG-669 Southwest Airlines Co. P.O. Box 36611 - Love Field Dallas, Texas 75235 Subject: Special Matters 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 aircraft: *** All terms used and not defined herein will have the same meaning as in the Agreement. 1. *** 2. *** 3. *** 4. *** 5. *** Letter agreement no. 6-1162-DSF-483/737-7H4 dated August 19, 1998 is amended to *** 6. 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. Southwest Airlines Co. 6-1162-JMG-669 Page 2 Very truly yours, THE BOEING COMPANY By /s/ Michael S. Anderson Its Attorney-In-Fact ACCEPTED AND AGREED TO this date:June 30, 2003 SOUTHWEST AIRLINES CO. By /s/ Deborah Ackerman Its VP-General Counsel P.A. No. 1810 SA-29 K/SWA