exv4w10



 











Exhibit 4.10




EXECUTION COPY


 

 




PARTICIPATION AGREEMENT N259WN




Dated as of October 3, 2007




Among




SOUTHWEST AIRLINES CO.,




Owner,




and


WILMINGTON TRUST COMPANY,




Not in its individual capacity

except as expressly provided herein,

but solely as Mortgagee, Subordination Agent

under the Intercreditor Agreement and Pass Through Trustee

under each of the Applicable Pass Through Trust Agreements




 






One Boeing Model 737-700 Aircraft

Bearing Manufacturer’s Serial No. 35554

and U.S. Registration No. N259WN




 

 








 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 
	SECTION 1.

	 	DEFINITIONS AND CONSTRUCTION
	 	 	1	 
	SECTION 2.

	 	SECURED LOANS; CLOSING
	 	 	2	 
	 

	 	2.1 Making of Loans and Issuance of Equipment Notes
	 	 	2	 
	 

	 	2.2 Closing
	 	 	2	 
	SECTION 3.

	 	[INTENTIONALLY OMITTED]
	 	 	2	 
	SECTION 4.

	 	CONDITIONS PRECEDENT
	 	 	2	 
	 

	 	4.1 Conditions Precedent to the Obligations of the Pass Through Trustees
	 	 	2	 
	 

	 	4.2 Conditions Precedent to Obligations of Mortgagee
	 	 	6	 
	 

	 	4.3 Conditions Precedent to Obligations of Owner
	 	 	6	 
	 

	 	4.4 Post-Recordation Opinion
	 	 	7	 
	SECTION 5.

	 	REPRESENTATIONS AND WARRANTIES
	 	 	7	 
	 

	 	5.1 Owner’s Representations and Warranties
	 	 	7	 
	 

	 	5.2 WTC’s Representations and Warranties
	 	 	10	 
	SECTION 6.

	 	COVENANTS, UNDERTAKINGS AND AGREEMENTS
	 	 	13	 
	 

	 	6.1 Covenants of Owner
	 	 	13	 
	 

	 	6.2 Covenants of WTC
	 	 	15	 
	 

	 	6.3 Covenants of Note Holders
	 	 	16	 
	 

	 	6.4 Agreements
	 	 	17	 
	SECTION 7.

	 	[INTENTIONALLY OMITTED]
	 	 	20	 
	SECTION 8.

	 	INDEMNIFICATION AND EXPENSES
	 	 	20	 
	 

	 	8.1 General Indemnity
	 	 	20	 
	 

	 	8.2 Expenses
	 	 	24	 
	 

	 	8.3 General Tax Indemnity
	 	 	25	 
	 

	 	8.4 Payments
	 	 	32	 
	 

	 	8.5 Interest
	 	 	32	 
	 

	 	8.6 Benefit of Indemnities
	 	 	32	 
	SECTION 9.

	 	ASSIGNMENT OR TRANSFER OF INTEREST
	 	 	33	 
	 

	 	9.1 Note Holders
	 	 	33	 
	 

	 	9.2 Effect of Transfer
	 	 	33	 
	SECTION 10.

	 	SECTION 1110
	 	 	33	 
	SECTION 11.

	 	CHANGE OF CITIZENSHIP
	 	 	33	 
	 

	 	11.1 Generally
	 	 	33	 
	 

	 	11.2 Mortgagee
	 	 	34	 
	SECTION 12.

	 	MISCELLANEOUS
	 	 	34	 
	 

	 	12.1 Amendments
	 	 	34	 
	 

	 	12.2 Severability
	 	 	34	 
	 

	 	12.3 Survival
	 	 	34	 
	 

	 	12.4 Reproduction of Documents
	 	 	35	 
	 

	 	12.5 Counterparts
	 	 	35	 
	 

	 	12.6 No Waiver
	 	 	35	 
	 

	 	12.7 Notices
	 	 	35	 
	 

	 	12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
	 	 	36	 
	 

	 	12.9 Third Party Beneficiary
	 	 	37	 
	 

	 	12.10 Entire Agreement
	 	 	37	 
	 

	 	12.11 Further Assurances
	 	 	37	 






(i)









 






SCHEDULES AND EXHIBITS




	 	 	 
	SCHEDULE 1 —

	 	Accounts; Addresses
	SCHEDULE 2 —

	 	Commitments
	SCHEDULE 3 —

	 	Certain Terms
	SCHEDULE 4 —

	 	Permitted Countries
	 
	EXHIBIT A —

	 	Opinion of special counsel to Owner
	EXHIBIT B —

	 	Opinion of corporate counsel to Owner
	EXHIBIT C —

	 	Opinion of special counsel to Mortgagee and to the Applicable Pass Through Trustees
	EXHIBIT D —

	 	Opinion of special counsel in Oklahoma City, Oklahoma






(ii)









 






PARTICIPATION AGREEMENT N259WN




          PARTICIPATION AGREEMENT N259WN, dated as of October 3, 2007 (this “Agreement”), among (a)
SOUTHWEST AIRLINES CO., a Texas corporation (“Owner”), (b) WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity, except as expressly provided herein, but
solely as Mortgagee (in its capacity as Mortgagee, “Mortgagee” and in its individual capacity,
“WTC”), (c) WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided
herein, but solely as Pass Through Trustee under each of the Applicable Pass Through Trust
Agreements (each, an “Applicable Pass Through Trustee”) and (d) WILMINGTON TRUST COMPANY, not in
its individual capacity, except as expressly provided herein, but solely as Subordination Agent
under the Intercreditor Agreement (“Subordination Agent”).




RECITALS




          A. Owner is the owner of the Aircraft.




          B. Owner and each Applicable Pass Through Trustee, concurrently with the execution and
delivery hereof, have entered into the Pass Through Trust Agreements, and on the Closing Date, the
Pass Through Trusts will be created and the Pass Through Certificates will be issued and sold.




          C. Each Applicable Pass Through Trustee has agreed to use a portion of the proceeds from the
issuance and sale of the Pass Through Certificates issued by each Applicable Pass Through Trust to
purchase from Owner, on behalf of the related Applicable Pass Through Trust, the Equipment Note
bearing the same interest rate as the Pass Through Certificates issued by such Pass Through Trust.




          D. Owner and Mortgagee, concurrently with the execution and delivery hereof, have entered into
the Trust Indenture for the benefit of the Note Holders, pursuant to which, among other things,
Owner agrees (1) to issue Equipment Notes, in the amounts and otherwise as provided in the Trust
Indenture, and (2) to mortgage, pledge and assign to Mortgagee all of Owner’s right, title and
interest in the Collateral to secure the Secured Obligations, including, without limitation,
Owner’s obligations under the Equipment Notes.




          E. The parties hereto wish to set forth in this Agreement the terms and conditions upon and
subject to which the aforesaid transactions shall be effected.




          NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:




SECTION 1. DEFINITIONS AND CONSTRUCTION




          Capitalized terms used but not defined herein (including in the initial paragraph and Recitals
above) shall have the respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A to the Trust Indenture.




 









 








SECTION 2. SECURED LOANS; CLOSING




          2.1 Making of Loans and Issuance of Equipment Notes




          Subject to the terms and conditions of this Agreement, on the date hereof or on such other
date agreed to by the parties hereto (the “Closing Date”):





	 	(a)	 	Each Applicable Pass Through Trustee listed on Schedule 2 shall
make a secured loan to the Owner in the amount in Dollars opposite such
Trustee’s name on Schedule 2; and
	 
	 	(b)	 	The Owner shall issue and the Mortgagee shall authenticate and
deliver, pursuant to and in accordance with the provisions of Article II of the
Trust Indenture, to the Subordination Agent as the registered holder on behalf
of each such Applicable Pass Through Trustee, one or more Equipment Notes,
dated the Closing Date, of the Series set forth opposite such Trustee’s name on
Schedule 2, in an aggregate principal amount equal to the amount of the secured
loan made by each such Applicable Pass Through Trustee.





          In addition, the Owner shall have the option on or after the Closing Date to redeem and
reissue Series B Equipment Notes and to issue from time to time Additional Series Equipment Notes,
subject to the terms of the Intercreditor Agreement. If Series B or Additional Series Equipment
Notes are so reissued or issued after the Closing Date, the Note Holder of such Equipment Notes
shall be entitled to execute a counterpart to this Agreement and become a party hereto.




          2.2 Closing




          (a) The Closing of the transactions contemplated hereby shall take place at the offices of
Milbank, Tweed, Hadley & McCloy LLP, One Chase Manhattan Plaza, New York, New York 10005, or at
such other place as the parties shall agree.




          (b) All payments pursuant to this Section 2 shall be made in immediately available funds to
such accounts set forth in Schedule 1 hereto.




SECTION 3. [INTENTIONALLY OMITTED]




SECTION 4. CONDITIONS PRECEDENT




          4.1 Conditions Precedent to the Obligations of the Pass Through Trustees




          The obligation of each Applicable Pass Through Trustee listed on Schedule 2 to make the
secured loan described in Section 2.1(a) and to participate in the transactions contemplated by
this Agreement on the Closing Date is subject to the satisfaction or waiver by each Applicable Pass
Through Trustee, on or prior to the Closing Date, of the conditions precedent set forth below in
the Section 4.1:




2









 









     4.1.1 Equipment Notes




          The Owner shall have tendered the Equipment Notes to be issued to such Applicable Pass Through
Trustees to the Mortgagee for authentication and the Mortgagee shall have authenticated such
Equipment Notes to be issued to such Applicable Pass Through Trustees and shall have tendered the
Equipment Notes to the Subordination Agent on behalf of such Applicable Pass Through Trustees,
against receipt of the loan proceeds, in accordance with Section 2.1.




     4.1.2 Delivery of Documents




          The Subordination Agent on behalf of each such Applicable Pass Through Trustee shall have
received executed counterparts or conformed copies of the following documents:




	 	(i)	 	this Agreement;
	 
	 	(ii)	 	the Trust Indenture;
	 
	 	(iii)	 	the initial Trust Indenture Supplement;
	 
	 	(iv)	 	the broker’s report and insurance certificates required by
Section 4.06 of the Trust Indenture;
	 
	 	(v)	 	the Consent and Agreement and the Engine Consent and Agreement;
	 
	 	(vi)	 	copies of the Bills of Sale;
	 
	 	(vii)	 	(A) a copy of the articles of incorporation and by-laws of
Owner and resolutions of the board of directors of Owner and/or the executive
committee thereof, in each case certified as of the Closing Date, by the
Secretary or an Assistant Secretary of Owner, duly authorizing the execution,
delivery and performance by Owner of the Operative Agreements to which it is
party required to be executed and delivered by Owner on or prior to the Closing
Date in accordance with the provisions hereof and thereof; and (B) an
incumbency certificate of Owner as to the person or persons authorized to
execute and deliver the Operative Agreements on behalf of Owner;
	 
	 	(viii)	 	an Officer’s Certificate of Owner, dated as of the Closing Date, stating that
its representations and warranties set forth in this Agreement are true and
correct as of the Closing Date (or, to the extent that any such representation
and warranty expressly relates to an earlier date, true and correct as of such
earlier date);
	 
	 	(ix)	 	the Financing Statements;
	 
	 	(x)	 	the following opinions of counsel, in each case dated the
Closing Date:




3









 












	 	(A)	 	an opinion of Vinson & Elkins L.L.P., special
counsel to Owner, substantially in the form of Exhibit A;
	 
	 	(B)	 	an opinion of Owner’s Legal Department,
substantially in the form of Exhibit B;
	 
	 	(C)	 	an opinion of Morris James LLP, special counsel
to Mortgagee and to the Applicable Pass Through Trustees, substantially
in the form of Exhibit C;
	 
	 	(D)	 	an opinion of DeBee Gilchrist, P.C., special
counsel in Oklahoma City, Oklahoma, substantially in the form of
Exhibit D; and






	 	(xi)	 	a copy of a current, valid Standard Certificate of
Airworthiness for the Aircraft duly issued by the FAA.






     4.1.3 Perfected Security Interest



          On the Closing Date, after giving effect to the filing of the FAA Filed Documents, the
Financing Statements and the registration of the International Interest of the Mortgagee in the
Airframe and each Engine with the International Registry, Mortgagee shall have received a duly
perfected first priority security interest in all of Owner’s right, title and interest in the
Aircraft, subject only to Permitted Liens.





