Document:

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                                                                    EXHIBIT 4.12

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                        PARTICIPATION AGREEMENT [N700GS]

                           Dated as of October , 2001

                                      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 737-74H AIRCRAFT
                     Bearing Manufacturer's Serial No. 27835
                        and U.S. Registration No. N700GS

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                                    CONTENTS
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<Caption>
                                                                                                               Page
                                                                                                               ----
<S>               <C>                                                                                          <C>
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.        EQUIPMENT NOTES.................................................................................3

SECTION 4.        CONDITIONS PRECEDENT............................................................................3
                  4.1      Conditions Precedent to the Obligations of the Pass Through Trustees...................3
                  4.2      Conditions Precedent to Obligations of Mortgagee.......................................6
                  4.3      Conditions Precedent to Obligations of Owner...........................................7
                  4.4      Post-Registration Opinion..............................................................7

SECTION 5.        REPRESENTATIONS AND WARRANTIES..................................................................8
                  5.1      Owner's Representations and Warranties.................................................8
                  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]........................................................................19

SECTION 8.        INDEMNIFICATION AND EXPENSES...................................................................19
                  8.1      General Indemnity.....................................................................19
                  8.2      Expenses..............................................................................24
                  8.3      General Tax Indemnity.................................................................24
                  8.4      Payments..............................................................................32
                  8.5      Interest..............................................................................32
                  8.6      Benefit of Indemnities................................................................32

SECTION 9.        ASSIGNMENT OR TRANSFER OF INTEREST.............................................................32
                  9.1      Note Holders..........................................................................32
                  9.2      Effect of Transfer....................................................................32

SECTION 10.       SECTION 1110...................................................................................33

SECTION 11.       CHANGE OF CITIZENSHIP..........................................................................33
                  11.1     Generally.............................................................................33
                  11.2     Mortgagee.............................................................................33
</Table>

                                       (i)
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<Table>
<S>               <C>                                                                                          <C>
SECTION 12.       MISCELLANEOUS..................................................................................33
                  12.1     Amendments............................................................................33
                  12.2     Severability..........................................................................34
                  12.3     Survival..............................................................................34
                  12.4     Reproduction of Documents.............................................................34
                  12.5     Counterparts..........................................................................34
                  12.6     No Waiver.............................................................................34
                  12.7     Notices...............................................................................35
                  12.8     GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE......................................35
                  12.9     Third-Party Beneficiary...............................................................36
                  12.10    Entire Agreement......................................................................36
                  12.11    Further Assurances....................................................................36
</Table>

SCHEDULES AND EXHIBITS

<Table>
<S>                      <C>
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
</Table>

                                      (ii)
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                        PARTICIPATION AGREEMENT [N700GS]

         PARTICIPATION AGREEMENT [N700GS], dated as of October , 2001 (this
"Agreement"), among (a) SOUTHWEST AIRLINES CO., a Texas corporation ("Owner")
with Charter No. 0023294150, (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 will 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 to be 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.

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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, 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 secured loan made by each such
                  Applicable Pass Through Trustee.

         In addition, the Owner shall have the option to issue the Series C
Equipment Notes on or after the Closing Date, subject to: (i) a Ratings
Confirmation (as defined in the Intercreditor Agreement) having been obtained,
and (ii) the Owner will cause (x) such Series C Equipment Notes to be subject to
the provisions of the Intercreditor Agreement that allow the "Controlling Party"
(as defined in the Intercreditor Agreement), during the continuance of an
"Indenture Default" (as defined in the Intercreditor Agreement), to direct the
Loan Trustee in taking action under the applicable Indenture and (y) the
Indenture under which such Series C Equipment Notes are issued being amended as
contemplated in Section 10.01(b) of the Indenture. If Series C Equipment Notes
are 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, 1 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.

         (c) Owner may elect to postpone the issuance of a series of Equipment
Notes pursuant to Section 2.02(b) of the Pass Through Trust Agreement.

         (d) In order to facilitate the transactions contemplated hereby, the
Owner will, subject to the terms and conditions hereof, enter into each of the
Pass Through Trust Agreements and will undertake to perform certain
administrative and ministerial duties under such Pass Through Trust Agreements.

                                       2
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SECTION 3. EQUIPMENT NOTES

         On the Closing Date, the Owner shall execute, and the Mortgagee shall
authenticate and deliver to the applicable Note Holder, an Equipment Note of
such Series in the principal amount and bearing the interest rate set forth
opposite the name of such Note Holder on Schedule 2 hereto. Subject to the terms
hereof, of the Pass Through Agreements and of the other Operative Agreements,
all such Equipment Notes shall be dated and authenticated as of the Closing Date
(and shall bear interest therefrom), shall be registered in such names as shall
be specified by the Note Holder and shall be paid in the manner and at such
places as are set forth in the Trust Indenture.

