SUP.AGT. 17 TO PUR.AGMT.
Published on December 31, 1969
Exhibit 10.3
Supplemental Agreement No. 17
to
Purchase Agreement No. 1405
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of the 8th day of June,
1994, by and between THE BOEING COMPANY, a Delaware corporation (hereinafter
called Boeing), and SOUTHWEST AIRLINES CO., a Texas corporation with its
principal office in the City of Dallas, State of Texas, (hereinafter called
Buyer);
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto entered into that certain Purchase
Agreement No. 1405, dated July 23, 1987, relating to the purchase and sale of
certain Boeing Model 737 aircraft (the "Aircraft"), which agreement, as amended,
together with all exhibits and specifications attached thereto and made a part
thereof, is hereinafter called the "Purchase Agreement;" and
WHEREAS, Buyer has agreed to purchase twelve (12) additional aircraft
delivering in 1995 and 1996;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
S17-1
1. Article 1, entitled "Subject Matter of Sale" is deleted in its
----------------------
entirety and replaced by the following new Article 1:
ARTICLE 1. Subject Matter of Sale.
----------------------
ARTICLE 1. Subject Matter of Sale.
----------------------
Subject to the provisions of this Agreement, Boeing shall sell
and deliver to Buyer, and Buyer shall purchase from Boeing eighteen (18) Boeing
Model 737-5H4 aircraft (hereinafter sometimes referred to as the "Block A and
Block B" Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-38500-3 (which includes CFM International, Inc. CFM56-3-B1
engines), dated July 23, 1987 (as described in Exhibit A attached to the
Purchase Agreement), twenty-three (23) Boeing Model 737-3H4 Aircraft
(hereinafter sometimes referred to as the Block C-1 and Block D-1 Substitute
Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-76300-2 Rev. T (which includes CFM International, Inc. CFM56-3-
B1 engines), dated September 19, 1989 (as described in Exhibit A-1 attached to
the Purchase Agreement), seven (7) Boeing Model 737-5H4 aircraft (hereinafter
sometimes referred to as the "Block C Aircraft) to be manufactured by Boeing in
accordance with Boeing Detail Specification D6-38500-3 (which includes CFM
International, Inc. CFM56-3-B1 engines), dated June 7, 1989, thirty-four (34)
Model 737-3H4 aircraft (hereinafter referred to as the "Block E Aircraft" to be
manufactured by Boeing in accordance with Boeing Detail Specification D6-76300-2
Rev. W (which includes CFM International, Inc. CFM56-3-B1 engines) dated May 22,
1992, (as described in Exhibit A-2 attached to the Purchase Agreement), three
(3) Model 737-3H4 aircraft (hereinafter referred to as the "Block F Aircraft")
to be manufactured by Boeing in accordance with Boeing Detail Specification D6-
76300-2 Rev. X (which includes CFM International, Inc. CFM56-3-B1 engines) dated
February 26, 1993, (as described in Exhibit A-3 attached to the Purchase
Agreement) and twelve (12) Model 737-3H4 aircraft (hereinafter referred to as
the "Block G Aircraft") to be manufactured by Boeing in accordance with Boeing
Detail Specification D6-76300-2 Rev. Z (which includes CFM International, Inc.
CFM56-3-B1 engines) dated February 15, 1994 (as further described in Exhibit A-4
attached to the Purchase Agreement) as such Detail Specifications may be
modified from time to time in accordance with the terms and conditions of
Article 7 herein. Such Detail Specifications as so modified are by this
reference incorporated in this Agreement and are hereinafter referred to as the
"Detail Specification." In connection with the sale and purchase of the
Aircraft, Boeing shall also deliver to Buyer such other things as may be
required by this Agreement including data, documents,
S17-2
training and services. All Block A, Block B, Block C, Block C-1 Substitute,
Block D-1 Substitute, Block E, Block F and Block G Aircraft are referred to
individually and collectively as the "Aircraft" or "AIRCRAFT."
2. Article 2.1, entitled "Time of Delivery" is deleted in its entirety
----------------
and replaced by the following new article 2.1 which adds the Block G Aircraft:
2.1 Time of Delivery. Each Aircraft shall be delivered to Buyer
----------------
assembled and ready for flight, and Buyer shall accept delivery of such
Aircraft, during the months set forth in the following schedule or such earlier
months as mutually agreed between Boeing and Buyer:
S17-3
3. Article 3.1, entitled "Basic Price" is deleted in its entirety and
-----------
replaced by the following new article 3.1 which adds the Basic Price for the
Block G Aircraft:
3.1 Basic Price. The basic price of each Aircraft shall be equal to
-----------
the sum of (i) Twenty Million Five Hundred Seventy-Three Thousand One Hundred
Twenty-Six Dollars ($20,573,126) for the Block A and Block B Aircraft, Twenty
Million, Six Hundred Three Thousand, Seven Hundred Twenty-Six Dollars
($20,603,726) for the Block C Aircraft, Twenty-Three Million Seven Hundred
Forty-One Thousand Eight Hundred Seventy-Six Dollars ($23,741,876) for the Block
C-1 Substitute Aircraft, Twenty-Three Million, Eight Hundred Eighty Thousand One
Hundred Seventy-Six Dollars ($23,880,176) for the Block D-1 Substitute Aircraft,
S17-4
Twenty-Nine Million Five Hundred Seventy-Three Thousand One Hundred Seventy-
Eight Dollars ($29,573,178) for the Block E Aircraft, Thirty Million Three
Hundred Three Thousand Six Hundred Seventy-Eight Dollars ($30,303,678) for the
Block F Aircraft and Thirty-One Million Six Hundred Twenty-Eight Thousand Eight
Hundred Sixty-Six Dollars ($31,628,866) for the Block G Aircraft, and (ii) such
price adjustments applicable to such Aircraft as may be made pursuant to the
provisions of this Agreement, including Article 7 (changes to Detail
Specification) and Article 8 (FAA Requirements) or other written agreements
executed by Buyer and Boeing.