     4.1.4 Violation of Law



          No change shall have occurred after the date of this Agreement in any applicable Law that
makes it a violation of Law for (a) Owner, any Applicable Pass Through Trustee, Subordination Agent
or Mortgagee to execute, deliver and perform the Operative Agreements to which any of them is a
party or (b) any Applicable Pass Through Trustee to make the loan contemplated by Section 2.1, to
acquire an Equipment Note or to realize the benefits of the security afforded by the Trust
Indenture.





     4.1.5 Representations, Warranties and Covenants



          The representations and warranties of each other party to this Agreement made, in each case,
in this Agreement and in any other Operative Agreement to which it is a party, shall be true and
accurate in all material respects as of the Closing Date (unless any such representation and
warranty shall have been made with reference to a specified date, in which case such representation
and warranty shall be true and accurate as of such specified date) and each other party to this
Agreement shall have performed and observed, in all material respects, all of its covenants,
obligations and agreements in this Agreement and in any other Operative Agreement to which it is a
party to be observed or performed by it as of the Closing Date.





     4.1.6 No Event of Default



          On the Closing Date, no event shall have occurred and be continuing, or would result from the
mortgage of the Aircraft, which constitutes a Default or an Event of Default.




4









 









     4.1.7 No Event of Loss



          No Event of Loss with respect to the Airframe or any Engine shall have occurred and no
circumstance, condition, act or event that, with the giving of notice or lapse of time or both,
would give rise to or constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.





     4.1.8 Title



          Owner shall have good title to the Aircraft, free and clear of all Liens, except Permitted
Liens.





     4.1.9 Certification



          The Aircraft shall have been duly certificated by the FAA as to type and airworthiness in
accordance with the terms of the Purchase Agreement.





     4.1.10 Section 1110



          Mortgagee shall be entitled to the benefits of Section 1110 (as currently in effect) with
respect to the right to take possession of the Airframe and Engines and to enforce any of its other
rights or remedies as provided in the Trust Indenture in the event of a case under Chapter 11 of
the Bankruptcy Code in which Owner is a debtor.





     4.1.11 Filing



          On the Closing Date (a) the FAA Filed Documents shall have been duly filed for recordation (or
shall be in the process of being so duly filed for recordation) with the FAA in accordance with the
Act, (b) the International Interest of the Mortgagee in the Airframe and each Engine granted under
the Trust Indenture shall have been registered with the International Registry and there shall
exist no registered International Interest with respect to the Airframe or either Engine on the
International Registry and (c) each Financing Statement shall have been duly filed (or shall be in
the process of being so duly filed) in the appropriate jurisdiction.





     4.1.12 No Proceedings



          No action or proceeding shall have been instituted, nor shall any action be threatened in
writing, before any Government Entity, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Government Entity, to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or any other Operative Agreement or the transactions
contemplated hereby or thereby.





     4.1.13 Governmental Action



          All appropriate action required to have been taken prior to the Closing Date by the FAA, or
any governmental or political agency, subdivision or instrumentality of the United States, in
connection with the transactions contemplated by this Agreement shall have been taken, and all
orders, permits, waivers, authorizations, exemptions and approvals of such entities



5









 






required to be in effect on the Closing Date in connection with the transactions contemplated
by this Agreement shall have been issued.





     4.1.14 Pass Through Trust Agreements and Underwriting Agreement



          The Applicable Pass Through Trustees shall have received duly authorized and validly executed
counterparts or conformed copies of the Applicable Pass Through Agreements and the Underwriting
Agreement in form and substance satisfactory to the Applicable Pass Through Trustees and all such
documents shall be in full force and effect and the conditions precedent to the obligations of the
Underwriters and the other requirements relating to the sale of the Certificates set forth in the
Underwriting Agreement (as defined in the Intercreditor Agreement) shall have been satisfied or
waived in accordance with the terms thereof.





     4.1.15 Other Aircraft



          The conditions precedent to the obligations of the Applicable Pass Through Trustees under each
of the other “Participation Agreements” (as defined in the Intercreditor Agreement) set forth in
such other “Participation Agreements” shall have been satisfied or waived in accordance with the
terms thereof and the “Closing” as defined therein shall have occurred contemporaneously with the
Closing hereunder.




          4.2 Conditions Precedent to Obligations of Mortgagee




          The obligation of Mortgagee to authenticate the Equipment Notes on the Closing Date is subject
to the satisfaction or waiver by Mortgagee, on or prior to the Closing Date, of the conditions
precedent set forth below in this Section 4.2.





     4.2.1 Delivery of Documents



          Executed originals of the agreements, instruments, certificates or documents described in
Section 4.1.2 shall have been received by Mortgagee, except as specifically provided therein,
unless the failure to receive any such agreement, instrument, certificate or document is the result
of any action or inaction by Mortgagee.





     4.2.2 Other Conditions Precedent



          Each of the conditions set forth in Sections 4.1.4, 4.1.5, 4.1.6 and 4.1.10 shall have been
satisfied unless the failure of any such condition to be satisfied is the result of any action or
inaction by Mortgagee.





          4.3 Conditions Precedent to Obligations of Owner



          The obligation of Owner to participate in the transaction contemplated hereby on the Closing
Date is subject to the satisfaction or waiver by Owner, on or prior to the Closing Date, of the
conditions precedent set forth below in this Section 4.3.




6









 









     4.3.1 Delivery of Documents



          Executed originals of the agreements, instruments, certificates or documents described in
Section 4.1.2 shall have been received by Owner, except as specifically provided therein, and shall
be satisfactory to Owner, unless the failure to receive any such agreement, instrument, certificate
or document is the result of any action or inaction by Owner. In addition, the Owner shall have
received the following:





	 	(i)	 	(A) an incumbency certificate of WTC as to the person or
persons authorized to execute and deliver the Operative Agreements on behalf of
WTC and (B) a copy of the Certificate of Incorporation and By-Laws and general
authorizing resolution of the board of directors (or executive committee) or
other satisfactory evidence of authorization of WTC, certified as of the
Closing Date by the Secretary or Assistant or Attesting Secretary of WTC, which
authorize the execution, delivery and performance by WTC of the Operative
Agreements to which it is a party; and
	 
	 	(ii)	 	an Officer’s Certificate of WTC, dated as of the Closing Date,
stating that its representations and warranties in its individual capacity or
as Mortgagee, an Applicable Pass Through Trustee or Subordination Agent, as the
case may be, set forth in this Agreement are true and correct as of the Closing
Date (or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);






     4.3.2 Other Conditions Precedent



          Each of the conditions set forth in Sections 4.1.4, 4.1.5, 4.1.6, 4.1.7, 4.1.8, 4.1.9, 4.1.10,
4.1.11, 4.1.12 and 4.1.13 shall have been satisfied or waived by Owner, unless the failure of any
such condition to be satisfied is the result of any action or inaction by Owner.




          4.4 Post-Recordation Opinion




          Promptly upon the recordation of the FAA Filed Documents pursuant to the Act, Owner will
request DeBee Gilchrist, P.C., special counsel in Oklahoma City, Oklahoma, to deliver to Owner,
each Pass Through Trustee and Mortgagee a favorable opinion or opinions addressed to each of them
with respect to such recordation.




SECTION 5. REPRESENTATIONS AND WARRANTIES




          5.1 Owner’s Representations and Warranties




          Owner represents and warrants to each Applicable Pass Through Trustee, Subordination Agent and
Mortgagee that:




7









 









     5.1.1 Organization; Qualification



          Owner is a corporation duly incorporated, validly existing and in good standing under the Laws
of the State of Texas and has the corporate power and authority to conduct the business in which it
is currently engaged and to own or hold under lease its properties and to enter into and perform
its obligations under the Operative Agreements to which it is party. Owner is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction in which the nature and
extent of the business conducted by it, or the ownership of its properties, requires such
qualification, except where the failure to be so qualified would not give rise to a Material
Adverse Change to Owner.





     5.1.2 Corporate Authorization



          Owner has taken, or caused to be taken, all necessary corporate action (including, without
limitation, the obtaining of any consent or approval of stockholders required by its articles of
incorporation or by-laws) to authorize the execution and delivery of each of the Operative
Agreements to which it is party, and the performance of its obligations thereunder.





     5.1.3 No Violation



          The execution and delivery by Owner of the Operative Agreements to which it is party, the
performance by Owner of its obligations thereunder and the consummation by Owner on the Closing
Date of the transactions contemplated thereby, do not and will not (a) violate any provision of the
articles of incorporation or by-laws of Owner, (b) violate any Law applicable to or binding on
Owner or (c) violate or constitute any default under (other than any violation or default that
would not result in a Material Adverse Change to Owner), or result in the creation of any Lien
(other than Permitted Liens) upon the Aircraft under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or
document to which Owner is a party or by which Owner or any of its properties is bound.





     5.1.4 Approvals



          The execution and delivery by Owner of the Operative Agreements to which Owner is a party, the
performance by Owner of its obligations thereunder and the consummation by Owner on the Closing
Date of the transactions contemplated thereby do not and will not require the consent or approval
of, or the giving of notice to, or the registration with, or the recording or filing of any
documents with, or the taking of any other action in respect of, (a) any trustee or other holder of
any Debt of Owner and (b) any Government Entity, other than the filing of (x) the FAA Filed
Documents and the Financing Statements (and continuation statements periodically), (y) the
registration of the International Interest of the Mortgagee in the Airframe and Engines with the
International Registry and (z) filings, recordings, notices or other ministerial actions pursuant
to any routine recording, contractual or regulatory requirements applicable to it.




8









 









     5.1.5 Valid and Binding Agreements



          The Operative Agreements to which Owner is a party have been duly authorized, executed and
delivered by Owner and, assuming the due authorization, execution and delivery thereof by the other
party or parties thereto, constitute the legal, valid and binding obligations of Owner and are
enforceable against Owner in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
and other similar Laws affecting the rights of creditors generally and general principles of
equity, whether considered in a proceeding at law or in equity.





     5.1.6 Registration and Recordation



          Except for (a) the filing for recordation (and recordation) of the FAA Filed Documents, (b)
the registration of the International Interest of the Mortgagee in the Airframe and Engines with
the International Registry, (c) the filing of the Financing Statements (and continuation statements
relating thereto at periodic intervals), and (d) the affixation of the nameplates referred to in
Section 4.02(f) of the Trust Indenture, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under Article 9 of the UCC) is
necessary in order to establish and perfect Mortgagee’s security interest in the Aircraft as
against Owner and any other Person, in each case, in any applicable jurisdictions in the United
States.





     5.1.7 Owner’s Location



          The Owner’s location (as such term is used in Section 9-307 of the UCC) is Texas. The full
and correct legal name and mailing address of Owner are correctly set forth in Schedule 1 hereto in
the column “Address for Notices”.





     5.1.8 No Event of Loss



          No Event of Loss has occurred with respect to the Airframe or any Engine, and, to the Actual
Knowledge of Owner, no circumstance, condition, act or event has occurred that, with the giving of
notice or lapse of time or both gives rise to or constitutes an Event of Loss with respect to the
Airframe or any Engine.





     5.1.9 Compliance With Laws



          (a) Owner is a Citizen of the United States and a U.S. Air Carrier.




          (b) Owner holds all licenses, permits and franchises from the appropriate Government Entities
necessary to authorize Owner to lawfully engage in air transportation and to carry on scheduled
commercial passenger service as currently conducted, except where the failure to so hold any such
license, permit or franchise would not give rise to a Material Adverse Change to Owner.




          (c) Owner is not an “investment company” or a company controlled by an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.




9









 









     5.1.10 Securities Laws



          Neither Owner nor any person authorized to act on its behalf has directly or indirectly
offered any beneficial interest or Security relating to the ownership of the Aircraft, or any of
the Equipment Notes or any other interest in or security under the Trust Indenture, for sale to, or
solicited any offer to acquire any such interest or security from, or has sold any such interest or
security to, any person in violation of the Securities Act.





     5.1.11 Broker’s Fees



          No Person acting on behalf of Owner is or will be entitled to any broker’s fee, commission or
finder’s fee in connection with the Transactions, other than the fees and expenses payable by Owner
in connection with the sale of the Pass Through Certificates.