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 fulfillment, prior to or on the Closing Date, of the
following conditions precedent:

                  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 Pass Through Trustee, 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) true and correct copies of the Bills of Sale;

                                       3
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                  (vii) (A) a copy of the articles of incorporation and bylaws
         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:

                           (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, Hitchens & Williams
                  LLP, special counsel to Mortgagee and to the Applicable Pass
                  Through Trustees, substantially in the form of Exhibit C; and

                           (D) an opinion of DeBee, Gilchrist & Lidia, 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 and the Financing Statements, 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
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                  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.

                  4.1.7    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
with the FAA in accordance with the Act, and

         (b) each Financing Statement shall have been duly filed in the
appropriate jurisdiction.

                                       5
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                  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 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 AGREEMENTS AND UNDERWRITING AGREEMENT

         The Pass Through Trustees shall have received duly authorized and
validly executed counterparts or conformed copies of the Pass Through Agreements
and the Underwriting Agreement in form and substance satisfactory to the 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 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    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.

                                       6
<PAGE>

                  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.

                  4.3.1    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-REGISTRATION OPINION

         Promptly upon the recordation of the FAA Filed Documents pursuant to
the Act, Owner will request DeBee, Gilchrist & Lidia, 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 registration and recordation.

                                       7
<PAGE>

SECTION 5. REPRESENTATIONS AND WARRANTIES

         5.1      OWNER'S REPRESENTATIONS AND WARRANTIES

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

                  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 has 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 bylaws) 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 bylaws 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 as permitted under the
Trust Indenture) 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

                                       8
<PAGE>

periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.

                  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 filing of the Financing Statements (and continuation
statements relating thereto at periodic intervals), and (c) 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    NAMES, ETC.

                  (i) The full and correct legal name, type of organization,
         jurisdiction of organization, organizational ID number (if applicable)
         and mailing address of the Owner as of the date hereof are correctly
         set forth in the paragraph describing the parties to this Agreement on
         page 1 hereof and, in the case of the mailing address, in Schedule 1
         hereto.

                  (ii) Schedule 1 correctly specifies the place of business of
         the Owner, or if the Owner has more than one place of business, the
         location of the chief executive office of the Owner.

                  (iii) The Owner has not (i) within the period of four months
         prior to the date hereof, changed its location (as defined in Section
         9-307 of the UCC), (ii) except as specified in Schedule 1, heretofore
         changed its name since 1971, or (iii) except as specified in Schedule
         1, heretofore become a "new debtor" (as defined in Section 9-102(a)(56)
         of the UCC) with respect to a currently effective security agreement
         previously entered into by any other Person.

                  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.

                                       9
<PAGE>

                  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.

                  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.

         5.2      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.

                                       10
<PAGE>

                  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 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.

                                       11
<PAGE>

                  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, 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.

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<PAGE>

                  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 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

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

                  6.1.2    NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE

         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 name, change
of its jurisdiction of organization or relocation of its chief executive office
(as such term is defined in Article 9 of the UCC) from its then present location
and will promptly take any action required by Section 6.1.3(c) as a result of
such change or relocation.

                                       13
<PAGE>

                  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 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, change in its name, change in its jurisdiction of organization or
organization ID number or any relocation of its chief executive office) in
respect of the Financing Statements to be prepared and, subject only to, if
required, 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.

                  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.

                  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

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<PAGE>

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, and (ii) 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 Trust 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 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.

                                       15
<PAGE>

         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

                  (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

                                       16
<PAGE>

         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 Applicable 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 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.

                  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:

         (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;

                                       17
<PAGE>

                  (B)      such proposed change of registration is made in
                           connection with a Permitted Lease to a Permitted Air
                           Carrier;

                  (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 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 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;

                                       18
<PAGE>

                  (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.

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 Pass Through Agreements, or the
enforcement of any of the terms of any of the Operative Agreements or the Pass
Through Agreements;

                                       19
<PAGE>

         (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
Pass Through Agreement or the falsity of any representation or warranty of Owner
in any Operative Agreement to which it is party or any 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;

         (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) 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

                                       20
<PAGE>

misconduct imputed to such person by reason of its interest in the Aircraft or
any Operative Agreement);

         (e) 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;

         (f) 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;

         (g) 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);

         (h) (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 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;

         (i) 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);

         (j) 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;

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

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

                                       21
<PAGE>

         (m) 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

         (n) 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. 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 without the
consent of the Indemnitee.

         (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

                                       22
<PAGE>

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.

                  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 to control or participate in any proceeding to the extent
permitted by Section 8.1.5.

                  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.

                                       23
<PAGE>

                  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 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

                                       24
<PAGE>

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 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,

                                       25
<PAGE>

(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 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 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 (i) 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

                                       26
<PAGE>

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 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,

                                       27
<PAGE>

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 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

                                       28
<PAGE>

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 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) or 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,

                                       29
<PAGE>

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, subject to Section
8.3.4(c), 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.

         (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

                                       30
<PAGE>

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.

                  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 15.8 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.

                                       31
<PAGE>

         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 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 all of the covenants of Note
Holders contained in the Operative Agreements.