4. Article 5.1, entitled "Advance Payment Base Price" is revised by
inserting after the Block F Aircraft the following:
5. Article 5.2, entitled "Advance Payment Schedule" is revised by
inserting after the Block F Aircraft the following schedules for the Block G
Aircraft:
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S17-6
6. The first sentence in Article 7.3.2 is revised to be written as "The
Block E, F and G Aircraft."
7. A new Exhibit A-4, entitled "Aircraft Configuration - the Block G
------------------------------------
Aircraft," attached hereto, is incorporated into the Purchase Agreement by this
--------
reference.
8. A new Exhibit D-3, entitled "Airframe and Engine Price Adjustment - the
------------------------------------------
Block G Aircraft" attached hereto, is incorporated into the Purchase Agreement
----------------
by this reference.
9. Letter Agreement No. 6-1162-STE-1364 entitled "Additional Contractual
----------------------
Matters" is revised by inserting a new article 2.5 as follows:
-------
"2.4 Block G Aircraft
----------------
At time of delivery of each of the Block G Aircraft, Boeing will
provide a credit memorandum in the amount of $7,500,000."
10. Boeing and Buyer agree that the provisions of Letter Agreement No. 6-
1162-STE-1363 , dated July 23, 1987, shall apply to paragraph 9 of this
Supplemental Agreement.
The Purchase Agreement shall be deemed to be supplemented to the extent herein
provided and as so supplemented shall 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/ R. Leo Lyons By: /s/ Gary A. Barron
---------------------------- ------------------------
Its: Attorney-In-Fact Its: Executive V.P. & COO
--------------------------- -----------------------
S17-7
EXHIBIT A-4
to
PURCHASE AGREEMENT NO. 1405
Dated______________________
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
AIRCRAFT CONFIGURATION
BLOCK G AIRCRAFT
MODEL 737-3H4
The Detail Specification, referred to in Article 1 of the Purchase
Agreement, is Boeing Detail Specification D6-76300-2 Revision Z dated February
15, 1994, as amended to incorporate the applicable specification language to
reflect the effect of the changes set forth in the Master Changes listed below,
including the effects of such changes on Manufacturer's Empty Weight (MEW) and
Operating Empty Weight (OEW). As soon as practicable, Boeing will furnish to
Buyer copies of the Detail Specification, which copies will reflect the effect
of such changes. The Aircraft Basic Price reflects and includes all effects of
such changes of price.
A-4-8
Exhibit A-4 to
Purchase Agreement No. 1405
Page 2
A-4-2
AIRFRAME AND ENGINE PRICE ADJUSTMENT
between
THE BOEING COMPANY
and
Southwest Airlines Co.
Exhibit D-3 to Purchase Agreement Number 1405
D-3
Exhibit D-3
Page 1
PRICE ADJUSTMENT DUE TO
-----------------------
ECONOMIC FLUCTUATIONS
---------------------
AIRFRAME PRICE ADJUSTMENT
-------------------------
(July 1993 Base Price)
--------------------
The Block G Aircraft
--------------------
1. Formula.
The Airframe Price Adjustment will be determined at the time of
Aircraft delivery in accordance with the following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
-----
123.7
M = .35 x ICI
-----
118.3
P = Aircraft Basic Price (as set forth in Article 3.2 of this
Agreement) less the base price of Engines (as defined in this
Exhibit D-3) in the amount of $6,154,566.
ECI = A value using the "Employment Cost Index for workers in
aerospace manufacturing" (aircraft manufacturing, standard
industrial classification code 3721, compensation, base month
and year June 1989 = 100), as released by the Bureau of Labor
Statistics, U.S. Department of Labor on a quarterly basis for
the months of March, June, September and December, calculated as
follows: A three-month arithmetic average value (expressed as a
decimal and rounded to the nearest tenth) will be determined
using the months set forth in the table below for the applicable
Aircraft, with the released Employment Cost Index value
described above for the month of March also being used for the
months of January and February; the value for June also used for
April and May; the value for September also used for July and
August; and the value for December also used for October and
November.
Exhibit D-3
Page 2
ICI = The three-month arithmetic average of the released monthly
values for the Industrial Commodities Index as set forth in the
"Producer Prices and Price Index" (Base Year 1982 = 100) as
released by the Bureau of Labor Statistics, U.S. Department of
Labor values (expressed as a decimal and rounded to the nearest
tenth) for the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI divided by 123.7 will be
expressed as a decimal rounded to the nearest ten-thousandth and then multiplied
by .65 with the resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
In determining the value of M, the ratio of ICI divided by 118.3 will be
expressed as a decimal rounded to the nearest ten-thousandth and then multiplied
by .35 with the resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
The following definitions of B and D will apply:
B = The calendar year before the year in which the scheduled month of
------
delivery as set forth in Article 2.1 occurs.
D = The calendar year during which the scheduled month of delivery as
------
set forth in Article 2.1 occurs.
Exhibit D
Page 3
2. If at the time of delivery of an Aircraft Boeing is unable to determine
the Airframe Price Adjustment because the applicable values to be used to
determine the ECI and ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Airframe Price Adjustment, to be used at the time of delivery
of each of the Aircraft, will be determined by utilizing the escalation
provisions set forth above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft
delivery will be used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment. If no values have been
released for an applicable month, the provisions set forth in Paragraph 2.2
below will apply. If prior to delivery of an Aircraft the U.S. Department of
Labor changes the base year for determination of the ECI or ICI values as
defined above, such rebased values will be incorporated in the Airframe Price
Adjustment calculation. The payment by Buyer to Boeing of the amount of the
Purchase Price for such Aircraft, as determined at the time of Aircraft
delivery, will be deemed to be the payment for such Aircraft required at the
delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S. Department of Labor
substantially revises the methodology used for the determination of the values
to be used to determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released values), or for any
reason has not released values needed to determine the applicable Aircraft
Airframe Price Adjustment, the parties will, prior to delivery of any such
Aircraft, select a substitute for such values from data published by the
Bureau of Labor Statistics or other similar data reported by non-governmental
United States organizations, such substitute to lead in application to the
same adjustment result, insofar as possible, as would have been achieved by
continuing the use of the original values as they may have fluctuated during
the applicable time period. Appropriate revision of the formula will be made
as required to reflect any substitute values. However, if within 24 months
from delivery of the Aircraft the Bureau of Labor Statistics should resume
releasing values for the months needed to determine the Airframe Price
Adjustment, such values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the Aircraft from that determined at the
time of delivery of such Aircraft.