     5.1.12 Section 1110



          Mortgagee is entitled to the benefits of Section 1110 (as currently in effect) with respect to
the right to take possession of the Airframe and Engines and to enforce any of its other rights or
remedies as provided in the Trust Indenture in the event of a case under Chapter 11 of the
Bankruptcy Code in which Owner is a debtor.





     5.1.13 Cape Town



          The Owner is a Transacting User Entity; is “situated”, for the purposes of the Cape Town
Treaty, in the United States; and has the power to “dispose” (as such term is used in the Cape Town
Treaty) of the Airframe and each Engine. The Trust Indenture, as supplemented by the Trust
Indenture Supplement in which the Airframe and Engines are listed, creates an International
Interest in such Airframe and Engines. The Airframe and each Engine are “aircraft objects” (as
defined in the Cape Town Treaty); and the United States is a Contracting State under the Cape Town
Treaty.




          5.2 WTC’s Representations and Warranties




          WTC represents and warrants (with respect to Section 5.2.10, solely in its capacity as
Subordination Agent) to Owner that:





     5.2.1 Organization, Etc.



          WTC is a Delaware banking corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware, holding a valid certificate to do business as a Delaware
banking corporation with banking authority to execute and deliver, and perform its obligations
under, the Applicable Pass Through Trustee Agreements and the Operative Agreements to which it is a
party.





     5.2.2 Corporate Authorization



          WTC has taken, or caused to be taken, all necessary corporate action (including, without
limitation, the obtaining of any consent or approval of stockholders required by Law or



10









 






by its Certificate of Incorporation or By-Laws) to authorize the execution and delivery by
WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as
the case may be, of the Pass Through Trustee Agreements and the Operative Agreements to which it is
a party and the performance of its obligations thereunder.





     5.2.3 No Violation



          The execution and delivery by WTC, in its individual capacity or as Mortgagee, a Pass Through
Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Agreements and the
Operative Agreements to which it is a party, the performance by WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of its obligations
thereunder and the consummation on the Closing Date of the transactions contemplated thereby, do
not and will not (a) violate any provision of the Certificate of Incorporation or By-Laws of WTC,
(b) violate any Law applicable to or binding on WTC, in its individual capacity or (except in the
case of any Law relating to any Plan) as Mortgagee, a Pass Through Trustee or Subordination Agent,
or (c) violate or constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to WTC, in its individual capacity or Mortgagee, a Pass Through
Trustee or Subordination Agent), or result in the creation of any Lien (other than the Lien of the
Trust Indenture) upon any property of WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, or any of WTC’s subsidiaries under, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other
agreement, instrument or document to which WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, is a party or by which WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, or any of their respective properties
is bound.





     5.2.4 Approvals



          The execution and delivery by WTC, in its individual capacity or as Mortgagee, a Pass Through
Trustee or Subordination Agent, as the case may be, of the Pass Through Trustee Agreements and the
Operative Agreements to which it is a party, the performance by WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of its obligations
thereunder and the consummation on the Closing Date by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of the transactions
contemplated thereby do not and will not require the consent, approval or authorization of, or the
giving of notice to, or the registration with, or the recording or filing of any documents with, or
the taking of any other action in respect of, (a) any trustee or other holder of any Debt of WTC or
(b) any Government Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.





     5.2.5 Valid and Binding Agreements



          The Pass Through Trustee Agreements and the Operative Agreements to which it is a party have
been duly authorized, executed and delivered by WTC and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid and binding
obligations of WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, and are enforceable against WTC,



11









 






in its individual capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as
the case may be, in accordance with the respective terms thereof, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other similar
Laws affecting the rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.





     5.2.6 Citizenship



          WTC is a Citizen of the United States.





     5.2.7 No Liens



          On the Closing Date, there are no Liens attributable to WTC in respect of all or any part of
the Collateral.





     5.2.8 Litigation



          There are no pending or, to the Actual Knowledge of WTC, threatened actions or proceedings
against WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, before any court, administrative agency or tribunal which, if determined adversely to WTC,
in its individual capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, would materially adversely affect the ability of WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, to perform its
obligations under any of the Mortgagee Agreements, the Pass Through Trustee Agreements or the
Subordination Agent Agreements.





     5.2.9 Securities Laws



          Neither WTC nor any person authorized to act on its behalf has directly or indirectly offered
any beneficial interest or Security relating to the ownership of the Aircraft or any interest in
the Collateral or any of the Equipment Notes or any other interest in or security under the
Collateral for sale to, or solicited any offer to acquire any such interest or security from, or
has sold any such interest or security to, any Person other than the Subordination Agent and the
Pass Through Trustees, except for the offering and sale of the Pass Through Certificates.





     5.2.10 Investment



          The Equipment Notes to be acquired by the Subordination Agent are being acquired by it for the
account of the Applicable Pass Through Trustees, for investment and not with a view to any resale
or distribution thereof, except that, subject to the restrictions on transfer set forth in Section
9, the disposition by it of its Equipment Notes shall at all times be within its control.





     5.2.11 Taxes



          There are no Taxes payable by any Applicable Pass Through Trustee or WTC, as the case may be,
imposed by the State of Delaware or any political subdivision or taxing authority thereof in
connection with the execution, delivery and performance by such Pass



12









 






Through Trustee or WTC, as the case may be, of this Agreement or any of the Pass Through
Trustee Agreements (other than franchise or other taxes based on or measured by any fees or
compensation received by any such Pass Through Trustee or WTC, as the case may be, for services
rendered in connection with the transactions contemplated by any of the Pass Through Trust
Agreements), and there are no Taxes payable by any Applicable Pass Through Trustee or WTC, as the
case may be, imposed by the State of Delaware or any political subdivision thereof in connection
with the acquisition, possession or ownership by any such Pass Through Trustee of any of the
Equipment Notes (other than franchise or other taxes based on or measured by any fees or
compensation received by any such Pass Through Trustee or WTC, as the case may be, for services
rendered in connection with the transactions contemplated by any of the Pass Through Trust
Agreements), and, assuming that the trusts created by the Pass Through Trust Agreements will not be
taxable as corporations, but, rather, each will be characterized as a grantor trust under subpart
E, Part I of Subchapter J of the Code or as a partnership under Subchapter K of the Code, such
trusts will not be subject to any Taxes imposed by the State of Delaware or any political
subdivision thereof;





     5.2.12 Broker’s Fees



          No Person acting on behalf of WTC, in its individual capacity or as Mortgagee, any Applicable
Pass Through Trustee or Subordination Agent, is or will be entitled to any broker’s fee, commission
or finder’s fee in connection with the Transactions.




SECTION 6. COVENANTS, UNDERTAKINGS AND AGREEMENTS




          6.1 Covenants of Owner




          Owner covenants and agrees, at its own cost and expense, with Note Holder and Mortgagee as
follows:





     6.1.1 Corporate Existence; U.S. Air Carrier



          Owner shall at all times maintain its corporate existence, except as permitted by Section 4.07
of the Trust Indenture, and shall at all times remain a U.S. Air Carrier.





     6.1.2 Notice of Change of Location



          Owner will give Mortgagee timely written notice (but in any event within 30 days prior to the
expiration of the period of time specified under applicable Law to prevent lapse of perfection) of
any change in its location (as such term is used in Section 9-307 of the UCC) or legal name and
will promptly take any action required by Section 6.1.3(c) as a result of such relocation.





     6.1.3 Certain Assurances



          (a) Owner shall duly execute, acknowledge and deliver, or shall cause to be executed,
acknowledged and delivered, all such further agreements, instruments, certificates or documents,
and shall do and cause to be done such further acts and things, in any case, as Mortgagee shall
reasonably request for accomplishing the purposes of this Agreement and the



13









 






other Operative Agreements, provided that any instrument or other document so executed by
Owner will not expand any obligations or limit any rights of Owner in respect of the transactions
contemplated by any Operative Agreement.




          (b) Owner shall promptly take such action with respect to the recording, filing, re-recording
and refiling of the Trust Indenture and any supplements thereto, including, without limitation, the
initial Trust Indenture Supplement, as shall be necessary to continue the perfection and priority
of the Lien created by the Trust Indenture.




          (c) Owner, at its sole cost and expense, will cause the FAA Filed Documents, the Financing
Statements and all continuation statements (and any amendments necessitated by any combination,
consolidation or merger of the Owner, or any relocation of its chief executive office) in respect
of the Financing Statements to be prepared and, subject only to the execution and delivery thereof
by Mortgagee, duly and timely filed and recorded, or filed for recordation, to the extent permitted
under the Act (with respect to the FAA Filed Documents) or the UCC or similar law of any other
applicable jurisdiction (with respect to such other documents).




          (d) If the Aircraft has been registered in a country other than the United States pursuant to
Section 4.02(e) of the Trust Indenture, Owner will furnish to Mortgagee annually after such
registration, commencing with the calendar year after such registration is effected, an opinion of
special counsel reasonably satisfactory to Mortgagee stating that, in the opinion of such counsel,
either that (i) such action has been taken with respect to the recording, filing, rerecording and
refiling of the Operative Agreements and any supplements and amendments thereto as is necessary to
establish, perfect and protect the Lien created by the Trust Indenture, reciting the details of
such actions, or (ii) no such action is necessary to maintain the perfection of such Lien.




          (e) Promptly after the occurrence of a Triggering Event or an Indenture Default resulting from
the failure of the Owner to make payments on any Equipment Note and on every Regular Distribution
Date while the Triggering Event or such Indenture Default shall be continuing, the Owner will, at
the Subordination Agent’s request from time to time but in any event no more frequently than once
every three months, provide to the Subordination Agent a statement setting forth the following
information with respect to the Aircraft: (A) whether the Aircraft is currently in service or
parked in storage, (B) the maintenance status of the Aircraft and (C) the location of the Engines
(as defined in the Trust Indenture). As used in this sentence, the terms “Triggering Event”,
“Indenture Default” and “Regular Distribution Date” shall have the respective meanings set forth in
the Intercreditor Agreement as originally executed.





     6.1.4 Securities Laws



          Neither Owner nor any person authorized to act on its behalf will directly or indirectly offer
any beneficial interest or Security relating to the ownership of the Aircraft or any interest in
any of the Equipment Notes or any other interest in or security under the Trust Indenture, for sale
to, or solicit any offer to acquire any such interest or security from, or sell any such interest
or security to, any person in violation of the Securities Act or applicable state or foreign
securities Laws.




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     6.1.5. Notice of Lease



          Owner shall give to Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., a copy of any notice regarding a lease of the Aircraft required to be given to the
Mortgagee pursuant to clause (w) of the first sentence of the penultimate paragraph of Section
4.02(b) of the Mortgage, at the time such notice is given to Mortgagee, if at such time Standard &
Poor’s is then rating the Pass Through Certificates.




          6.2 Covenants of WTC




          WTC in its individual capacity or as Mortgagee, each Applicable Pass Through Trustee or
Subordination Agent, as the case may be, covenants and agrees with Owner as follows:





     6.2.1 Liens



          WTC (a) will not directly or indirectly create, incur, assume or suffer to exist any Lien
attributable to it on or with respect to all or any part of the Collateral or the Aircraft, (b)
will, at its own cost and expense, promptly take such action as may be necessary to discharge any
Lien attributable to WTC on all or any part of the Collateral or the Aircraft and (c) will
personally hold harmless and indemnify Owner, each Note Holder, each of their respective
Affiliates, successors and permitted assigns, and the Collateral from and against (i) any and all
Expenses, (ii) any reduction in the amount payable out of the Collateral, and (iii) any
interference with the possession, operation or other use of all or any part of the Aircraft,
imposed on, incurred by or asserted against any of the foregoing as a consequence of any such Lien.





     6.2.2 Securities Act



          WTC in its individual capacity or as Mortgagee, an Applicable Pass Through Trustee or
Subordination Agent, will not offer any beneficial interest or Security relating to the ownership
of the Aircraft or any interest in the Collateral, or any of the Equipment Notes or any other
interest in or security under the Trust Indenture for sale to, or solicit any offer to acquire any
such interest or security from, or sell any such interest or security to, any Person in violation
of the Securities Act or applicable state or foreign securities Laws, provided that the foregoing
shall not be deemed to impose on WTC any responsibility with respect to any such offer, sale or
solicitation by any other party hereto.