         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

                                       32
<PAGE>

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 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

                                       33
<PAGE>

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.

         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. 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 respective 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,

                                       34
<PAGE>

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 (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
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 IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN 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,

                                       35
<PAGE>

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 RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY 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 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 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,

                                       36
<PAGE>

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
<PAGE>

         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
                                         ---------------------------------------
                                         Name: Laura Wright
                                         Title: Vice President - Finance
                                                      and Treasurer

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

                                       By
                                         ---------------------------------------
                                         Name:
                                         Title:

                                       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, 2001-1A-1

                                       By
                                         ---------------------------------------
                                         Name:
                                         Title:

                                       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, 2001-1A-2

                                       By
                                         ---------------------------------------
                                         Name:
                                         Title:

                                                                  SIGNATURE PAGE
<PAGE>

                                       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, 2001-1B

                                       By
                                         ---------------------------------------
                                         Name:
                                         Title:

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

                                       By
                                         ---------------------------------------
                                         Name:
                                         Title:

                                                                  SIGNATURE PAGE
<PAGE>

                                                         -----------------------
                                                               SCHEDULE 1
                                                                   TO
                                                         PARTICIPATION AGREEMENT
                                                         -----------------------

                               ACCOUNTS; ADDRESSES

<Table>
<Caption>
                                   ACCOUNT FOR PAYMENTS                        ADDRESS FOR NOTICES
                                   --------------------                        -------------------
<S>                           <C>                                          <C>
SOUTHWEST AIRLINES CO.        Bank One Dallas                              Southwest Airlines Co.
                              Account No.: 98120109                        2702 Love Field Drive
                              ABA#:  11100614                              P.O. Box 36611
                              Attention: Joanne Deboer                     Dallas, Texas 75235-1611
                              Voice: 214-290-2652                          Attention: Treasurer
                              Reference: Southwest [N700GS]                Facsimile: (214) 792-4022

WILMINGTON TRUST COMPANY,     The Chase Manhattan Bank                     Wilmington Trust Company
MORTGAGEE                     New York, New York 10081                     Rodney Square North
                              Account No.: 920-1-014363                    1100 North Market Street
                              ABA#: 021-000021                             Wilmington, Delaware 19890
                              Attention: Corporate Trust                   Attention: Corporate Trust
                              Administration                               Administration
                              Reference: Southwest [N700GS]                Facsimile: (302) 651-8882

WILMINGTON TRUST COMPANY,     The Chase Manhattan Bank                     Wilmington Trust Company
AS SUBORDINATION AGENT        New York, New York 10081                     Rodney Square North
                              Account No.: 920-1-014363                    1100 North Market Street
                              ABA#: 021-000021                             Wilmington, Delaware 19890
                              Attention: Corporate Trust                   Attention: Corporate Trust
                              Administration                               Administration
                              Reference: Southwest [N700GS]                Facsimile: (302) 651-8882

WILMINGTON TRUST COMPANY,     The Chase Manhattan Bank                     Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR   New York, New York  10081                    Rodney Square North
THE 2001-1A-1 PASS THROUGH    Account No.: 920-1-014363                    1100 North Market Street
TRUST                         ABA#: 021-000021                             Wilmington, Delaware 19890
                              Attention: Corporate Trust                   Attention: Corporate Trust
                              Administration                               Administration
                              Reference: Southwest [N700GS]                Facsimile: (302) 651-8882

WILMINGTON TRUST COMPANY,     The Chase Manhattan Bank                     Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR   New York, New York 10081                     Rodney Square North
THE 2001-1A-2 PASS THROUGH    Account No.: 920-1-014363                    1100 North Market Street
TRUST                         ABA#: 021-000021                             Wilmington, Delaware 19890
                              Attention: Corporate Trust                   Attention: Corporate Trust
                              Administration                               Administration
                              Reference: Southwest [N700GS]                Facsimile: (302) 651-8882
</Table>

<PAGE>

<Table>
<Caption>
                                   ACCOUNT FOR PAYMENTS                        ADDRESS FOR NOTICES
                                   --------------------                        -------------------
<S>                           <C>                                          <C>
WILMINGTON TRUST COMPANY,     The Chase Manhattan Bank                     Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR   New York, New York 10081                     Rodney Square North
THE 2001-1B PASS THROUGH      Account No.: 920-1-014363                    1100 North Market Street
TRUST                         ABA#: 021-000021                             Wilmington, Delaware 19890
                              Attention: Corporate Trust                   Attention: Corporate Trust
                              Administration                               Administration
                              Reference: Southwest [N700GS]                Facsimile: (302) 651-8882
</Table>

                                       ii
<PAGE>

                                                        ------------------------
                                                        SCHEDULE 2 - COMMITMENTS
                                                         PARTICIPATION AGREEMENT
                                                        ------------------------