Exhibit D-3
Page 4
2.3 In the event escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States
Government, the parties agree, to the extent they may lawfully do so, to
equitably adjust the Purchase Price of any affected Aircraft to reflect an
allowance for increases or decreases in labor compensation and material costs
occurring since February, 1993, which is consistent with the applicable
provisions of paragraph 1 of this Exhibit D-3.
3. For the calculations herein, the values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft
delivery will be used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment.
Note: Any rounding of a number, as required under this Exhibit D-3 with respect
---- to escalation of the airframe price, will be accomplished as follows: if
the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to the
next higher numbe r.
ENGINE PRICE ADJUSTMENT - CFM INTERNATIONAL, INC.
-------------------------------------------------
(1993 BASE PRICE)
-----------------
(a) The Aircraft Basic Price of each Aircraft set forth in Article 3.1 of
this Agreement includes an aggregate price for CFM56-3-B1 engines and all
accessories, equipment and parts therefor provided by the engine manufacturer
(collectively in this Exhibit D-3 called "Engines") of Six Million One Hundred
Fifty-Four Thousand Five Hundred Sixty-Six Dollars ($6,154,566). The adjustment
in Engine price applicable to each Aircraft ("Engine Price Adjustment" herein)
will be determined at the time of Aircraft delivery in accordance with the
following formula:
D1 = (Pb x CPI ) - Pb
------
130.51
(b) The following definitions will apply herein:
D1 = Engine Price Adjustment
Pb = Aggregate Engine Base Price as set forth in Paragraph (a) above.
CPI = The Composite Price Index as determined in accordance with the
formula set forth below. The Index values referred to below, to be
used in determining the CPI, will be for the ninth month prior to
the month of scheduled Aircraft delivery. Such Index values will
be those prepared by the Bureau of Labor Statistics, U.S.
Department of Labor.
CPI = L + M1 + M2 + M3
L = The Labor Index for such month will be the quotient,
expressed as a decimal and rounded to the nearest
thousandth, of the "Hourly Earnings of Aircraft Engines and
Engine Parts Production Workers" SIC 3724, for such month
divided by Eleven Dollars and Sixteen Cents ($11.16). Such
quotient will be multiplied by 100 and then by fifty-five
percent (55%) with the value resulting from the latter
multiplication expressed as a decimal and rounded to the
nearest hundredth.
M1 = The Industrial Commodities Index for such month will be
equal to ten percent (10%) of the Producer Price Index for
"all commodities other than Farm and Foods," Code 3-15,
(Base Year 1982 = 100) for such month, expressed as a
decimal and rounded to the nearest hundredth.
M2 = The Metals and Metal Products Index for such month will be
equal to twenty-five percent (25%) of the Producer Price
Index for "Metals and Metal Products," Code 10, (Base Year
1982 = 100) for such month expressed as a decimal and
rounded to the nearest hundredth.
M3 = The Fuel Index for such month will be equal to ten percent
(10%) of the Producer Price Index for "Fuel and Related
Products and Power," Code 5, (Base Year 1982 = 100) for
such month expressed as a decimal and rounded to the
nearest hundredth.
130.51 = Composite Price Index for October, 1992.
The factor (CPI divided by 130.51) by which the Aggregate Engine Base Price is
to be multiplied will be expressed as a decimal and rounded to the nearest
thousandth.
The Engine Price Adjustment will not be made if it would result in a decrease
in the aggregate Engine base price.
(c) The values of the Average Hourly Earnings and Producer Price Indices used
in determining the Engine Price Adjustment will be those published by the Bureau
of Labor Statistics, U.S. Department of Labor as of a date 30 days prior to the
scheduled Aircraft delivery to Buyer. Such values will be considered final and
no Engine Price Adjustment will be made after Aircraft delivery for any
subsequent changes in published Index values.
(d) If the U.S. Department of Labor, Bureau of Labor Statistics (i)
substantially revises the methodology (in contrast to benchmark adjustments or
other corrections of previously published data) or (ii) discontinues publication
of any of the data referred to above, CFMI agrees to meet jointly with Boeing
and Buyer to jointly select a substitute for the revised or discontinued data;
such substitute data to lead in application to the same adjustment result,
insofar as possible, as would have been achieved by continuing the use of the
original data as it may have fluctuated had it not been revised or
discontinued.
Appropriate revision of the Engine Price Adjustment provisions set forth above
will be made to accomplish this result for the affected Engines.
In the event the Engine price escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States Government,
CFMI agrees to meet with Boeing and Buyer to jointly agree, to the extent such
parties may lawfully do so, to adjust equitably the purchase price of any
affected Engine(s) to reflect an allowance for increases in labor, material and
fuel costs that have occurred from the period represented by the CPI to the
ninth month preceding the month of scheduled delivery of the applicable
aircraft.
NOTE: Any rounding of a number, as required under this Exhibit D-3 with respect
---- to escalation of the Engine price, will be accomplished as follows: if
the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to the
next higher number.
CHANGE ORDER NO. 14
DATED
JUNE 6, 1994
TO
PURCHASE AGREEMENT NO. 1405
BETWEEN
THE BOEING COMPANY
AND
SOUTHWEST AIRLINES
[This paragraph to be filled in by contracts:]
Purchase Agreement No. 1405, dated September 17, 1987, between The Boeing
Company and Southwest Airlines, is hereby amended/ in accordance with Article
7.1 as follows:
I. Changes To Detail Specification D6-76300-2.
The effects of the changes listed below are hereby incorporated into Detail
Specification D6-76300 under Revision "AA" dated May 11, 1994 and described in
Exhibit A of the Purchase Agreement.