     6.2.3 Performance of Agreements



          WTC, in its individual capacity and as Mortgagee, an Applicable Pass Through Trustee or
Subordination Agent, as the case may be, shall perform its obligations under the Pass Through
Trustee Agreements and the Operative Agreements in accordance with the terms thereof.





     6.2.4 Withholding Taxes



          WTC shall indemnify (on an after-tax basis) and hold harmless Owner against any United States
withholding taxes (and related interest, penalties and additions to tax) as a result of



15









 






the failure by WTC to withhold on payments to any Note Holder if such Note Holder failed to
provide to Mortgagee necessary certificates or forms to substantiate the right to exemption from
such withholding tax.




          6.3 Covenants of Note Holders




          Each Note Holder (including Subordination Agent) as to itself only covenants and agrees with
Owner and Mortgagee as follows:





     6.3.1 Withholding Taxes



          Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on an after-tax basis) and
hold harmless Owner and Mortgagee against any United States withholding taxes (and related
interest, penalties and additions to tax) as a result of the inaccuracy or invalidity of any
certificate or form provided by such Note Holder to Mortgagee in connection with such withholding
taxes. Any amount payable hereunder shall be paid within 30 days after receipt by a Note Holder of
a written demand therefor.





     6.3.2 Transfer; Compliance



          (a) Such Note Holder will (i) not transfer any Equipment Note or interest therein in violation
of the Securities Act or applicable state or foreign securities Law; provided, that the foregoing
provisions of this section shall not be deemed to impose on such Note Holder any responsibility
with respect to any such offer, sale or solicitation by any other party hereto, and (ii) perform
and comply with the obligations specified to be imposed on it (as a Note Holder) under each of the
Trust Indenture and the form of Equipment Note set forth in the Trust Indenture.




          (b) Except for the transfer of the interests of each Applicable Pass Through Trustee in the
Equipment Notes to the trustee of the Related Trust (as defined in each Applicable Pass Through
Trust Agreement) in accordance with the related Applicable Pass Through Trust Agreement, each Note
Holder will not sell, assign, convey, exchange or otherwise transfer any Equipment Note or any
interest in, or represented by, any Equipment Note (it being understood that this provision is not
applicable to the Pass Through Certificates) unless the proposed transferee thereof first provides
Owner with both of the following:





	 	(i)	 	a written representation and covenant that either (a) no
portion of the funds it uses to purchase, acquire and hold such Equipment Note
or interest directly or indirectly constitutes, or may be deemed under the Code
or ERISA or any rulings, regulations or court decisions thereunder to
constitute, the assets of any Plan or (b) the transfer, and subsequent holding,
of such Equipment Note or interest shall not involve or give rise to a
transaction that constitutes a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code involving Owner, a Pass
Through Trustee, the Subordination Agent or the proposed transferee (other than
a transaction that is exempted from the prohibitions of such sections by
applicable provisions of ERISA or the Code or administrative exemptions or
regulations issued thereunder); and




16









 












	 	(ii)	 	a written covenant that it will not transfer any Equipment Note
or any interest in, or represented by, any Equipment Note unless the subsequent
transferee also makes the representation described in clause (i) above and
agrees to comply with this clause (ii).





          6.4 Agreements





     6.4.1 Quiet Enjoyment



          Each Pass Through Trustee, Subordination Agent, each Note Holder and Mortgagee agrees as to
itself with Owner that, so long as no Event of Default shall have occurred and be continuing, such
Person shall not (and shall not permit any Affiliate or other Person claiming by, through or under
it to) interfere with Owner’s rights in accordance with the Trust Indenture to the quiet enjoyment,
possession and use of the Aircraft.





     6.4.2 Consents



          Each Pass Through Trustee, Subordination Agent and Mortgagee covenants and agrees, for the
benefit of Owner, that it shall not unreasonably withhold its consent to any consent or approval
requested of it under the terms of any of the Operative Agreements which by its terms is not to be
unreasonably withheld.





     6.4.3 Insurance



          Each Pass Through Trustee, Subordination Agent, Mortgagee and each Note Holder agrees not to
obtain or maintain insurance for its own account as permitted by Section 4.06 of the Trust
Indenture if such insurance would limit or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Owner pursuant to Section 4.06 of the Trust Indenture.





     6.4.4 Extent of Interest of Note Holders



          A Note Holder shall not, as such, have any further interest in, or other right with respect
to, the Collateral when and if the principal and Make-Whole Amount, if any, of and interest on the
Equipment Note held by such Holder, and all other sums, then due and payable to such Holder
hereunder and under any other Operative Agreement, shall have been paid in full. The preceding
sentence shall not limit the rights of the Related Note Holders with respect to Related Secured
Obligations under the Trust Indenture, provided that a Related Note Holder shall not, as such, have
any further interest in, or other right with respect to, the Collateral when and if the Related
Secured Obligations attributable to the Related Equipment Note held by such Holder shall have been
paid in full.





     6.4.5 Foreign Registration



          Each Note Holder and Mortgagee hereby agree, for the benefit of Owner but subject to the
provisions of Section 4.02(b) of the Trust Indenture:




17









 








          (a) that Owner shall be entitled to register the Aircraft or cause the Aircraft to be
registered in a country other than the United States subject to compliance with the following:





	 	(i)	 	each of the following requirements is satisfied:






	 	(A)	 	no Special Default or Event of Default shall
have occurred and be continuing at the time of such registration;
	 
	 	(B)	 	such proposed change of registration is made in
connection with a Permitted Lease to a Permitted Air Carrier; and
	 
	 	(C)	 	such country is a country with which the United
States then maintains normal diplomatic relations or, if Taiwan, the
United States then maintains diplomatic relations at least as good as
those in effect on the Closing Date;






	 	(ii)	 	the Mortgagee shall have received an opinion of counsel
(subject to customary exceptions) reasonably satisfactory to the Mortgagee
addressed to Mortgagee as to the effect that:






	 	(A)	 	such country would recognize the Owner’s
ownership interest in the Aircraft;
	 
	 	(B)	 	after giving effect to such change in
registration, the Lien of the Trust Indenture on the Owner’s right,
title and interest in and to the Aircraft shall continue as a valid and
duly perfected first priority security interest and International
Interest and all filing, recording or other action necessary to protect
the same shall have been accomplished (or, if such opinion cannot be
given at the time of such proposed change in registration because such
change in registration is not yet effective, (1) the opinion shall
detail what filing, recording or other action is necessary and (2) the
Mortgagee shall have received a certificate from Owner that all
possible preparations to accomplish such filing, recording and other
action shall have been done, and such filing, recording and other
action shall be accomplished and a supplemental opinion to that effect
shall be delivered to the Mortgagee on or prior to the effective date
of such change in registration);
	 
	 	(C)	 	unless Owner or the Permitted Air Carrier shall
have agreed to provide insurance covering the risk of requisition of
use of the Aircraft by the government of such country (so long as the
Aircraft is registered under the laws of such country), the laws of
such country require fair compensation by the government of such
country payable in currency freely convertible into Dollars and freely
removable from such country (without license or permit, unless Owner
prior to such proposed reregistration has obtained




18









 






	 	 	 	such license or permit) for the taking or requisition by such
government of such use; and






	 	(D)	 	it is not necessary, solely as a consequence of
such change in registration and without giving effect to any other
activity of the Mortgagee (or any Affiliate of the Mortgagee), for the
Mortgagee to qualify to do business in such jurisdiction as a result of
such reregistration in order to exercise any rights or remedies with
respect to the Aircraft.





          (b) In addition, as a condition precedent to any change in registration, Owner shall have
given to Mortgagee assurances reasonably satisfactory to Mortgagee:





	 	(i)	 	to the effect that the provisions of Section 4.06 of the Trust
Indenture have been complied with after giving effect to such change of
registration;
	 
	 	(ii)	 	of the payment by Owner of all reasonable out-of-pocket
expenses of each Note Holder and Mortgagee in connection with such change of
registry, including, without limitation (1) the reasonable fees and
disbursements of counsel to Mortgagee, (2) any filing or recording fees, Taxes
or similar payments incurred in connection with the change of registration of
the Aircraft and the creation and perfection of the security interest therein
in favor of Mortgagee for the benefit of Note Holders, and (3) all costs and
expenses incurred in connection with any filings necessary to continue in the
United States the perfection of the security interest in the Aircraft in favor
of Mortgagee for the benefit of Note Holders; and
	 
	 	(iii)	 	to the effect that the tax and other indemnities in favor of
each person named as an indemnitee under any other Operative Agreement afford
each such person substantially the same protection as provided prior to such
change of registration (or Owner shall have agreed upon additional indemnities
that, together with such original indemnities, in the reasonable judgment of
Mortgagee, afford such protection).






     6.4.6 Interest in Certain Engines



          Each Note Holder and Mortgagee agree, for the benefit of each of the lessor, conditional
seller, mortgagee or secured party of any airframe or engine leased to, or purchased by, Owner or
any Permitted Lessee subject to a lease, conditional sale, trust indenture or other security
agreement that it will not acquire or claim, as against such lessor, conditional seller, mortgagee
or secured party, any right, title or interest in any engine as the result of such engine being
installed on the Airframe at any time while such engine is subject to such lease, conditional sale,
trust indenture or other security agreement and owned by such lessor or conditional seller or
subject to a trust indenture or security interest in favor of such mortgagee or secured party.




19









 








SECTION 7. [INTENTIONALLY OMITTED]




SECTION 8. INDEMNIFICATION AND EXPENSES




          8.1 General Indemnity





     8.1.1 Indemnity



          Whether or not any of the transactions contemplated hereby are consummated, Owner shall
indemnify, protect, defend and hold harmless each Indemnitee from, against and in respect of, and
shall pay on a net after-tax basis, any and all Expenses of any kind or nature whatsoever that may
be imposed on, incurred by or asserted against any Indemnitee, relating to, resulting from, or
arising out of or in connection with, any one or more of the following:




          (a) The Operative Agreements, the Applicable Pass Through Agreements, or the enforcement of
any of the terms of any of the Operative Agreements or the Applicable Pass Through Agreements;




          (b) The Aircraft, the Airframe, any Engine or any Part, including, without limitation, with
respect thereto, (i) the manufacture, design, purchase, acceptance, nonacceptance or rejection,
ownership, registration, reregistration, deregistration, delivery, nondelivery, lease, sublease,
assignment, possession, use or non-use, operation, maintenance, testing, repair, overhaul,
condition, alteration, modification, addition, improvement, storage, airworthiness, replacement,
repair, sale, substitution, return, abandonment, redelivery or other disposition of the Aircraft,
any Engine or any Part, (ii) any claim or penalty arising out of violations of applicable Laws by
Owner (or any Permitted Lessee), (iii) tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed), (iv) death or property damage of
passengers, shippers or others, (v) environmental control, noise or pollution and (vi) any Liens in
respect of the Aircraft, any Engine or any Part;




          (c) The offer, sale, or delivery of any Equipment Notes, Pass Through Certificates or any
interest therein or represented thereby; and




          (d) Any breach of or failure to perform or observe, or any other noncompliance with, any
covenant or agreement or other obligation to be performed by Owner under any Operative Agreement to
which it is party or any Applicable Pass Through Agreement or the falsity of any representation or
warranty of Owner in any Operative Agreement to which it is party or any Applicable Pass Through
Agreement.