                                   COMMITMENTS

<Table>
<Caption>
             PASS THROUGH                             SERIES OF                             DOLLAR AMOUNT
               TRUSTEE                             EQUIPMENT NOTES                             OF LOAN
             ------------                          ---------------                          -------------
<S>                                                <C>                                     <C>
              CLASS A-1                               SERIES A-1                           $ 1,744,144.44
              CLASS A-2                               SERIES A-2                           $12,424,597.58
               CLASS B                                 SERIES B                            $ 2,880,097.46
</Table>

<PAGE>

                                                      --------------------------
                                                      SCHEDULE 3 - CERTAIN TERMS
                                                        PARTICIPATION AGREEMENT
                                                      --------------------------

                                  CERTAIN TERMS

<Table>
<Caption>
          DEFINED TERM                                                   DEFINITION
          ------------                                                   ----------
<S>                                                                     <C>
Minimum Liability Insurance Amount                                      $200,000,000

Threshold Amount                                                        $  5,500,000
</Table>

<PAGE>

                                                --------------------------------
                                                SCHEDULE 4 - PERMITTED COUNTRIES
                                                    PARTICIPATION AGREEMENT
                                                --------------------------------

                               PERMITTED COUNTRIES

<Table>
<S>                           <C>
Argentina                     Malaysia

Australia                     Malta

Austria                       Mexico

Bahamas                       Morocco

Belgium                       Netherlands

Brazil                        New Zealand

Canada                        Norway

Chile                         Paraguay

Denmark                       People's Republic of China

Egypt                         Philippines

Ecuador                       Portugal

Finland                       Republic of China (Taiwan)

France                        Singapore

Germany                       South Africa

Greece                        South Korea

Hungary                       Spain

Iceland                       Sweden

India                         Switzerland

Indonesia                     Thailand

Ireland                       Trinidad and Tobago

Italy                         United Kingdom

Japan                         Uruguay

Luxembourg                    Venezuela
</Table>

<PAGE>

                                    EXHIBIT A

                  [Form of Opinion of Special Counsel to Owner]

                                October __, 2001

To the Persons Listed on Schedule I
Attached Hereto

                  Re:    Mortgage of Boeing Model 737-700 Aircraft with
                         Manufacturer's Serial Number 27835 and U.S.
                         Registration Number N700GS

Ladies and Gentlemen:

                  We have been requested by Southwest Airlines Co., a Texas
corporation (the "Company"), to act as special counsel with respect to, and to
render this opinion letter in connection with, the transactions contemplated by
the Participation Agreement N700GS, dated as of October __, 2001 (the
"Participation Agreement"), among the Company, as Owner, and Wilmington Trust
Company, a Delaware banking corporation ("WTC"), in its capacity as Mortgagee
(the "Mortgagee"), as Subordination Agent under the Intercreditor Agreement (as
defined in the Participation Agreement) and as Pass Through Trustee under the
Applicable Pass Through Trust Agreements (as defined in the Participation
Agreement). Capitalized terms used herein and not otherwise defined herein have
the respective meanings given to those terms in the Participation Agreement.

                  In connection with this opinion letter we have examined, among
other things, originals or copies certified or otherwise identified to our
satisfaction of the following documents:

                  (i)      Participation Agreement;

                  (ii)     Trust Indenture;

                  (iii)    Trust Indenture Supplement No. 1;

                  (iv)     Airframe Manufacturer Consent and Agreement; and

                  (v)      Forms of the Equipment Notes.

<PAGE>

                  We have also examined and relied upon such other documents and
such other corporate records, certificates and other statements of governmental
officials and corporate officers and other representatives of the Company as we
have deemed necessary or appropriate for the purposes of this opinion. As to
certain facts material to the opinions expressed herein, we have relied upon
representations and warranties contained in the Operative Agreements. The
opinions expressed herein are subject to the following exceptions, assumptions,
qualifications and limitations:

                  A. The opinions set forth below are limited to the laws of the
State of Texas, the laws of the State of New York and the federal laws of the
United States of America, except that we express no opinion with respect to (i)
the laws, regulations or ordinances of any county, town or municipality or
governmental subdivision or agency thereof, (ii) state securities or blue sky
laws or federal securities laws, including the Securities Act and the Investment
Company Act of 1940, as amended, (iii) any federal or state tax, antitrust or
fraudulent transfer or conveyance laws, (iv) the Employee Retirement Income
Security Act of 1974, as amended, or (v) the Act (except as expressly provided
in paragraph 5 below), or any other laws, rules or regulations governing,
regulating or relating to the acquisition, ownership, registration, use or sale
of an aircraft, airframe or aircraft engine or to the particular nature of the
equipment owned by the Company. In addition, our opinions are based upon a
review of those laws, statutes, rules and regulations which, in our experience,
are normally applicable to transactions of the type contemplated by the
Participation Agreement.