CHANGE NO./TITLE/AFFECTED AIRCRAFT:
----------------------------------
II. Effect of Changes on Purchase Agreement No. 1510.
------------------------------------------------
The effects of the foregoing changes, except Rapid Revisions, on the scheduled
month of delivery, Aircraft Basic Price and Advance Payment Base Price of each
affected Aircraft, as described in Articles 2 and 3. respectively, of the
Purchase Agreement, are set forth below:
SIGNED as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES
By /s/ R. Leo Lyons By /s/ Gary A. Barron
--------------------------- ------------------
Title Attorney - In - Fact Title Executive V.P. & CO
----------------------- -------------------
WEIGHT AND PRICE TABULATION
CHANGE ORDER NO. 14
TO
PURCHASE AGREEMENT NO. 1405
SOUTHWEST AIRLINES
MODEL 737-3H4 AIRCRAFT
CHANGE SUMMARY
DEVELOPMENT CHANGE NO.25
DETAIL SPECIFICATION D6-76300-2
SOUTHWEST AIRLINES
MODEL 737-3H4 AIRCRAFT
1. Coffee Makers
Appendix II, Galley 1 and Galley 4, is revised to reflect the correct part
number and effectivity in accordance with Boeing Telex number R-7200-9401507,
dated April 1, 1994, for Aircraft PS766 and on.
2. Miscellaneous Revisions
- Paragraph 1-60 is updated to reflect current airplanes and
identification.
- Figure 1-4 is revised to reflect the accurate armrest orientation.
- Appendix I, Chapter 21, the effectivity of the Nord Micro part numbers
is revised to reflect the accurate incorporation.
- The entire Detail Specification has been revised to our standard
format.
S18-6
Supplemental Agreement No. 18
to
Purchase Agreement No. 1405
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of the 13th day of July,
1994, by and between THE BOEING COMPANY, a Delaware corporation (hereinafter
called Boeing), and SOUTHWEST AIRLINES CO., a Texas corporation with its
principal office in the City of Dallas, State of Texas, (hereinafter called
Buyer);
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto entered into that certain Purchase Agreement
No. 1405, dated July 23, 1987, relating to the purchase and sale of certain
Boeing Model 737 aircraft (the "Aircraft"), which agreement, as amended,
together with all exhibits and specifications attached thereto and made a part
thereof, is hereinafter called the "Purchase Agreement;" and
WHEREAS, Buyer has agreed to purchase four (4) additional aircraft
delivering in February 1995 and to revise the delivery month of two (2) aircraft
from January 1995 to November 1994;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
S18-7
1. Article 1, entitled "Subject Matter of Sale" is deleted in its entirety
----------------------
and replaced by the following new Article 1:
ARTICLE 1. Subject Matter of Sale.
----------------------
ARTICLE 1. Subject Matter of Sale.
----------------------
Subject to the provisions of this Agreement, Boeing shall sell and
deliver to Buyer, and Buyer shall purchase from Boeing eighteen (18) Boeing
Model 737-5H4 aircraft (hereinafter sometimes referred to as the "Block A and
Block B" Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-38500-3 (which includes CFM International, Inc. CFM56-3-B1
engines), dated July 23, 1987 (as described in Exhibit A attached to the
Purchase Agreement), twenty-three (23) Boeing Model 737-3H4 Aircraft
(hereinafter sometimes referred to as the Block C-1 and Block D-1 Substitute
Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-76300-2 Rev. T (which includes CFM International, Inc. CFM56-3-
B1 engines), dated September 19, 1989 (as described in Exhibit A-1 attached to
the Purchase Agreement), seven (7) Boeing Model 737-5H4 aircraft (hereinafter
sometimes referred to as the "Block C Aircraft) to be manufactured by Boeing in
accordance with Boeing Detail Specification D6-38500-3 (which includes CFM
International, Inc. CFM56-3-B1 engines), dated June 7, 1989, thirty-four (34)
Model 737-3H4 aircraft (hereinafter referred to as the "Block E Aircraft" to be
manufactured by Boeing in accordance with Boeing Detail Specification D6-76300-2
Rev. W (which includes CFM International, Inc. CFM56-3-B1 engines) dated May 22,
1992, (as described in Exhibit A-2 attached to the Purchase Agreement), three
(3) Model 737-3H4 aircraft (hereinafter referred to as the "Block F Aircraft")
to be manufactured by Boeing in accordance with Boeing Detail Specification D6-
76300-2 Rev. X (which includes CFM International, Inc. CFM56-3-B1 engines) dated
February 26, 1993, (as described in Exhibit A-3 attached to the Purchase
Agreement), twelve (12) Model 737-3H4 aircraft (hereinafter referred to as the
"Block G Aircraft") to be manufactured by Boeing in accordance with Boeing
Detail Specification D6-76300-2 Rev. Z (which includes CFM International, Inc.
CFM56-3-B1 engines) dated February 15, 1994 (as further described in Exhibit A-4
attached to the Purchase Agreement) and four (4) Model 737-3H4 aircraft
(hereinafter referred to as the "Block H Aircraft") to be manufactured by Boeing
in accordance with Boeing Detail Specification D6-76300-2 Rev. Z (which includes
CFM International, Inc. CFM56-3-B1 engines) dated February 15, 1994 (as further
described in Exhibit A-5 attached to the Purchase Agreement) and as such Detail
Specifications may be modified from time to time in accordance with the terms
and conditions of Article 7
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herein. Such Detail Specifications as so modified are by this reference
incorporated in this Agreement and are hereinafter referred to as the "Detail
Specification." In connection with the sale and purchase of the Aircraft, Boeing
shall also deliver to Buyer such other things as may be required by this
Agreement including data, documents, training and services. All Block A, Block
B, Block C, Block C-1 Substitute, Block D-1 Substitute, Block E, Block F, Block
G and Block H Aircraft are referred to individually and collectively as the
"Aircraft" or "AIRCRAFT."