     8.1.2 Exceptions



          Notwithstanding anything contained in Section 8.1.1, Owner shall not be required to indemnify,
protect, defend and hold harmless any Indemnitee pursuant to Section 8.1.1 in respect of any
Expense of such Indemnitee:




          (a) For any Taxes or a loss of Tax benefit, whether or not Owner is required to indemnify
therefor pursuant to Section 8.3;




20









 








          (b) Except to the extent attributable to acts or events occurring prior thereto, acts or
events (other than acts or events related to the performance by Owner of its obligations pursuant
to the terms of the Operative Agreements) that occur after the Trust Indenture is required to be
terminated in accordance with Section 11.01 of the Trust Indenture; provided, that nothing in this
clause (b) shall be deemed to exclude or limit any claim that any Indemnitee may have under
applicable Law by reason of an Event of Default or for damages from Owner for breach of Owner’s
covenants contained in the Operative Agreements or to release Owner from any of its obligations
under the Operative Agreements that expressly provide for performance after termination of the
Trust Indenture;




          (c) To the extent attributable to any Transfer (voluntary or involuntary) by or on behalf of
such Indemnitee of any Equipment Note or interest therein, except for out-of-pocket costs and
expenses incurred as a result of any such Transfer pursuant to the exercise of remedies under any
Operative Agreement;




          (d) [Intentionally Omitted]




          (e) To the extent attributable to the gross negligence or willful misconduct of such
Indemnitee or any related Indemnitee (as defined below) (other than gross negligence or willful
misconduct imputed to such person by reason of its interest in the Aircraft or any Operative
Agreement);




          (f) [Intentionally Omitted]




          (g) To the extent attributable to the incorrectness or breach of any representation or
warranty of such Indemnitee or any related Indemnitee contained in or made pursuant to any
Operative Agreement or any Pass Through Agreement;




          (h) To the extent attributable to the failure by such Indemnitee or any related Indemnitee to
perform or observe any agreement, covenant or condition on its part to be performed or observed in
any Operative Agreement or any Pass Through Agreement;




          (i) To the extent attributable to the offer or sale by such Indemnitee or any related
Indemnitee of any interest in the Aircraft, the Equipment Notes, the Pass Through Certificates, or
any similar interest, in violation of the Securities Act or other applicable federal, state or
foreign securities Laws (other than any thereof caused by acts or omissions of Owner);




          (j) (i) With respect to any Indemnitee (other than Mortgagee), to the extent attributable to
the failure of the Mortgagee to distribute funds received and distributable by it in accordance
with the Trust Indenture, (ii) with respect to any Indemnitee (other than the Subordination Agent),
to the extent attributable to the failure of the Subordination Agent to distribute funds received
and distributable by it in accordance with the Intercreditor Agreement, (iii) with respect to any
Indemnitee (other than the Pass Through Trustees), to the extent attributable to the failure of a
Pass Through Trustee to distribute funds received and distributable by it in accordance with the
Pass Through Trust Agreements, (iv) with respect to Mortgagee, to the extent attributable to the
negligence or willful misconduct of Mortgagee in the distribution of funds received and
distributable by it in accordance with the Trust Indenture, (v) with respect to the Subordination
Agent, to the extent attributable to the negligence or willful misconduct of the




21









 







Subordination Agent in the distribution of funds received and distributable by it in
accordance with the Intercreditor Agreement, and (vi) with respect to the Pass Through Trustees, to
the extent attributable to the negligence or willful misconduct of a Pass Through Trustee in the
distribution of funds received and distributable by it in accordance with the Pass Through Trust
Agreements;




          (k) Other than during the continuation of an Event of Default, to the extent attributable to
the authorization or giving or withholding of any future amendments, supplements, waivers or
consents with respect to any Operative Agreement or Pass Through Agreement other than such as have
been requested by Owner or as are required by or made pursuant to the terms of the Operative
Agreements or Pass Through Agreements (unless such requirement results from the actions of an
Indemnitee not required by or made pursuant to the Operative Agreements or the Pass Through
Agreements);




          (l) To the extent attributable to any amount which any Indemnitee expressly agrees to pay or
such Indemnitee expressly agrees shall not be paid by or be reimbursed by Owner;




          (m) To the extent that it is an ordinary and usual operating or overhead expense;




          (n) [Intentionally Omitted]




          (o) For any Lien attributable to such Indemnitee or any related Indemnitee;




          (p) If another provision of an Operative Agreement or a Pass Through Agreement specifies the
extent of Owner’s responsibility or obligation with respect to such Expense, to the extent arising
from other than failure of Owner to comply with such specified responsibility or obligation; or




          (q) To the extent incurred by or asserted against an Indemnitee as a result of any “prohibited
transaction”, within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code.




          For purposes of this Section 8.1, a Person shall be considered a “related” Indemnitee with
respect to an Indemnitee if such Person is an Affiliate or employer of such Indemnitee, a director,
officer, employee, agent, or servant of such Indemnitee or any such Affiliate or a successor or
permitted assignee of any of the foregoing.





     8.1.3 Separate Agreement



          This Agreement constitutes a separate agreement with respect to each Indemnitee and is
enforceable directly by each such Indemnitee.





     8.1.4 Notice



          If a claim for any Expense that an Indemnitee shall be indemnified against under this Section
8.1 is made, such Indemnitee shall give prompt written notice thereof to Owner.




22









 








Notwithstanding the foregoing, the failure of any Indemnitee to notify Owner as provided in
this Section 8.1.4, or in Section 8.1.5, shall not release Owner from any of its obligations to
indemnify such Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to Owner (in which event Owner shall not be responsible for such additional
expense) or materially impairs Owner’s ability to contest such claim.





     8.1.5 Notice of Proceedings; Defense of Claims; Limitations



          (a) In case any action, suit or proceeding shall be brought against any Indemnitee for which
Owner is responsible under this Section 8.1, such Indemnitee shall notify Owner of the commencement
thereof and Owner may, at its expense, participate in and to the extent that it shall wish (subject
to the provisions of the following paragraph), assume and control the defense thereof and, subject
to Section 8.1.5(c), settle or compromise the same.




          (b) Owner or its insurer(s) shall have the right, at its or their expense, to investigate or,
if Owner or its insurer(s) shall agree not to dispute liability to the Indemnitee giving notice of
such action, suit or proceeding under this Section 8.1.5 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of, any action, suit
or proceeding, relating to any Expense for which indemnification is sought pursuant to this Section
8.1, and each Indemnitee shall cooperate with Owner or its insurer(s) with respect thereto;
provided, that Owner shall not be entitled to control the defense of any such action, suit,
proceeding or compromise any such Expense during the continuance of any Event of Default. In
connection with any such action, suit or proceeding being controlled by Owner, such Indemnitee
shall have the right to participate therein, at its sole cost and expense, with counsel reasonably
satisfactory to Owner; provided, that such Indemnitee’s participation does not, in the reasonable
opinion of the independent counsel appointed by the Owner or its insurers to conduct such
proceedings, interfere with the defense of such case.




          (c) In no event shall any Indemnitee enter into a settlement or other compromise with respect
to any Expense without the prior written consent of Owner, which consent shall not be unreasonably
withheld or delayed, unless such Indemnitee waives its right to be indemnified with respect to such
Expense under this Section 8.1.




          (d) In the case of any Expense indemnified by the Owner hereunder which is covered by a policy
of insurance maintained by Owner pursuant to Section 4.06 of the Indenture, at Owner’s expense,
each Indemnitee agrees to cooperate with the insurers in the exercise of their rights to
investigate, defend or compromise such Expense as may be required to retain the benefits of such
insurance with respect to such Expense.




          (e) If an Indemnitee is not a party to this Agreement, Owner may require such Indemnitee to
agree in writing to the terms of this Section 8 and Section 12.8 prior to making any payment to
such Indemnitee under this Section 8.




          (f) Nothing contained in this Section 8.1.5 shall be deemed to require an Indemnitee to
contest any Expense or to assume responsibility for or control of any judicial proceeding with
respect thereto.




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     8.1.6 Information



          Owner will provide the relevant Indemnitee with such information not within the control of
such Indemnitee, as is in Owner’s control or is reasonably available to Owner, which such
Indemnitee may reasonably request and will otherwise cooperate with such Indemnitee so as to enable
such Indemnitee to fulfill its obligations under Section 8.1.5. The Indemnitee shall supply Owner
with such information not within the control of Owner, as is in such Indemnitee’s control or is
reasonably available to such Indemnitee, which Owner may reasonably request and will otherwise
cooperate with Owner so as to enable Owner to control or participate in any proceeding to the
extent permitted by Section 8.1.5 and otherwise to fulfill its obligations under Section 8.15.





     8.1.7 Effect of Other Indemnities; Subrogation; Further Assurances



          Upon the payment in full by Owner of any indemnity provided for under this Agreement, Owner,
without any further action and to the full extent permitted by Law, will be subrogated to all
rights and remedies of the person indemnified (other than with respect to any of such Indemnitee’s
insurance policies or in connection with any indemnity claim such Indemnitee may have under Section
6.03 or 8.01 of the Trust Indenture) in respect of the matter as to which such indemnity was paid.
Each Indemnitee will give such further assurances or agreements and cooperate with Owner to permit
Owner to pursue such claims, if any, to the extent reasonably requested by Owner and at Owner’s
expense.





     8.1.8 Refunds



          If an Indemnitee receives any refund, in whole or in part, with respect to any Expense paid by
Owner hereunder, it will promptly pay the amount refunded (but not an amount in excess of the
amount Owner or any of its insurers has paid in respect of such Expense) over to Owner unless an
Event of Default shall have occurred and be continuing, in which case such amounts shall be paid
over to Mortgagee to hold as security for Owner’s obligations under the Operative Agreements or, if
requested by Owner, applied to satisfy such obligations.




          8.2 Expenses





     8.2.1 Invoices and Payment



          The Mortgagee, the Applicable Pass Through Trustees and the Subordination Agent shall promptly
submit to Owner for its prompt approval (which shall not be unreasonably withheld) copies of
invoices in reasonable detail of the Transaction Expenses for which it is responsible for providing
information as they are received (but in no event later than the 90th day after the Closing Date).
If so submitted and approved, the Owner agrees promptly, but in any event no later than the 105th
day after the Closing Date, to pay Transaction Expenses.





     8.2.2 Payment of Other Expenses



          Owner shall pay (i) the ongoing fees and expenses of Mortgagee, and (ii) all reasonable
out-of-pocket costs and expenses (including the reasonable fees and disbursements of



24









 






counsel) incurred by Mortgagee or any Note Holder attributable to any waiver, amendment or
modification of any Operative Agreement to the extent requested by Owner.




          8.3 General Tax Indemnity





     8.3.1 General



          Except as provided in Section 8.3.2, Owner agrees that each payment paid by Owner under the
Equipment Notes, and any other payment or indemnity paid by Owner to a Tax Indemnitee under any
Operative Agreement, shall be free of all withholdings or deductions with respect to Taxes of any
nature (other than U.S. federal, state or local withholding taxes on, based on or measured by gross
or net income), and in the event that Owner shall be required by applicable law to make any such
withholding or deduction for any such payment (x) Owner shall make all such withholdings or
deductions, (y) the amount payable by Owner shall be increased so that after making all required
withholdings or deductions such Tax Indemnitee receives the same amount that it would have received
had no such withholdings or deductions been made, and (z) Owner shall pay the full amount withheld
or deducted to the relevant Taxing Authority in accordance with applicable law. Except as provided
in Section 8.3.2 and whether or not any of the transactions contemplated hereby are consummated,
Owner shall pay, indemnify, protect, defend and hold each Tax Indemnitee harmless from all Taxes
imposed by any Taxing Authority that may from time to time be imposed on or asserted against any
Tax Indemnitee or the Aircraft, the Airframe, any Engine or any Part or any interest in any of the
foregoing (whether or not indemnified against by any other Person), upon or with respect to the
Operative Agreements or the transactions or payments contemplated thereby, including but not
limited to any Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine, any
Part, any Operative Agreement (including without limitation any Equipment Notes) or any data or any
other thing delivered or to be delivered under an Operative Agreement, (y) the purchase,
manufacture, acceptance, rejection, sale, transfer of title, return, ownership, mortgaging,
delivery, transport, charter, rental, lease, re-lease, sublease, assignment, possession,
repossession, presence, use, condition, storage, preparation, maintenance, modification,
alteration, improvement, operation, registration, transfer or change of registration,
reregistration, repair, replacement, overhaul, location, control, the imposition of any Lien,
financing, refinancing requested by the Owner, abandonment or other disposition of the Aircraft,
the Airframe, any Engine, any Part, any data or any other thing delivered or to be delivered under
an Operative Agreement or (z) interest, fees or any other income, proceeds, receipts or earnings,
whether actual or deemed, arising upon, in connection with, or in respect of, any of the Operative
Agreements (including the property or income or other proceeds with respect to property held as
part of the Collateral) or the transactions contemplated thereby.