                  B. The opinions set forth in paragraphs 3 and 6 below are
subject to (i) limitations on enforceability arising from applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, fraudulent conveyance,
fraudulent transfer, preferential transfer and similar laws relating to or
affecting the rights and remedies of creditors generally and the effect of
general principles of equity, including, without limitation, laches and estoppel
as equitable defenses and concepts of materiality, reasonableness, good faith
and fair dealing (regardless of whether such enforceability is considered or
applied in a proceeding in equity or at law) and considerations of
impracticability or impossibility of performance, and defenses based upon
unconscionability of otherwise enforceable obligations in the context of the
factual circumstances under which enforcement thereof is sought and (ii) the
qualification that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. In
addition, certain remedial and procedural provisions of the Company Documents
(as defined in paragraph 2 below) are or may be unenforceable in whole or in
part, but the inclusion of such provisions does not affect the validity of those
agreements and does not, in our opinion, make the remedies provided in those
agreements, or otherwise available under applicable law, inadequate for the
practical realization of the substantive benefits purported to be provided
thereby, except for the economic consequences resulting from any delay imposed
by, or any procedure required by, applicable laws, rules, regulations and by
constitutional requirements. We express no opinion as to (i) any provision
contained in any Operative Agreement (a) providing for indemnification or
exculpation of any Person for such Person's gross negligence, willful
misconduct, recklessness or unlawful conduct or in respect of liabilities under
the Securities Act, (b) providing for late payment charges or an increase in
interest rate upon delinquency in payment or the occurrence of a default or
other specified event but only to the extent such provision is deemed to
constitute a penalty or liquidated damages provision, (c) as

<PAGE>

such provision relates to the subject matter jurisdiction of federal courts or
the waiver of inconvenient forum with respect to proceedings in federal courts,
(d) that purports to establish (or may be construed to establish) evidentiary
standards or (e) providing for the waiver of any statutory right or any broadly
or vaguely stated rights or unknown future rights, or any waiver which is
against public policy considerations or (ii) Section 12.8(c) of the
Participation Agreement or any comparable provision of any other Operative
Agreement. Under certain circumstances the requirement that the provisions of an
Operative Agreement may be modified or waived only in writing or only in a
specific instance and provisions to the effect that failure or delay in
exercising any right, remedy, power and/or privilege will not impair or waive
such right, remedy, power and/or privilege may be unenforceable to the extent
that an oral agreement has been effected or a course of dealing has occurred
modifying such provisions. A court may modify or limit contractual agreements
regarding attorneys' fees.

                  C. To the extent that our opinions expressed herein involve
conclusions as to the matters set forth in the opinions dated the date hereof of
Morris, James, Hitchens & Williams LLP or DeBee, Gilchrist & Lidia being
delivered to you on the date hereof, we have assumed, without independent
investigation, the correctness of the matters set forth in such opinions.

                  D. We have assumed the due authorization, execution and
delivery of the Operative Agreements by each of the parties thereto, that each
of such parties (other than the Company) has the power and authority to execute,
deliver and perform each such Operative Agreement and has obtained or made all
necessary consents, approvals, filings and registrations in connection therewith
(except any required under Texas law by the Company), that such execution,
delivery and performance does not violate its charter, by-laws or similar
instrument, that value has been given by each Applicable Pass Through Trustee to
the Company under the Trust Indenture, that the Company has rights in the
Collateral and that WTC is duly organized, validly existing and in good standing
in its jurisdiction of organization and qualified to transact business in each
other jurisdiction where such qualification is necessary to perform its duties
and obligations under the Operative Agreements and the Pass Through Trust
Agreement.

                  E. We have assumed the due authentication of the Equipment
Notes by the Mortgagee and the delivery thereof against payment therefor, all in
accordance with the Participation Agreement and the Trust Indenture, and that
the Equipment Notes conform to the forms thereof examined by us. We have assumed
that the Company holds an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo.

                  F. We have assumed that all signatures on documents examined
by us are genuine, that all persons signing such documents have legal capacity,
that all documents submitted to us as originals are authentic and that all
documents submitted to us as copies or specimens conform with the originals,
which facts we have not independently verified.

                  G. We express no opinion as to any provision in any Operative
Agreement that is contrary to Section 9-311, or Part V of Article 9, of the UCC.

                  H. We have not made any examination of, and express no opinion
with respect to (and to the extent relevant have assumed the accuracy and
sufficiency of),

<PAGE>

(i) descriptions of, the legal or beneficial ownership of, or the title or
condition of title to, the Collateral or any other property covered by any of
the Operative Agreements, (ii) except as expressly set forth in paragraphs 5 and
7 below, the existence, creation, validity or attachment of any Lien thereon,
(iii) except as expressly set forth in paragraph 5 below, the perfection of any
Lien thereon and (iv) the priority or enforcement of any Lien thereon.

                  I. In giving an opinion regarding the valid existence and good
standing of the Company, we have relied solely upon certificates of public
officials.

                  J. The opinions expressed herein are given as of the date
hereof. We assume no obligation to advise you of any facts or circumstance that
may come to our attention, or any changes in law that may occur after the date
hereof, which may affect the opinion expressed herein.

                  Based on and subject to the foregoing, we are of the opinion
that:

                  1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas.