2. Article 2.1, entitled "Time of Delivery" is deleted in its entirety and
replaced by the following new article 2.1 which revises the contract delivery
month of the January 1995 aircraft to November 1994 and adds the Block H
Aircraft:
2.1 Time of Delivery. Each Aircraft shall be delivered to Buyer
assembled and ready for flight, and Buyer shall accept delivery of such
Aircraft, during the months set forth in the following schedule or such earlier
months as mutually agreed between Boeing and Buyer:
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3. Article 3.1, entitled "Basic Price" is deleted in its entirety and
-----------
replaced by the following new article 3.1 which adds the Basic Price for the
Block H Aircraft:
3.1 Basic Price. The basic price of each Aircraft shall be equal to
-----------
the sum of (i) Twenty Million Five Hundred Seventy-Three Thousand One Hundred
Twenty-Six Dollars ($20,573,126) for the Block A and Block B Aircraft, Twenty
Million, Six Hundred Three Thousand, Seven Hundred Twenty-Six Dollars
($20,603,726) for the Block C Aircraft, Twenty-Three Million Seven Hundred
Forty-One Thousand Eight Hundred Seventy-Six Dollars ($23,741,876) for the Block
C-1 Substitute Aircraft, Twenty-Three Million, Eight Hundred Eighty Thousand One
Hundred Seventy-Six Dollars ($23,880,176) for the Block D-1 Substitute Aircraft,
Twenty-Nine Million Five Hundred Seventy-Three Thousand One Hundred Seventy-
Eight Dollars ($29,573,178) for the Block E Aircraft, Thirty Million Three
Hundred Three Thousand Six Hundred Seventy-Eight Dollars ($30,303,678) for the
Block F Aircraft, Thirty-One Million Six Hundred Twenty-Eight Thousand Eight
Hundred Sixty-Six Dollars ($31,628,866) for the Block G Aircraft and Thirty-One
Million Six Hundred Twenty One Thousand Seven Hundred Sixty Six Dollars
($31,621,766) for the Block H Aircraft, and (ii) such price adjustments
applicable to such Aircraft as may be made pursuant to the provisions of this
Agreement, including Article 7 (changes to Detail Specification) and Article 8
(FAA Requirements) or other written agreements executed by Buyer and Boeing.
4. Article 5.1, entitled "Advance Payment Base Price", for the Block E
--------------------------
aircraft is revised by deleting the January 1995 aircraft and the associated
advance payment base price and inserting the following:
November 1994 $33,509,000
5. Article 5.1, entitled "Advance Payment Base Price" is revised by
--------------------------
inserting after the Block G Aircraft the following:
S18-7
6. Article 5.2, entitled "Advance Payment Schedule" is revised by
------------------------
inserting after the Block G Aircraft the following schedule for the Block H
Aircraft:
7. The title and the first sentence in Article 7.3.2 is revised to be
written as "The Block E, F, G and H Aircraft."
8. A new Exhibit A-5, entitled "Aircraft Configuration - the Block H
------------------------------------
Aircraft," attached hereto, is incorporated into the Purchase Agreement by this
--------
reference.
9. Exhibit D-3, entitled "Airframe and Engine Price Adjustment - the Block
------------------------------------------------
G Aircraft" is revised by adding "and Block H" after the letter G and before
----------
Aircraft in the title on page 1.
10. Letter Agreement No. 6-1162-STE-1364 entitled "Additional Contractual
----------------------
Matters" is revised by adding "and Block H" after the letter G and before
-------
Aircraft in the title of Article 2.5 and in the text of Article 2.5.
11. Boeing and Buyer agree that the provisions of Letter Agreement No. 6-
1162-STE-1363 , dated July 23, 1987, shall apply to paragraph 10 of this
Supplemental Agreement.
S18-6
The Purchase Agreement shall be deemed to be supplemented to the extent herein
provided and as so supplemented shall 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/ R. Leo Lyons By: /s/ Gary A. Barron
------------------------------- --------------------
Its: Attorney-In-Fact Its: Executive V.P. & COO
------------------------------ ---------------------
S18-7
EXHIBIT A-5
to
PURCHASE AGREEMENT NO. 1405
Dated July 13, 1994
--------------
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
AIRCRAFT CONFIGURATION
BLOCK H AIRCRAFT
MODEL 737-3H4
The Detail Specification, referred to in Article 1 of the Purchase
Agreement, is Boeing Detail Specification D6-76300-2 Revision Z dated February
15, 1994, as amended to incorporate the applicable specification language to
reflect the effect of the changes set forth in the Master Changes listed below,
including the effects of such changes on Manufacturer's Empty Weight (MEW) and
Operating Empty Weight (OEW). As soon as practicable, Boeing will furnish to
Buyer copies of the Detail Specification, which copies will reflect the effect
of such changes. The Aircraft Basic Price reflects and includes all effects of
such changes of price.
A-5-1
Exhibit A-5 to
Purchase Agreement No. 1405
Page 2
2523MP3102 N/C
BILINGUAL PLACARD INSTALLATION
S19-6
Supplemental Agreement No. 19
to
Purchase Agreement No. 1405
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of the 21st day of November,
1994, by and between THE BOEING COMPANY, a Delaware corporation (hereinafter
called Boeing), and SOUTHWEST AIRLINES CO., a Texas corporation with its
principal office in the City of Dallas, State of Texas, (hereinafter called
Buyer);
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto entered into that certain Purchase Agreement
No. 1405, dated July 23, 1987, relating to the purchase and sale of certain
Boeing Model 737 aircraft (the "Aircraft"), which agreement, as amended,
together with all exhibits and specifications attached thereto and made a part
thereof, is hereinafter called the "Purchase Agreement;" and
WHEREAS, Buyer has agreed to purchase five (5) additional aircraft
delivering in July 1995 (1), October 1995 (2) and November 1995 (2) and to
revise the delivery month of one (1) aircraft from April 1995 to March 1995;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Article 1, entitled "Subject Matter of Sale" is deleted in its entirety
----------------------
and replaced by the following new Article 1:
S19-7
ARTICLE 1. Subject Matter of Sale.
----------------------
ARTICLE 1. Subject Matter of Sale.