     8.3.2 Certain Exceptions



          The provisions of Section 8.3.1 shall not apply to, and Owner shall have no liability
hereunder for, Taxes:




          (a) imposed on a Tax Indemnitee by the federal government of the United States or any Taxing
Authority or governmental subdivision of the United States or therein (including any state or local
Taxing Authority) (i) on, based on, or measured by, gross or net



25









 






income or gross or net receipts, including capital gains taxes, excess profits taxes, minimum
taxes from tax preferences, alternative minimum taxes, branch profits taxes, accumulated earnings
taxes, personal holding company taxes, succession taxes and estate taxes, and any withholding taxes
on, based on or measured by gross or net income or receipts or (ii) on, or with respect to, or
measured by, capital or net worth or in the nature of a franchise tax or a tax for the privilege of
doing business (other than, in the case of clause (i) or (ii), sales, use, license or property
Taxes);




          (b) imposed on a Tax Indemnitee by any Taxing Authority or governmental subdivision thereof or
therein outside of the United States (including any Taxing Authority in or of a territory,
possession or commonwealth of the United States) (i) on, based on, or measured by, gross or net
income or gross or net receipts, including capital gains taxes, excess profits taxes, minimum taxes
from tax preferences, alternative minimum taxes, branch profits taxes, accumulated earnings taxes,
personal holding company taxes, succession taxes and estate taxes, and any withholding taxes on,
based on or measured by gross or net income or receipts or (ii) on, or with respect to, or measured
by, capital or net worth or in the nature of a franchise tax or a tax for the privilege of doing
business (other than, in the case of clause (i) or (ii), (A) sales, use, license or property Taxes,
or (B) any Taxes imposed by any Taxing Authority (other than a Taxing Authority within whose
jurisdiction such Tax Indemnitee is incorporated or organized or maintains its principal place of
business) if such Tax Indemnitee would not have been subject to Taxes of such type by such
jurisdiction but for (I) the location, use or operation of the Aircraft, the Airframe, any Engine
or any Part thereof by an Owner Person within the jurisdiction of the Taxing Authority imposing
such Tax, or (II) the activities of any Owner Person in such jurisdiction, including, but not
limited to, use of any other aircraft by Owner in such jurisdiction, (III) the status of any Owner
Person as a foreign entity or as an entity owned in whole or in part by foreign persons, (IV) Owner
having made (or having been deemed to have made) payments to such Tax Indemnitee from the relevant
jurisdiction or (V) in the case of the Applicable Pass Through Trustees, the Note Holders or any
related Tax Indemnitee, the Owner being incorporated or organized or maintaining a place of
business or conducting activities in such jurisdiction);




          (c) on, or with respect to, or measured by, any trustee fees, commissions or compensation
received by the Pass Through Trustee, Subordination Agent or Mortgagee;




          (d) that are being contested as provided in Section 8.3.4 hereof;




          (e) imposed on any Tax Indemnitee to the extent that such Taxes result from the gross
negligence or willful misconduct of such Tax Indemnitee or any Affiliate thereof;




          (f) imposed on or with respect to a Tax Indemnitee (including the transferee in those cases in
which the Tax on transfer is imposed on, or is collected from, the transferee) as a result of a
transfer or other disposition (including a deemed transfer or disposition) by such Tax Indemnitee
or a related Tax Indemnitee of any interest in the Aircraft, the Airframe, any Engine or any Part,
any interest arising under the Operative Agreements or any Equipment Note or as a result of a
transfer or disposition (including a deemed transfer or disposition) of any interest in a Tax
Indemnitee (other than (A) a substitution or replacement of the Aircraft, the Airframe, any Engine
or any Part by an Owner Person that is treated for Tax purposes as a transfer or



26









 






disposition, or (B) a transfer pursuant to an exercise of remedies upon an Event of Default
that shall have occurred and have been continuing);




          (g) Taxes in excess of those that would have been imposed had there not been a transfer or
other disposition by or to such Tax Indemnitee or a related Tax Indemnitee described in paragraph
(f) above;




          (h) consisting of any interest, penalties or additions to tax imposed on a Tax Indemnitee as a
result of (in whole or in part) failure of such Tax Indemnitee or a related Tax Indemnitee to file
any return properly and timely, unless such failure shall be caused by the failure of Owner to
fulfill its obligations, if any, under Section 8.3.6 with respect to such return;




          (i) resulting from, or that would not have been imposed but for, any Liens arising as a result
of claims against, or acts or omissions of, or otherwise attributable to such Tax Indemnitee or a
related Tax Indemnitee that the Owner is not obligated to discharge under the Operative Agreements;




          (j) imposed on any Tax Indemnitee as a result of the breach by such Tax Indemnitee or a
related Tax Indemnitee of any covenant of such Tax Indemnitee or any Affiliate thereof contained in
any Operative Agreement or the inaccuracy of any representation or warranty by such Tax Indemnitee
or any Affiliate thereof in any Operative Agreement;




          (k) in the nature of an intangible or similar Tax upon or with respect to the value or
principal amount of the interest of any Note Holder in any Equipment Note or the loan evidenced
thereby but only if such Taxes are in the nature of franchise Taxes or result from the Tax
Indemnitee doing business in the taxing jurisdiction and are imposed because of the place of
incorporation or the activities unrelated to the transactions contemplated by the Operative
Agreements in the taxing jurisdiction of such Tax Indemnitee;




          (l) imposed on a Tax Indemnitee by a Taxing Authority of a jurisdiction outside the United
States to the extent that such Taxes would not have been imposed but for a connection between the
Tax Indemnitee or a related Tax Indemnitee and such jurisdiction imposing such Tax unrelated to the
transactions contemplated by the Operative Agreements; or




          (m) Taxes relating to ERISA or Section 4975 of the Code.




          For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees that are successors,
assigns, agents, servants or Affiliates of such Tax Indemnitee shall be related Tax Indemnitees.





     8.3.3 Payment



          (a) Owner’s indemnity obligation to a Tax Indemnitee under this Section 8.3 shall equal the
amount which, after taking into account any Tax imposed upon the receipt or accrual of the amounts
payable under this Section 8.3 and any tax benefits actually recognized by such Tax Indemnitee as a
result of the indemnifiable Tax (including, without limitation, any benefits recognized as a result
of an indemnifiable Tax being utilized by such Tax Indemnitee as



27









 






a credit against Taxes not indemnifiable under this Section 8.3), shall equal the amount of
the Tax indemnifiable under this Section 8.3.




          (b) At Owner’s request, the computation of the amount of any indemnity payment owed by Owner
or any amount owed by a Tax Indemnitee to Owner pursuant to this Section 8.3 shall be verified and
certified by an independent public accounting firm selected by such Tax Indemnitee and reasonably
satisfactory to Owner. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Owner unless such verification
shall result in an adjustment in Owner’s favor of 5% or more of the net present value of the
payment as computed by such Tax Indemnitee, in which case the costs shall be paid by such Tax
Indemnitee.




          (c) Each Tax Indemnitee shall provide Owner with such certifications, information and
documentation as shall be in such Tax Indemnitee’s possession and as shall be reasonably requested
by Owner to minimize any indemnity payment pursuant to this Section 8.3; provided, that
notwithstanding anything to the contrary contained herein, no Tax Indemnitee shall be required to
provide Owner with any Tax returns.




          (d) Each Tax Indemnitee shall promptly forward to Owner any written notice, bill or advice
received by it from any Taxing Authority concerning any Tax for which it seeks indemnification
under this Section 8.3. Owner shall pay any amount for which it is liable pursuant to this Section
8.3 directly to the appropriate Taxing Authority if legally permissible or upon demand of a Tax
Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a contest occurs in
accordance with Section 8.3.4, within 30 days after a Final Determination (as defined below)), but
in no event more than one Business Day prior to the date the Tax to which such amount payable
hereunder relates is due. If requested by a Tax Indemnitee in writing, Owner shall furnish to the
appropriate Tax Indemnitee the original or a certified copy of a receipt for Owner’s payment of any
Tax paid by Owner or such other evidence of payment of such Tax as is acceptable to such Tax
Indemnitee. Owner shall also furnish promptly upon written request such data as any Tax Indemnitee
may reasonably require to enable such Tax Indemnitee to comply with the requirements of any taxing
jurisdiction unless such data is not reasonably available to Owner or, unless such data is
specifically requested by a Taxing Authority, is not customarily furnished by domestic air carriers
under similar circumstances. For purposes of this Section 8.3, a “Final Determination” shall mean
(i) a decision, judgment, decree or other order by any court of competent jurisdiction that occurs
pursuant to the provisions of Section 8.3.4, which decision, judgment, decree or other order has
become final and unappealable, (ii) a closing agreement or settlement agreement entered into in
accordance with Section 8.3.4 that has become binding and is not subject to further review or
appeal (absent fraud, misrepresentation, etc.), or (iii) the termination of administrative
proceedings and the expiration of the time for instituting a claim in a court proceeding.




          (e) If any Tax Indemnitee shall actually realize a tax savings by reason of any Tax paid or
indemnified by Owner pursuant to this Section 8.3 (whether such tax savings shall be by means of a
foreign tax credit, depreciation or cost recovery deduction or otherwise) and such savings is not
otherwise taken into account in computing such payment or indemnity such Tax Indemnitee shall pay
to Owner an amount equal to the lesser of (i) the amount of such tax savings, plus any additional
tax savings recognized as the result of any payment made pursuant




28









 







to this sentence, when, as, if, and to the extent, realized or (ii) the amount of all payments
pursuant to this Section 8.3 by Owner to such Tax Indemnitee (less any payments previously made by
such Tax Indemnitee to Owner pursuant to this Section 8.3.3 (e)) (and the excess, if any, of the
amount described in clause (i) over the amount described in clause (ii) shall be carried forward
and applied to reduce pro tanto any subsequent obligations of Owner to make payments to such Tax
Indemnitee pursuant to this Section 8.3); provided, that such Tax Indemnitee shall not be required
to make any payment pursuant to this sentence so long as a Lease Event of Default of a monetary
nature has occurred and is continuing. If a tax benefit is later disallowed or denied, the
disallowance or denial shall be treated as a Tax indemnifiable under Section 8.3.1 without regard
to the provisions of Section 8.3.2 (other than Section 8.3.2 (f)). Each such Tax Indemnitee shall
in good faith use reasonable efforts in filing its tax returns and in dealing with Taxing
Authorities to seek and claim any such tax benefit.





     8.3.4 Contest



          (a) If a written claim is made against a Tax Indemnitee for Taxes with respect to which Owner
could be liable for payment or indemnity hereunder, or if a Tax Indemnitee makes a determination
that a Tax is due for which Owner could have an indemnity obligation hereunder, such Tax Indemnitee
shall promptly give Owner notice in writing of such claim (provided, that failure to so notify
Owner shall not relieve Owner of its indemnity obligations hereunder unless such failure to notify
effectively forecloses Owner’s rights to require a contest of such claim) and shall take no action
with respect to such claim without the prior written consent of Owner for 30 days following the
receipt of such notice by Owner; provided, that, in the case of a claim made against a Tax
Indemnitee, if such Tax Indemnitee shall be required by law to take action prior to the end of such
30-day period, such Tax Indemnitee shall, in such notice to Owner, so inform Owner, and such Tax
Indemnitee shall take no action for as long as it is legally able to do so (it being understood
that a Tax Indemnitee shall be entitled to pay the Tax claimed and sue for a refund prior to the
end of such 30-day period if (i)(A) the failure to so pay the Tax would result in substantial
penalties (unless immediately reimbursed by Owner) and the act of paying the Tax would not
materially prejudice the right to contest or (B) the failure to so pay would result in criminal
penalties and (ii) such Tax Indemnitee shall take any action so required in connection with so
paying the Tax in a manner that is the least prejudicial to the pursuit of the contest). In
addition, such Tax Indemnitee shall (provided, that Owner shall have agreed to keep such
information confidential other than to the extent necessary in order to contest the claim) furnish
Owner with copies of any requests for information from any Taxing Authority relating to such Taxes
with respect to which Owner may be required to indemnify hereunder. If requested by Owner in
writing within 30 days after its receipt of such notice, such Tax Indemnitee shall, at the expense
of Owner (including, without limitation, all reasonable costs, expenses and reasonable attorneys’
and accountants’ fees and disbursements), in good faith contest (or, if permitted by applicable
law, allow Owner to contest) through appropriate administrative and judicial proceedings the
validity, applicability or amount of such Taxes by (I) resisting payment thereof, (II) not paying
the same except under protest if protest is necessary and proper or (III) if the payment is made,
using reasonable efforts to obtain a refund thereof in an appropriate administrative and/or
judicial proceeding. If requested to do so by Owner, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be required to pursue
any appeals to the United States Supreme Court. If and to the extent the Tax Indemnitee is able to
separate the contested issue or issues from other



29









 






issues arising in the same administrative or judicial proceeding that are unrelated to the
transactions contemplated by the Operative Agreements without, in the good faith judgment of such
Tax Indemnitee, adversely affecting such Tax Indemnitee, such Tax Indemnitee shall permit Owner to
control the conduct of any such proceeding and shall provide to Owner (at Owner’s cost and expense)
with such information or data that is in such Tax Indemnitee’s control or possession that is
reasonably necessary to conduct such contest. In the case of a contest controlled by a Tax
Indemnitee, such Tax Indemnitee shall consult with Owner in good faith regarding the manner of
contesting such claim and shall keep Owner reasonably informed regarding the progress of such
contest. A Tax Indemnitee shall not fail to take any action expressly required by this Section
8.3.4 (including, without limitation, any action regarding any appeal of an adverse determination
with respect to any claim) and shall not settle or compromise any claim without the prior written
consent of the Owner (except as contemplated by Section 8.3.4(b) or (c)).