                  2. The Company has all necessary corporate power to execute,
deliver and perform its obligations under the Participation Agreement, the Trust
Indenture, the Trust Indenture Supplement No. 1 and the Equipment Notes
(collectively, the "Company Documents"). Neither the execution nor delivery of
the Company Documents by the Company nor the consummation of the transactions
contemplated thereby, will result in any violation of (a) its articles of
incorporation or bylaws or (b) any law, governmental rule or regulation known to
us to be applicable to, or binding on, the Company, or requires the approval of
the shareholders of the Company.

                  3. Each Company Document constitutes the valid and binding
obligation of the Company and is enforceable against the Company in accordance
with its terms.

                  4. Except for the matters referred to in clauses (i) through
(iii) of paragraph 5 below, no approval, authorization or other action by or
filing with any governmental authority is required for the execution and
delivery by the Company of the Company Documents or the consummation of the
transactions contemplated thereby to occur at the Closing.

                  5. Except for (i) the registration of the Aircraft with the
FAA pursuant to the Act, (ii) the filing and recordation in accordance with the
Act of the FAA Filed Documents, and assuming that at the time of such filing no
other unrecorded document relating to the Aircraft has been filed pursuant to
the Act, (iii) the filing of Financing Statements referred to in Section 4.1.11
of the Participation Agreement, and the filing of periodic continuation
statements with respect thereto, (a) no further filing or recording of any
document is necessary (x) to establish the Company's title to the Airframe and
Engines, and (y) to create a valid security interest in the Company's interest
as owner of the Airframe and Engines or in the Purchase Agreement (to the extent
a security interest therein is created by the Trust Indenture) in favor of the
Mortgagee pursuant to the Trust Indenture and (b) no further filing or recording
of any document in the State of Texas or New York or under the Act is required
to perfect a security interest in the Company's interest as owner of the
Airframe and Engines or in the Purchase

<PAGE>

Agreement (to the extent a security interest therein is created by the Trust
Indenture) in favor of the Mortgagee pursuant to the Trust Indenture.

                  6. The Mortgagee will be entitled to the benefits of Section
1110 of Title 11 of the United States Code with respect to the Airframe and
Engines delivered on the date hereof in connection with any case commenced by or
against the Company under Chapter 11 of Title 11 of the United States Code.

                  7. Upon issuance, execution, authentication and delivery of
the Equipment Notes at the Closing, the Trust Indenture creates the security
interest in favor of the Mortgagee, as trustee for the benefit of the holders of
the Equipment Notes, in the Collateral it purports to create to the extent that
the UCC applies to a security interest in such property.

                  This opinion is being delivered pursuant to Section
4.1.2(x)(A) of the Participation Agreement. This opinion may be relied upon by
you (and any permitted Transferee under Section 9.1 of the Participation
Agreement) in connection with the matters set forth herein and, without our
prior written consent, may not be relied upon for any other purpose and may not
be furnished to any other Person for any purpose.

                                       Very truly yours,

                                   SCHEDULE I

Wilmington Trust Company, individually, as Mortgagee, as Subordination Agent and
as each Applicable Pass Through Trustee

Westdeutsche Landesbank Girozentrale, New York branch, as Liquidity Provider

Moody's Investors Service, Inc.

Standard & Poor's Ratings Services

<PAGE>

                                    EXHIBIT B

                 [Form of Opinion of Corporate Counsel to Owner]

                                October __, 2001

To the Persons Listed on Schedule I
Attached Hereto

                  Re:      Mortgage of Boeing Model 737-700 Aircraft with
                           Manufacturer's Serial Number 27835 and U.S.
                           Registration Number N700GS

Ladies and Gentlemen:

                  This opinion letter is being delivered by Southwest Airlines
Co., a Texas corporation ("Southwest"), through its Legal Department in
connection with the transactions contemplated by the Participation Agreement
[N700GS] dated as of October 30, 2001, among Wilmington Trust Company, a
Delaware banking corporation, as Mortgagee, Subordination Agent under the
Intercreditor Agreement (as defined in the Participation Agreement) and as Pass
Through Trustee under the Applicable Pass Through Trust Agreements (as defined
in the Participation Agreement), and Southwest, as Owner (the "Participation
Agreement"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings given those terms in the Participation
Agreement. This opinion letter is being furnished to you pursuant to Section
4.1.2 (x)(B) of the Participation Agreement.

                  In giving the following opinions, members of Southwest's Legal
Department or lawyers retained by Southwest's Legal Department have reviewed the
Participation Agreement and the other Operative Agreements to which Southwest is
a party and have relied upon originals, or copies certified or otherwise
identified to our satisfaction, of such records, documents, certificates and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinions expressed below. In addition, Southwest's Legal
Department has assumed and has not verified the accuracy as to factual matters
of each document reviewed. As used herein, the phrase "to our knowledge" or
words of similar import shall mean actual knowledge of Southwest's Legal
Department after reasonable investigation, but shall not be interpreted to
impute to any member of Southwest's Legal Department knowledge of others.