----------------------
Subject to the provisions of this Agreement, Boeing shall sell and
deliver to Buyer, and Buyer shall purchase from Boeing eighteen (18) Boeing
Model 737-5H4 aircraft (hereinafter sometimes referred to as the "Block A and
Block B" Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-38500-3 (which includes CFM International, Inc. CFM56-3-B1
engines), dated July 23, 1987 (as described in Exhibit A attached to the
Purchase Agreement), twenty-three (23) Boeing Model 737-3H4 Aircraft
(hereinafter sometimes referred to as the Block C-1 and Block D-1 Substitute
Aircraft) to be manufactured by Boeing in accordance with Boeing Detail
Specification D6-76300-2 Rev. T (which includes CFM International, Inc. CFM56-3-
B1 engines), dated September 19, 1989 (as described in Exhibit A-1 attached to
the Purchase Agreement), seven (7) Boeing Model 737-5H4 aircraft (hereinafter
sometimes referred to as the "Block C Aircraft) to be manufactured by Boeing in
accordance with Boeing Detail Specification D6-38500-3 (which includes CFM
International, Inc. CFM56-3-B1 engines), dated June 7, 1989, thirty-four (34)
Model 737-3H4 aircraft (hereinafter referred to as the "Block E Aircraft" to be
manufactured by Boeing in accordance with Boeing Detail Specification D6-76300-2
Rev. W (which includes CFM International, Inc. CFM56-3-B1 engines) dated May 22,
1992, (as described in Exhibit A-2 attached to the Purchase Agreement), three
(3) Model 737-3H4 aircraft (hereinafter referred to as the "Block F Aircraft")
to be manufactured by Boeing in accordance with Boeing Detail Specification D6-
76300-2 Rev. X (which includes CFM International, Inc. CFM56-3-B1 engines) dated
February 26, 1993, (as described in Exhibit A-3 attached to the Purchase
Agreement), twelve (12) Model 737-3H4 aircraft (hereinafter referred to as the
"Block G Aircraft") to be manufactured by Boeing in accordance with Boeing
Detail Specification D6-76300-2 Rev. Z (which includes CFM International, Inc.
CFM56-3-B1 engines) dated February 15, 1994 (as further described in Exhibit A-4
attached to the Purchase Agreement), four (4) Model 737-3H4 aircraft
(hereinafter referred to as the "Block H Aircraft") to be manufactured by Boeing
in accordance with Boeing Detail Specification D6-76300-2 Rev. Z (which includes
CFM International, Inc. CFM56-3-B1 engines) dated February 15, 1994 (as further
described in Exhibit A-5 attached to the Purchase Agreement) and five (5) Model
737-3H4 aircraft (hereinafter referred to as the "Block I Aircraft") to be
manufactured by Boeing in accordance with Boeing Detail Specification D6-76300-2
Rev. AA (which includes CFM International, Inc. CFM56-3-B1 engines) dated May
11, 1994 as further described in Exhibit A-6 attached to the Purchase Agreement
and as such Detail
S19-6
Specifications may be modified from time to time in accordance with the terms
and conditions of Article 7 herein. Such Detail Specifications as so modified
are by this reference incorporated in this Agreement and are hereinafter
referred to as the "Detail Specification." In connection with the sale and
purchase of the Aircraft, Boeing shall also deliver to Buyer such other things
as may be required by this Agreement including data, documents, training and
services. All Block A, Block B, Block C, Block C-1 Substitute, Block D-1
Substitute, Block E, Block F, Block G, Block H and Block I Aircraft are referred
to individually and collectively as the "Aircraft" or "AIRCRAFT."
2. Article 2.1, entitled "Time of Delivery" is deleted in its entirety and
replaced by the following new article 2.1 which revises the contract delivery
month of one (1) of the April 1995 aircraft to March 1995 and adds the Block I
Aircraft:
2.1 Time of Delivery. Each Aircraft shall be delivered to Buyer
assembled and ready for flight, and Buyer shall accept delivery of such
Aircraft, during the months set forth in the following schedule or such earlier
months as mutually agreed between Boeing and Buyer:
S19-7
S19-6
3. Article 3.1, entitled "Basic Price" is deleted in its entirety and
-----------
replaced by the following new article 3.1 which adds the Basic Price for the
Block I Aircraft:
3.1 Basic Price. The basic price of each Aircraft shall be equal to
-----------
the sum of (i) Twenty Million Five Hundred Seventy-Three Thousand One Hundred
Twenty-Six Dollars ($20,573,126) for the Block A and Block B Aircraft, Twenty
Million, Six Hundred Three Thousand, Seven Hundred Twenty-Six Dollars
($20,603,726) for the Block C Aircraft, Twenty-Three Million Seven Hundred
Forty-One Thousand Eight Hundred Seventy-Six Dollars ($23,741,876) for the Block
C-1 Substitute Aircraft, Twenty-Three Million, Eight Hundred Eighty Thousand One
Hundred Seventy-Six Dollars ($23,880,176) for the Block D-1 Substitute Aircraft,
Twenty-Nine Million Five Hundred Seventy-Three Thousand One Hundred Seventy-
Eight Dollars ($29,573,178) for the Block E Aircraft, Thirty Million Three
Hundred Three Thousand Six Hundred Seventy-Eight Dollars ($30,303,678) for the
Block F Aircraft, Thirty-One Million Six Hundred Twenty-Eight Thousand Eight
Hundred Sixty-Six Dollars ($31,628,866) for the Block G Aircraft, Thirty-One
Million Six Hundred Twenty One Thousand Seven Hundred Sixty Six Dollars
($31,621,766) for the Block H Aircraft, Thirty-Two Million Sixty-Five Thousand
Four Hundred Fifty Eight Dollars ($32,065,458) for the Block I Aircraft and (ii)
such price adjustments applicable to such Aircraft as may be made pursuant to
the provisions of this Agreement, including Article 7 (changes to Detail
Specification) and Article 8 (FAA Requirements) or other written agreements
executed by Buyer and Boeing.
