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EXHIBIT 4.40
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N604SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
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THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (the "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing
Southwest Airlines 1995 Trust N604SW and dated as of August 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of August 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. One thereto relating to the Aircraft
referred to below dated August 25, 1995 ("Lease Supplement No. 1") between
Lessor and Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N604SW, Manufacturer's serial no. 27955;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 859176 and 858187; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on September 15, 1995 and assigned
Conveyance No. Z96924; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits ▇-▇, ▇-▇, ▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇-▇, ▇-▇ and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits ▇-▇, ▇-▇ and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
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"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the two separate Trust
Supplements Nos. 1995-A3 and 1995-A4 dated as of October 1, 1995 between Lessee
and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N604SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the Guarantor, (viii) the respective Affiliates, successors and assigns
of the foregoing and (ix) the respective directors, officers, employees,
agents, partners and servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
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(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof, and the letter agreement dated
August 25, 1995 among Lessee, the Owner Participant and the Owner Trustee."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of August 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
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"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of August 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft, as supplemented by the Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated August 25, 1995, and as
amended by the First Amendment to Trust Indenture and as may be further amended
or supplemented from time to time."
(k) The definitions of "Assumed Interest Rate," "Assumed
Interest Amount," "Break Amount" and "Rent Differential Amount" are hereby
deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Interim and Basic Rent. No Interim Rent or Basic
Rent shall be paid during the Preliminary Lease Term. Lessee hereby agrees to
pay to Lessor (i) Interim Rent for the Interim Lease Term with respect to the
Aircraft on the first Rent Payment Date set forth in Part I of Exhibit C, and
(ii) Basic Rent for the Base Lease Term with respect to the Aircraft on each
subsequent Rent Payment Date set forth in Part I of Exhibit C, in each case in
an amount equal to the percentage of Lessor's Cost of the Aircraft set forth in
Part I of Exhibit C opposite such Rent Payment Date, subject to the terms of
the next succeeding paragraph of this Section 3.3 and Section 3.7. Each
installment (or portion of an installment) of Interim Rent or Basic Rent under
the heading `Advance' in Part I of Exhibit C payable on a Rent Payment Date
shall relate to the respective Lease Period immediately following such Rent
Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading `Arrears' in Part I of Exhibit C payable
on a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on such Rent Payment Date, any scheduled payments then required to
be made on account of the principal of and interest on the Certificates, and
(b) Stipulated Loss Value, Termination Value and, unless Lessee shall have
assumed the Certificates pursuant to Section 18.2(c) hereof, the Special
Purchase Price and the initial installment of the Special Purchase Price if
paid in installments, in each case whether or not adjusted in accordance with
the provisions of Section 3.7, as of the date of determination thereof,
together with any amount of
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Basic Rent required to be paid on such date and all other amounts payable on
such date, shall equal under any circumstances and in any event, an amount at
least sufficient to pay in full any scheduled payments then required to be made
on account of the principal of and interest (including, without limitation any
interest on overdue principal and, to the extent permitted by applicable law,
interest), and Premium, if any, on the Certificates and all amounts which would
be payable prior thereto or on a parity therewith if Section 3.03 of the Trust
Indenture were applicable at the time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.386568% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.623122% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Interim Rent, Basic Rent, Stipulated Loss
Value, Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, then in each case, the Interim Rent and
Basic Rent percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value percentages set
forth in Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a), on or prior to ▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇)
in the case of a recalculation pursuant to clause (b), on or prior to the
second Rent Payment Date following the relevant Section 18 Refinancing Date,
(iii) in the case of a recalculation pursuant to clause (c), prior to the
relevant Refinancing Date or (iv) in the case of a recalculation pursuant to
clause (d), prior to the Rent Payment Date next following the event described
in clause (d), in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible consistent
with clause (A). In addition, in the event of an adjustment pursuant to this
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be recalculated in accordance with the terms of Section 18.2(b)."
(d) The first sentence of Section 3.8 is hereby amended to be
and read in its entirety as follows:
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"3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received the
Deferred Equity Amount on the Deferred Equity Date, then Lessee shall
pay to the Indenture Trustee on behalf of the Owner Participant on the
Deferred Equity Date an amount equal to the amount not so paid by the
Owner Participant (such amount herein referred to as an "Advance")."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay
to Lessor in the manner and in funds of the type specified in Section 3.6, (A)
the Stipulated Loss Value for the Aircraft, determined as of the date of
payment (as described in the definition of Stipulated Loss Value), (B) all
unpaid Interim Rent and Basic Rent due on or prior to the SLV Determination
Date with reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date), and (C) (without
duplication) any other Rent which is due and payable through and including the
date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
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Section 8. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
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IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Senior Financial Services Officer
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EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N604SW]
B-1
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EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N604SW]
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EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
Part III
Special Purchase Price
45.79938905% of Lessor's Cost
SALE AND LEASE AMENDMENT [N604SW]
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