                  Based on the foregoing, and subject to the assumptions and
limitations contained herein, Southwest's Legal Department is of the opinion
that:

                  (a) Southwest is an "air carrier" within the meaning of
Section 40102 of the Act, holds an air carrier operating certificate issued
pursuant to Chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo, is
a "citizen of the United States" as such term is defined in Section 40102 of
such Act and holds all authority, necessary licenses and certificates under such
Act and the rules and regulations promulgated thereunder necessary for the
conduct of its business and to perform its obligations under the Participation
Agreement, the Trust Indenture, the Trust Indenture Supplement No. 1 and the
Equipment Notes (collectively, the "Agreements").

<PAGE>

                  (b) The execution, delivery and performance by Southwest of
each of the Agreements do not, to our knowledge, constitute a breach or result
in a default under any indenture, mortgage, deed of trust, credit agreement,
conditional sale contract or other loan agreement to which Southwest is a party
or by which Southwest or its property may be bound.

                  (c) The execution, delivery and performance of each of the
Agreements has been duly authorized by all necessary corporate action on the
part of Southwest, and each of the Agreements has been duly executed and
delivered by Southwest.

                  (d) There are no pending or, to our knowledge, threatened
actions, suits or proceedings before any court or administrative agency or
arbitrator that question the validity of any of the Agreements or that would
have been required to be disclosed in Southwest's Annual Report on Form 10-K
filed for the year ended 2000, on any subsequent Quarterly Report on Form 10-Q
or Current Report on Form 8-K, except such as are therein disclosed.

                  The foregoing opinions are limited to the federal law of the
United States of America (other than (i) the Federal Aviation Act (except as
expressly provided in paragraph (a) above) or any other laws, rules or
regulations governing, regulating or relating to the acquisition, ownership,
registration, use or sale of an aircraft, airframe or aircraft engine or to the
particular nature of the equipment to be acquired by Southwest, (ii) federal
securities laws, (iii) federal tax, antitrust or fraudulent transfer or
conveyance laws, as to which we express no opinion), and the law of the State of
Texas (other than state securities or blue sky laws, or state tax, antitrust or
fraudulent transfer or conveyance laws, as to which we express no opinion).

                  This opinion letter is furnished to you for the purpose
indicated above, and may not be relied upon by any other Person (except any
permitted Transferee under Section 9.1 of the Participation Agreement) or for
any other purpose without our written consent.

                                       Very truly yours,

                                       Southwest Airlines Co.,
                                       Legal Department

                                   SCHEDULE I

Wilmington Trust Company, individually and as Mortgagee, as Subordination Agent
and as each Applicable Pass Through Trustee

Westdeutsche Landesbank Girozentrale, as Liquidity Provider

Moody's Investors Service, Inc.

Standard & Poor's Ratings Services

<PAGE>

                                    EXHIBIT C

                [Form of Opinion of Special Counsel to Mortgagee
                  and to the Applicable Pass Through Trustees]

                                     [date]

To Each of the Persons
Listed on Schedule A
Attached Hereto

                  Re:      Southwest Airlines Co. Financing of One Boeing
                           737-700 Aircraft Bearing Manufacturer's Serial
                           Number [____]

Ladies and Gentlemen:

                  We have acted as special counsel to Wilmington Trust Company,
                  a Delaware banking corporation (in its individual capacity,
                  "Wilmington Trust"), in connection with the Trust Indenture
                  and Mortgage [N_______], dated as of ________ __, 2001 (the
                  "Trust Indenture"), between Wilmington Trust, not in its
                  individual capacity, except as expressly stated therein, but
                  solely as Mortgagee (the "Mortgagee"), and Southwest Airlines
                  Co. (the "Owner"). Pursuant to the Participation Agreement
                  [N_______], dated as of ________ __, 2001 (the "Participation
                  Agreement"), among Southwest Airlines Co., as Owner, and
                  Wilmington Trust, not in its individual capacity except as
                  expressly provided therein, but solely as Mortgagee,
                  Subordination Agent under the Intercreditor Agreement, and
                  Pass Through Trustee under each of the Pass Through
                  Agreements, financing is being provided for the acquisition of
                  one Boeing 737-700 Aircraft bearing Manufacturer's Serial
                  No.________. This opinion is furnished pursuant to Section
                  4.1.2(x)(C) of the Participation Agreement. Capitalized terms
                  used herein and not otherwise defined are used as defined in
                  the Participation Agreement or, if not defined therein, as
                  defined in the Trust Indenture, except that reference herein
                  to any instrument shall mean such instrument as in effect on
                  the date hereof.