4. Article 5.1, entitled "Advance Payment Base Price", for the Block E
--------------------------
aircraft is revised by inserting the March 1995 aircraft and the associated
advance payment base price:
March 1995 $32,879,000
5. Article 5.1, entitled "Advance Payment Base Price" is revised by
--------------------------
inserting after the Block H Aircraft the following:
S19-7
6. Article 5.2, entitled "Advance Payment Schedule" is revised by inserting
------------------------
after the Block H Aircraft the following schedule for the Block I Aircraft:
7. The title and the first sentence in Article 7.3.2 is revised to be
written as "The Block E, F, G H and I Aircraft."
8. A new Exhibit A-6, entitled "Aircraft Configuration - the Block I
------------------------------------
Aircraft," attached hereto, is incorporated into the Purchase Agreement by this
--------
reference.
9. Exhibit D-4, entitled "Airframe and Engine Price Adjustment - the Block
------------------------------------------------
I Aircraft" attached hereto, is incorporated into the Purchase Agreement by this
----------
reference.
10. Letter Agreement No. 1405-6R3 entitled "Option Aircraft" is revised in
Article 5, paragraph 5.1 by deleting the phrase "thirty (30) months" and
inserting the phrase "twenty (20) months."
S19-6
11. Letter Agreement No. 6-1162-STE-1364 entitled "Additional Contractual
----------------------
Matters" is revised in the title of Article 2.5 and in the text of Article 2.5
-------
by deleting the word "and" and inserting a comma after the letter G and adding
"and Block I" after the letter H and before Aircraft
12. A new paragraph 12 is incorporated into Letter Agreement No. 6-1162-
STE-1364, dated July 23, 1987, by this reference. "Boeing will issue to Buyer
at the time of delivery of the July 1995 Block I Aircraft a credit memorandum in
the amount of $153,000. Such credit memorandum will be applied to the final
delivery price of the July 1995 Block I Aircraft. The credit memorandum is for
Buyer's 737-300 simulator data for the Heads Up Display System."
13. Boeing and Buyer agree that the provisions of Letter Agreement No. 6-
1162-STE-1363 , dated July 23, 1987, shall apply to paragraph 11 and 12 of this
Supplemental Agreement.
The Purchase Agreement shall be deemed to be supplemented to the extent herein
provided and as so supplemented shall 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/ R. L, Lyons By: /s/ Gary J. Barron
-------------------------------- ----------------------
Its: Attorney-In-Fact Its: Executive V.P. & COO
-------------------------------- ---------------------
S19-3
EXHIBIT A-6
to
PURCHASE AGREEMENT NO. 1405
Dated______________________
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
AIRCRAFT CONFIGURATION
BLOCK I AIRCRAFT
MODEL 737-3H4
The Detail Specification, referred to in Article 1 of the Purchase
Agreement, is Boeing Detail Specification D6-76300-2 Revision AA dated May 11,
1994 as amended to incorporate the applicable specification language to reflect
the effect of the changes set forth in the Master Changes listed below,
including the effects of such changes on Manufacturer's Empty Weight (MEW) and
Operating Empty Weight (OEW). As soon as practicable, Boeing will furnish to
Buyer copies of the Detail Specification, which copies will reflect the effect
of such changes. The Aircraft Basic Price reflects and includes all effects of
such changes of price.
A-6-1
Exhibit A-6 to
Purchase Agreement No. 1405
Page 2
A-6-2
AIRFRAME AND ENGINE PRICE ADJUSTMENT
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Exhibit D-4 to Purchase Agreement Number 1405
PRICE ADJUSTMENT DUE TO
-----------------------
ECONOMIC FLUCTUATIONS
---------------------
AIRFRAME PRICE ADJUSTMENT
-------------------------
(July 1994 Base Price)
--------------------
The Block I Aircraft
--------------------
1. Formula.
-------
The Airframe Price Adjustment will be determined at the time of Aircraft
delivery in accordance with the following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
-----
125.9
M = .35 x ICI
-----
118.5
P = Aircraft Basic Price (as set forth in Article 3.2 of this
Agreement) less the base price of Engines (as defined in this
Exhibit D) in the amount of $6,277,658.
ECI = A value using the "Employment Cost Index for workers in
aerospace manufacturing" (aircraft manufacturing, standard
industrial classification code 3721, compensation, base month
and year June 1989 = 100), as released by the Bureau of Labor
Statistics, U.S. Department of Labor on a quarterly basis for
the months of March, June, September and December, calculated as
follows: A three-month arithmetic average value (expressed as a
decimal and rounded to the nearest tenth) will be determined
using the months set forth in the table below for the applicable
Aircraft, with the released Employment Cost Index value
described above for the month of March also being used for the
months of January and February; the value for June also used for
April and May; the value for September also used for July and
August; and the value for December also used for October and
November.
D-4-1
ICI = The three-month arithmetic average of the released monthly
values for the Industrial Commodities Index as set forth in the
"Producer Prices and Price Index" (Base Year 1982 = 100) as
released by the Bureau of Labor Statistics, U.S. Department of
Labor values (expressed as a decimal and rounded to the nearest
tenth) for the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI divided by 125.9 will be
expressed as a decimal rounded to the nearest ten-thousandth and then multiplied
by .65 with the resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
In determining the value of M, the ratio of ICI divided by 118.5 will be
expressed as a decimal rounded to the nearest ten-thousandth and then multiplied
by .35 with the resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
The following definitions of B and D will apply:
B = The calendar year before the year in which the scheduled month of
------
delivery as set forth in Article 2.1 occurs.
D = The calendar year during which the scheduled month of delivery as
------
set forth in Article 2.1 occurs.