          (b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee be required to pursue
any contest (or to permit Owner to pursue any contest) unless (i) Owner shall have agreed to pay
such Tax Indemnitee on demand all reasonable costs and expenses incurred by such Tax Indemnitee in
connection with contesting such Taxes, including, without limitation, all reasonable out of pocket
costs and expenses and reasonable attorneys’ and accountants’ fees and disbursements, (ii) if such
contest shall involve the payment of the claim, Owner shall advance the amount thereof (to the
extent indemnified hereunder) plus interest, penalties and additions to tax with respect thereto
that are required to be paid prior to the commencement of such contest on an interest-free
after-Tax basis to such Tax Indemnitee (and such Tax Indemnitee shall promptly pay to the Owner any
net realized tax benefits resulting from such advance including any tax benefits resulting from
making such payment), (iii) such Tax Indemnitee shall have reasonably determined that the action to
be taken will not result in any material risk of forfeiture, sale or loss of the Aircraft (unless
Owner shall have made provisions to protect the interests of any such Tax Indemnitee in a manner
reasonably satisfactory to such Tax Indemnitee) (provided, that such Tax Indemnitee agrees to
notify Owner in writing promptly after it becomes aware of any such risk), (iv) no Lease Event of
Default shall have occurred and be continuing unless Owner has provided security for its
obligations hereunder by advancing to such Tax Indemnitee before proceeding or continuing with such
contest, the amount of the Tax being contested, plus any interest and penalties and an amount
estimated in good faith by such Tax Indemnitee for expenses, and (v) prior to commencing any
judicial action controlled by Owner, Owner shall have acknowledged its liability for such claim
hereunder, provided that Owner shall not be bound by its acknowledgment if the Final Determination
articulates conclusions of law and fact that demonstrate that Owner has no liability for the
contested amounts hereunder. Notwithstanding the foregoing, if any Tax Indemnitee shall release,
waive, compromise or settle any claim which may be indemnifiable by Owner pursuant to this Section
8.3 without the written permission of Owner, Owner’s obligation to indemnify such Tax Indemnitee
with respect to such claim (and all directly related claims and claims based on the outcome of such
claim) shall terminate and, subject to Section 8.3.4(c), such Tax Indemnitee shall repay to Owner
any amount previously paid or advanced to such Tax Indemnitee with respect to such claim, plus
interest at the rate that would have been payable by the relevant Taxing Authority with respect to
a refund of such Tax.




30









 








          (c) Notwithstanding anything contained in this Section 8.3, a Tax Indemnitee will not be
required to contest the imposition of any Tax and shall be permitted to settle or compromise any
claim without Owner’s consent if such Tax Indemnitee (i) shall waive its right to indemnity under
this Section 8.3 with respect to such Tax (and any directly related claim and any claim the outcome
of which is determined based upon the outcome of such claim), (ii) shall pay to Owner any amount
previously paid or advanced by Owner pursuant to this Section 8.3 with respect to such Tax, plus
interest at the rate that would have been payable by the relevant Taxing Authority with respect to
a refund of such Tax, and (iii) shall agree to discuss with Owner the views or positions of any
relevant Taxing Authority with respect to the imposition of such Tax.





     8.3.5 Refund



          If any Tax Indemnitee shall receive a refund of, or be entitled to a credit against other
liability for, all or any part of any Taxes paid, reimbursed or advanced by Owner, such Tax
Indemnitee shall pay to Owner within 30 days of such receipt an amount equal to the lesser of (a)
the amount of such refund or credit plus any net tax benefit (taking into account any Taxes
incurred by such Tax Indemnitee by reason of the receipt of such refund or realization of such
credit) actually realized by such Tax Indemnitee as a result of any payment by such Tax Indemnitee
made pursuant to this sentence (including this clause (a)) and (b) such tax payment, reimbursement
or advance by Owner to such Tax Indemnitee theretofore made pursuant to this Section 8.3 (and the
excess, if any, of the amount described in clause (a) over the amount described in clause (b) shall
be carried forward and applied to reduce pro tanto any subsequent obligation of Owner to make
payments to such Tax Indemnitee pursuant to this Section 8.3). If, in addition to such refund or
credit, such Tax Indemnitee shall receive (or be credited with) an amount representing interest on
the amount of such refund or credit, such Tax Indemnitee shall pay to Owner within 30 days of such
receipt or realization of such credit that proportion of such interest that shall be fairly
attributable to Taxes paid, reimbursed or advanced by Owner prior to the receipt of such refund or
realization of such credit.





     8.3.6 Tax Filing



          If any report, return or statement is required to be filed with respect to any Tax which is
subject to indemnification under this Section 8.3, Owner shall timely file the same (except for any
such report, return or statement which a Tax Indemnitee has timely notified the Owner in writing
that such Tax Indemnitee intends to file, or for which such Tax Indemnitee is required by law to
file, in its own name); provided, that the relevant Tax Indemnitee shall furnish Owner with any
information in such Tax Indemnitee’s possession or control that is reasonably necessary to file any
such return, report or statement and is reasonably requested in writing by Owner (it being
understood that the Tax Indemnitee shall not be required to furnish copies of its actual tax
returns, although it may be required to furnish relevant information contained therein). Owner
shall either file such report, return or statement and send a copy of such report, return or
statement to such Tax Indemnitee, or, where Owner is not permitted to file such report, return or
statement, it shall notify such Tax Indemnitee of such requirement and prepare and deliver such
report, return or statement to such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
within a reasonable time prior to the time such report, return or statement is to be filed.




31









 









     8.3.7 Forms



          Each Tax Indemnitee agrees to furnish from time to time to Owner or Mortgagee or to such other
person as Owner or Mortgagee may designate, at Owner’s or Mortgagee’s request, such duly executed
and properly completed forms as may be necessary or appropriate in order to claim any reduction of
or exemption from any withholding or other Tax imposed by any Taxing Authority, if (x) such
reduction or exemption is available to such Tax Indemnitee and (y) Owner has provided such Tax
Indemnitee with any information necessary to complete such form not otherwise reasonably available
to such Tax Indemnitee.





     8.3.8 Non-Parties



          If a Tax Indemnitee is not a party to this Agreement, Owner may require the Tax Indemnitee to
agree in writing, in a form reasonably acceptable to Owner, to the terms of this Section 8.3 and
Section 12.8 prior to making any payment to such Tax Indemnitee under this Section 8.3.





     8.3.9 Subrogation



          Upon payment of any Tax by Owner pursuant to this Section 8.3 to or on behalf of a Tax
Indemnitee, Owner, without any further action, shall be subrogated to any claims that such Tax
Indemnitee may have relating thereto. Such Tax Indemnitee shall cooperate with Owner (to the
extent such cooperation does not result in any unreimbursed cost, expense or liability to such Tax
Indemnitee) to permit Owner to pursue such claims.





          8.4 Payments



          Any payments made pursuant to Section 8.1 or 8.3 shall be due on the 60th day after demand
therefor and shall be made directly to the relevant Indemnitee or Tax Indemnitee or to Owner, in
immediately available funds at such bank or to such account as specified by such Indemnitee or Tax
Indemnitee or Owner, as the case may be, in written directives to the payor, or, if no such
direction shall have been given, by check of the payor payable to the order of, and mailed to, such
Indemnitee or Tax Indemnitee or Owner, as the case may be, by certified mail, postage prepaid, at
its address as set forth in this Agreement.





          8.5 Interest



          If any amount, payable by Owner, any Indemnitee or any Tax Indemnitee under Section 8.1 or 8.3
is not paid when due, the person obligated to make such payment shall pay on demand, to the extent
permitted by Law, to the person entitled thereto, interest on any such amount for the period from
and including the due date for such amount to but excluding the date the same is paid, at the
Payment Due Rate. Such interest shall be paid in the same manner as the unpaid amount in respect
of which such interest is due.





          8.6 Benefit of Indemnities



          The obligations of Owner in respect of all indemnities, obligations, adjustments and payments
in Section 8.1 or 8.3 are expressly made for the benefit of, and shall be enforceable



32









 






by, the Indemnitee or Tax Indemnitee entitled thereto, notwithstanding any provision of the
Trust Indenture.




SECTION 9. ASSIGNMENT OR TRANSFER OF INTEREST




          9.1 Note Holders




          Subject to Section 6.3.2 hereof and Section 2.07 of the Trust Indenture, any Note Holder may,
at any time and from time to time, Transfer or grant participations in all or any portion of the
Equipment Notes and/or all or any portion of its beneficial interest in its Equipment Notes to any
person (it being understood that the sale or issuance of Pass Through Certificates by a Pass
Through Trustee shall not be considered a Transfer or participation); provided, that any
participant in any such participations shall not have any direct rights under the Operative
Agreements or any Lien on all or any part of the Aircraft or the Collateral and Owner shall not
have any increased liability or obligations as a result of any such participation. In the case of
any such Transfer, the Transferee, by acceptance of Equipment Notes in connection with such
Transfer, shall be deemed to be bound by (i) all of the covenants of Note Holders contained in the
Operative Agreements and (ii) certain terms of the Intercreditor Agreement as specified in such
Equipment Notes and/or Section 2.07 of the Trust Indenture.




          9.2 Effect of Transfer




          Upon any Transfer in accordance with Section 9.1 (other than any Transfer by any Note Holder,
to the extent it only grants participations in Equipment Notes or in its beneficial interest
therein), Transferee shall be deemed a “Note Holder,” for all purposes of this Agreement and the
other Operative Agreements, and the transferring Note Holder shall be released from all of its
liabilities and obligations under this Agreement and any other Operative Agreements to the extent
such liabilities and obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the Transferee; provided, that such transferring Note
Holder (and its respective Affiliates, successors, assigns, agents, servants, representatives,
directors and officers) will continue to have the benefit of any rights or indemnities under any
Operative Agreement vested or relating to circumstances, conditions, acts or events prior to such
Transfer.




SECTION 10. SECTION 1110




          It is the intention of each of the Owner, the Note Holders (such intention being evidenced by
each of their acceptance of an Equipment Note), and Mortgagee that Mortgagee shall be entitled to
the benefits of Section 1110 in the event of a case under Chapter 11 of the Bankruptcy Code in
which Owner is a debtor.




SECTION 11. CHANGE OF CITIZENSHIP




          11.1 Generally




          Without prejudice to the representations, warranties or covenants regarding the status of any
party hereto as a Citizen of the United States, each of Owner, WTC and Mortgagee agrees that it
will, immediately upon obtaining knowledge of any facts that would cast doubt



33









 






upon its continuing status as a Citizen of the United States and promptly upon public
disclosure of negotiations in respect of any transaction which would or might adversely affect such
status, notify in writing all parties hereto of all relevant matters in connection therewith.




          11.2 Mortgagee




          Upon WTC giving any notice in accordance with Section 11.1, Mortgagee shall (if and so long as
such citizenship is necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as Mortgagee’s citizenship could have any adverse effect on Owner or any Note
Holder), subject to Section 9.02 of the Trust Indenture, resign as Mortgagee promptly upon its
ceasing to be such a citizen.