D-4-2
Exhibit D-4
Page 3
2. If at the time of delivery of an Aircraft Boeing is unable to determine
the Airframe Price Adjustment because the applicable values to be used to
determine the ECI and ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Airframe Price Adjustment, to be used at the time of delivery
of each of the Aircraft, will be determined by utilizing the escalation
provisions set forth above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft delivery
will be used to determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor Statistics) to
calculate the Airframe Price Adjustment. If no values have been released for an
applicable month, the provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of Labor changes the base
year for determination of the ECI or ICI values as defined above, such rebased
values will be incorporated in the Airframe Price Adjustment calculation. The
payment by Buyer to Boeing of the amount of the Purchase Price for such
Aircraft, as determined at the time of Aircraft delivery, will be deemed to be
the payment for such Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S. Department of Labor
substantially revises the methodology used for the determination of the values
to be used to determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released values), or for any
reason has not released values needed to determine the applicable Aircraft
Airframe Price Adjustment, the parties will, prior to delivery of any such
Aircraft, select a substitute for such values from data published by the Bureau
of Labor Statistics or other similar data reported by non-governmental United
States organizations, such substitute to lead in application to the same
adjustment result, insofar as possible, as would have been achieved by
continuing the use of the original values as they may have fluctuated during the
applicable time period. Appropriate revision of the formula will be made as
required to reflect any substitute values. However, if within 24 months from
delivery of the Aircraft the Bureau of Labor Statistics should resume releasing
values for the months needed to determine the Airframe Price Adjustment, such
values will be used to determine any increase or decrease in the Airframe Price
Adjustment for the Aircraft from that determined at the time of delivery of such
Aircraft.
D-4-3
Exhibit D
Page 4
2.3 In the event escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States Government,
the parties agree, to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an allowance for
increases or decreases in labor compensation and material costs occurring since
February, 1994, which is consistent with the applicable provisions of paragraph
1 of this Exhibit D.
3. For the calculations herein, the values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft delivery
will be used to determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor Statistics) to
calculate the Airframe Price Adjustment.
Note: Any rounding of a number, as required under this Exhibit D-4 with respect
---- to escalation of the airframe price, will be accomplished as follows: if
the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to the
next higher number.
D-4-4
Exhibit D
Page 7
ENGINE PRICE ADJUSTMENT - CFM INTERNATIONAL, INC.
-------------------------------------------------
(1994 BASE PRICE)
-----------------
(a) The Aircraft Basic Price of each Aircraft set forth in Article 3.1 of
this Agreement includes an aggregate price for CFM56-3-B1 engines and all
accessories, equipment and parts therefor provided by the engine manufacturer
(collectively in this Exhibit D called "Engines") of Six Million Two Hundred
Seventy-Seven Thousand Six Hundred Fifty Eight Dollars ($6,277,658). The
adjustment in Engine price applicable to each Aircraft ("Engine Price
Adjustment" herein) will be determined at the time of Aircraft delivery in
accordance with the following formula:
D1 = (Pb x CPI ) - Pb
------
133.18
(b) The following definitions will apply herein:
D1 = Engine Price Adjustment
Pb = Aggregate Engine Base Price as set forth in Paragraph (a) above.
CPI = The Composite Price Index as determined in accordance with the
formula set forth below. The Index values referred to below, to be
used in determining the CPI, will be for the ninth month prior to
the month of scheduled Aircraft delivery. Such Index values will
be those prepared by the Bureau of Labor Statistics, U.S.
Department of Labor.
CPI = L + M1 + M2 + M3
L = The Labor Index for such month will be the quotient,
expressed as a decimal and rounded to the nearest
thousandth, of the "Hourly Earnings of Aircraft Engines and
Engine Parts Production Workers" SIC 3724, for such month
divided by Eleven Dollars and Sixteen Cents ($11.16). Such
quotient will be multiplied by 100 and then by fifty-five
percent (55%) with the value resulting from the latter
multiplication expressed as a decimal and rounded to the
nearest hundredth.
D-7
Exhibit D
Page 6
M1 = The Industrial Commodities Index for such month will be
equal to ten percent (10%) of the Producer Price Index for
"all commodities other than Farm and Foods," Code 3-15,
(Base Year 1982 = 100) for such month, expressed as a
decimal and rounded to the nearest hundredth.
M2 = The Metals and Metal Products Index for such month will be
equal to twenty-five percent (25%) of the Producer Price
Index for "Metals and Metal Products," Code 10, (Base Year
1982 = 100) for such month expressed as a decimal and
rounded to the nearest hundredth.
M3 = The Fuel Index for such month will be equal to ten percent
(10%) of the Producer Price Index for "Fuel and Related
Products and Power," Code 5, (Base Year 1982 = 100) for
such month expressed as a decimal and rounded to the
nearest hundredth.
133.18 = Composite Price Index for October, 1993.
The factor (CPI divided by 133.18) by which the Aggregate Engine Base Price is
to be multiplied will be expressed as a decimal and rounded to the nearest
thousandth.
The Engine Price Adjustment will not be made if it would result in a decrease
in the aggregate Engine base price.
(c) The values of the Average Hourly Earnings and Producer Price Indices used
in determining the Engine Price Adjustment will be those published by the Bureau
of Labor Statistics, U.S. Department of Labor as of a date 30 days prior to the
scheduled Aircraft delivery to Buyer. Such values will be considered final and
no Engine Price Adjustment will be made after Aircraft delivery for any
subsequent changes in published Index values.
(d) If the U.S. Department of Labor, Bureau of Labor Statistics (i)
substantially revises the methodology (in contrast to benchmark adjustments or
other corrections of previously published data) or (ii) discontinues publication
of any of the data referred to above, CFMI agrees to meet
D-6
Exhibit D
Page 7
jointly with Boeing and Buyer to jointly select a substitute for the revised or
discontinued data; such substitute data to lead in application to the same
adjustment result, insofar as possible, as would have been achieved by
continuing the use of the original data as it may have fluctuated had it not
been revised or discontinued.
Appropriate revision of the Engine Price Adjustment provisions set forth above
will be made to accomplish this result for the affected Engines.
In the event the Engine price escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States Government,
CFMI agrees to meet with Boeing and Buyer to jointly agree, to the extent such
parties may lawfully do so, to adjust equitably the purchase price of any
affected Engine(s) to reflect an allowance for increases in labor, material and
fuel costs that have occurred from the period represented by the CPI to the
ninth month preceding the month of scheduled delivery of the applicable
aircraft.
NOTE: Any rounding of a number, as required under this Exhibit D-4 with respect
---- to escalation of the Engine price, will be accomplished as follows: if
the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to the
next higher number.
D-7