SECTION 12. MISCELLANEOUS




          12.1 Amendments




          No provision of this Agreement may be amended, supplemented, waived, modified, discharged,
terminated or otherwise varied orally, but only by an instrument in writing that specifically
identifies the provision of this Agreement that it purports to amend, supplement, waive, modify,
discharge, terminate or otherwise vary and is signed by the party against which the enforcement of
the amendment, supplement, waiver, modification, discharge, termination or variance is sought.
Each such amendment, supplement, waiver, modification, discharge, termination or variance shall be
effective only in the specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral communication, course of
dealing or performance or other manner not set forth in an agreement, document or instrument in
writing and signed by the party against which enforcement of the same is sought.




          12.2 Severability




          If any provision hereof shall be held invalid, illegal or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by Law, (a) all other provisions hereof shall remain in
full force and effect in such jurisdiction and (b) such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held invalid, illegal or
unenforceable may be waived, such Law is hereby waived by the parties hereto to the full extent
permitted, to the end that this Agreement shall be deemed to be a valid and binding agreement in
all respects, enforceable in accordance with its terms.




          12.3 Survival




          The indemnities set forth herein shall survive the delivery or return of the Aircraft, the
Transfer of any interest by any Note Holder of its Equipment Note and the expiration or other
termination of this Agreement or any other Operative Agreement.




34









 








          12.4 Reproduction of Documents




          This Agreement, all schedules and exhibits hereto and all agreements, instruments and
documents relating hereto, including, without limitation, (a) consents, waivers and modifications
that may hereafter be executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such party by any
photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process,
and such party may destroy any original documents so reproduced. To the extent permitted by law,
any such reproduction shall be as admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction likewise is admissible in evidence.




          12.5 Counterparts




          This Agreement and any amendments, waivers, consents or supplements hereto may be executed in
any number of counterparts (or upon separate signature pages bound together into one or more
counterparts), each of which when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.




          12.6 No Waiver




          No failure on the part of any party hereto to exercise, and no delay by any party hereto in
exercising, any of its rights, powers, remedies or privileges under this Agreement or provided at
Law, in equity or otherwise shall impair, prejudice or constitute a waiver of any such right,
power, remedy or privilege or be construed as a waiver of any breach hereof or default hereunder or
as an acquiescence therein nor shall any single or partial exercise of any such right, power,
remedy or privilege preclude any other or further exercise thereof by it or the exercise of any
other right, power, remedy or privilege by it. No notice to or demand on any party hereto in any
case shall, unless otherwise required under this Agreement, entitle such party to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of
any party hereto to any other or further action in any circumstances without notice or demand.




          12.7 Notices




          Unless otherwise expressly permitted by the terms hereof, all notices, requests, demands,
authorizations, directions, consents, waivers and other communications required or permitted to be
made, given, furnished or filed hereunder shall be in writing in the English language (it being
understood that the specification of a writing in certain instances and not in others does not
imply an intention that a writing is not required as to the latter), shall refer specifically to
this Agreement or other applicable Operative Agreement, and shall be personally delivered, sent by
facsimile or telecommunication transmission (which in either case provides written confirmation to
the sender of its delivery), sent by registered mail or certified mail, return receipt requested,
postage prepaid, or sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other




35









 







address, facsimile or other number as each party hereto may hereafter specify by notice to the
other parties hereto. Each such notice, request, demand, authorization, direction, consent, waiver
or other communication shall be effective when received or, if made, given, furnished or filed (a)
by facsimile or telecommunication transmission, when confirmed, or (b) by registered or certified
mail, three Business Days after being deposited, properly addressed, with the U.S. Postal Service.




          12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE




          (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.




          (b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY AND COUNTY OF NEW
YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.




          (c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT,
ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, AT THE ADDRESS SET FORTH PURSUANT TO SECTION 12.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 12.8(c), SHALL
CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY
AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY
SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT
RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON.




          (d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR
PROCEEDING BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.




          (e) EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
IN ANY COURT IN ANY




36









 







JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.




          12.9 Third Party Beneficiary




          This Agreement is not intended to, and shall not, provide any person not a party hereto (other
than the Indenture Indemnitees, each of which is an intended third party beneficiary with respect
to the provisions of Section 8.1 (and, in the case of the Tax Indemnitees, Section 8.3) and the
persons referred to in Section 6.4.6, which are intended third party beneficiaries with respect to
such Section) with any rights of any nature whatsoever against any of the parties hereto and no
person not a party hereto (other than the Indenture Indemnitees, with respect to the provisions of
Section 8.1 (and, in the case of the Tax Indemnitees, Section 8.3), and the persons referred to in
Section 6.4.6 with respect to the provisions of such Section) shall have any right, power or
privilege in respect of any party hereto, or have any benefit or interest, arising out of this
Agreement.




          12.10 Entire Agreement




          This Agreement, together with the other Operative Agreements, on and as of the date hereof,
constitutes the entire agreement of the parties hereto with respect to the subject matter hereof,
and all prior or contemporaneous understandings or agreements, whether written or oral, among any
of the parties hereto with respect to such subject matter are hereby superseded in their
entireties.




          12.11 Further Assurances




          Each party hereto shall execute, acknowledge and deliver or shall cause to be executed,
acknowledged and delivered, all such further agreements, instruments, certificates or documents,
and shall do and cause to be done such further acts and things, in any case, as any other party
hereto shall reasonably request in connection with the administration of, or to carry out more
effectually the purposes of, or to better assure and confirm into such other party the rights and
benefits to be provided under this Agreement and the other Operative Agreements.




[This space intentionally left blank]




37









 








          IN WITNESS WHEREOF, each of the parties has caused this Participation Agreement to be duly
executed and delivered as of the day and year first above written.




	 	 	 	 	 
	 	SOUTHWEST AIRLINES CO.,

Owner

 	 
	 	By  	/s/ Scott Topping
 	 
	 	 	Name:  	Scott Topping 	 
	 	 	Title:  	Vice President Treasurer 	 
	 
	 	WILMINGTON TRUST COMPANY,

not in its individual capacity, except
as expressly provided herein, but solely
as Mortgagee

 	 
	 	By  	/s/  James P. Lawler
 	 
	 	 	Name:  	James P. Lawler 	 
	 	 	Title:  	Vice President 	 
	 
	 	WILMINGTON TRUST COMPANY,

not in its individual capacity, except as
expressly provided
herein, but solely as Pass Through
Trustee under the Pass
Through Trust Agreement for the Southwest
Airlines Pass
Through Trust, 2007-1A

 	 
	 	By  	/s/  James P. Lawler
 	 
	 	 	Name:  	James P. Lawler 	 
	 	 	Title:  	Vice President 	 



38









 






	 	 	 	 	 



	 	 	 	 	 
	 	WILMINGTON TRUST COMPANY,

not in its individual capacity, except as
expressly provided
herein, but solely as Pass Through
Trustee under the Pass
Through Trust Agreement for the Southwest
Airlines Pass
Through Trust, 2007-1B

 	 
	 	By  	/s/  James P. Lawler
 	 
	 	 	Name:  	James P. Lawler 	 
	 	 	Title:  	Vice President 	 
	 
	 	WILMINGTON TRUST COMPANY,

not in its individual capacity, except as
expressly
provided herein, but solely as
Subordination Agent

 	 
	 	By  	/s/  James P. Lawler
 	 
	 	 	Name:  	James P. Lawler 	 
	 	 	Title:  	Vice President 	 



39









 






	 	 	 	 	 



SCHEDULE 1




ACCOUNTS; ADDRESSES




	 	 	 	 	 
	 	 	Account for Payments	 	Address for Notices
	 
	 	 	 	 
	Southwest Airlines Co.
	 	JPMorgan Chase Bank, N.A.	 	Southwest Airlines Co.
	 
	 	Account No. 98120109	 	2702 Love Field Drive
	 
	 	ABA # 021000021	 	P.O. Box 36611
	 
	 	Attention:  Christopher Short	 	Dallas, Texas 75235-1611
	 
	 	Voice:  (312) 954-9298	 	Attention:  Treasurer
	 
	 	 	 	Facsmile:  (214) 792-4022
	 
	 	 	 	 
	Wilmington Trust Company, Mortgagee
	 	Wilmington Trust Company	 	Wilmington Trust Company
	 
	 	Wilmington, DE	 	Rodney Square North
	 
	 	ABA # 031100092	 	1100 North Market Street
	 
	 	Attention:  Mark Brzoska	 	Wilmington, Delaware  19890
	 
	 	Reference: SWA 2007-1N259WN	 	Attention:  Corporate
	 
	 	 	 	Trust Administration
	 
	 	 	 	Facsimile:  (302) 636-4141
	 
	 	 	 	 
	Wilmington Trust Company, as
	 	Wilmington Trust Company	 	Wilmington Trust Company
	Subordination Agent
	 	Wilmington, DE	 	Rodney Square North
	 
	 	Account No. 080559-000	 	1100 North Market Street
	 
	 	ABA # 031100092	 	Wilmington, Delaware  19890
	 
	 	Attention:  Mark Brzoska	 	Attention:  Corporate
	 
	 	Reference:  SWA 2007-1	 	Trust Administration
	 
	 	Collection Account	 	Facsimile:  (302) 636-4141
	 
	 	 	 	 
	Wilmington Trust Company, as Pass
	 	Wilmington Trust Company	 	Wilmington Trust Company
	Through Trustee for the 2007-1A
	 	Wilmington, DE	 	Rodney Square North
	Pass Through Trust
	 	Account No. 080561-000	 	1100 North Market Street
	 
	 	ABA # 031100092	 	Wilmington, Delaware  19890
	 
	 	Attention:  Mark Brzoska	 	Attention:  Corporate
	 
	 	Reference:  SWA 2007-1A	 	Trust Administration
	 
	 	 	 	Facsimile:  (302) 636-4141
	 
	 	 	 	 
	Wilmington Trust Company, as Pass
	 	Wilmington Trust Company	 	Wilmington Trust Company
	Through Trustee for the 2007-1B
	 	Wilmington, DE	 	Rodney Square North
	Pass Through Trust
	 	Account No. 080562-000	 	1100 North Market Street
	 
	 	ABA # 031100092	 	Wilmington, Delaware  19890
	 
	 	Attention:  Mark Brzoska	 	Attention:  Corporate
	 
	 	Reference:  SWA 2007-1B	 	Trust Administration
	 
	 	 	 	Facsimile:  (302) 636-4141






 









 






SCHEDULE 2




COMMITMENTS




	 	 	 	 	 	 	 	 	 
	Pass Through	 	Series of	 	Dollar Amount
	Trustee	 	Equipment Notes	 	of Loan
	Class A
	 	Series A	 	$	25,077,000.00	 
	Class B
	 	Series B	 	$	5,348,867.51	 






 









 






SCHEDULE 3




CERTAIN TERMS




	 	 	 	 	 
	Defined Term	 	Definition
	 
	Minimum Liability Insurance Amount
	 	$	350,000,000	 
	Threshold Amount
	 	$	6,000,000	 






 









 






SCHEDULE 4




PERMITTED COUNTRIES




	 	 	 
	Argentina

	 	Luxembourg
	Aruba

	 	Malaysia
	Australia

	 	Malta
	Austria

	 	Mexico
	Bahamas

	 	Morocco
	Belgium

	 	Netherlands
	Bolivia

	 	Netherlands Antilles
	Brazil

	 	New Zealand
	Canada

	 	Norway
	Chile

	 	Paraguay
	Colombia

	 	People’s Republic of China
	Czech Republic

	 	Peru
	Denmark

	 	Philippines
	Egypt

	 	Poland
	Ecuador

	 	Portugal
	Finland

	 	Republic of China (Taiwan)
	France

	 	Russia
	Germany

	 	Singapore
	Greece

	 	South Africa
	Guatemala

	 	South Korea
	Hungary

	 	Spain
	Iceland

	 	Sweden
	India

	 	Switzerland
	Indonesia

	 	Thailand
	Ireland

	 	Trinidad and Tobago
	Italy

	 	Turkey
	Jamaica

	 	United Kingdom
	Japan

	 	Uruguay
	Jordan

	 	Venezuela
	Kuwait