<PAGE>

         We have examined executed counterparts, forms or copies otherwise
identified to our satisfaction of the following documents:

                  (a) the Participation Agreement;

                  (b) the Trust Indenture and the Trust Indenture Supplement
                  (the documents in paragraphs (a) and (b) above being
                  collectively referred to as the "Mortgagee Documents");

                  (c) the Equipment Notes being issued today and authenticated
                  by the Mortgagee (the "Equipment Notes");

                  (d) a Certificate of Good Standing for Wilmington Trust,
                  obtained as of a recent date from the Secretary of State of
                  the State of Delaware;

                  (e) one or more certificates of an officer of Wilmington
                  Trust, dated the Delivery Date (the "Officer's Certificate"),
                  certifying as to the truth of its representations and
                  warranties set forth in the Participation Agreement; and

                  (f) one or more certificates and/or affidavits of an officer
                  of Wilmington Trust, dated the Delivery Date (collectively,
                  the "Secretary's Certificate"), certifying as to, among other
                  things, the amended charter of Wilmington Trust attached
                  thereto (the "Charter"), the amended bylaws of Wilmington
                  Trust attached thereto (the "Bylaws"), and the citizenship of
                  Wilmington Trust.

         For purposes of this letter, we have not reviewed any documents other
than the documents referenced in paragraphs (a) through (f) above. In
particular, we have not reviewed and express no opinion as to any other document
that is referred to in, incorporated by reference into, or attached to any of
the documents reviewed by us. The opinions in this letter relate only to the
documents specified in such opinions, and not to any exhibit, schedule, or other
attachment to, or any other document referred to in or incorporated by reference
into, any of such documents. We have assumed that there exists no provision in
any document that we have not reviewed that bears upon or is inconsistent with
or contrary to the opinions in this letter. We have conducted no factual
investigation of our own, and have relied solely upon the documents reviewed by
us, the statements and information set forth in such documents, certain
statements of governmental authorities and others (as applicable), and the
additional matters recited or assumed in this letter, all of which we assume to
be true, complete, and accurate in all respects and none of which we have
independently investigated or verified.

<PAGE>

         Based upon and subject to the foregoing and subject to the assumptions,
exceptions, qualifications, and limitations in this letter, it is our opinion
that:

              1. Wilmington Trust has been duly incorporated and is validly
     existing as a Delaware banking corporation in good standing under the laws
     of the State of Delaware, and has the corporate power and authority to
     execute, deliver and perform, in its individual capacity, or as Mortgagee,
     Pass Through Trustee, or Subordination Agent, as the case may be, the
     Mortgagee Documents, and to authenticate the Equipment Notes. Wilmington
     Trust is a "citizen of the United States" as defined in Section
     40103(a)(15) of Title 49, U.S.C., as amended.

              2. Each of the Mortgagee Documents has been duly authorized,
     executed and delivered by Wilmington Trust in its individual capacity, or
     as Mortgagee, the Pass Through Trustee, or Subordination Agent, as the case
     may be, and constitutes the legal, valid and binding obligation of
     Wilmington Trust in its individual capacity, or as the Mortgagee, the Pass
     Through Trustee or Subordination Agent, as the case may be, enforceable
     against Wilmington Trust, the Mortgagee, the Pass Through Trustee or the
     Subordination Agent, as the case may be, in accordance with its terms.

              3. The execution, delivery and performance by Wilmington Trust,
     the Mortgagee, the Pass Through Trustee or the Subordination Agent, as the
     case may be, of the Mortgagee Documents to which each is a party, the
     authentication by the Mortgagee of the Equipment Notes and the consummation
     by Wilmington Trust, the Mortgagee, the Pass Through Trustee or the
     Subordination Agent, as the case may be, of any of the transactions
     contemplated thereby are not in violation of the Charter or Bylaws of
     Wilmington Trust or of any law, governmental rule, or regulation of the
     State of Delaware or of any law, governmental rule, or regulation of the
     United States of America governing the banking and trust powers of
     Wilmington Trust or, to our knowledge, of any indenture, mortgage, bank
     credit agreement, note or bond purchase agreement, long-term lease, license
     or other agreement or instrument to which it is a party or by which it is
     bound or, to our knowledge, of any judgment or order of the State of
     Delaware or the United States of America relating to the banking and trust
     powers of Wilmington Trust.

              4. Neither the execution and delivery by Wilmington Trust, the
     Mortgagee, the Pass Through Trustee or the Subordination Agent, as the case
     may be, of the Mortgagee Documents to which each is a party, the
     authentication of the Equipment Notes, nor the consummation of any of the
     transactions by Wilmington Trust, the Mortgagee, the Pass Through Trustee
     or the Subordination Agent, as the case may be, contemplated thereby
     requires the consent or approval of, the giving of notice to, the
     registration with, or the taking of any other action in respect of, any
     governmental authority or agency of the State of

<PAGE>

     Delaware or the United States of America governing the banking or trust
     powers of Wilmington Trust or under any Delaware law.

              5. There are no taxes, fees or other charges (other than taxes
     payable by Wilmington Trust on or measured by any compensation received by
     Wilmington Trust for its services as Mortgagee, Subordination Agent or Pass
     Through Trustee) payable under the laws of the State of Delaware or any
     political subdivision thereof in respect of the execution, delivery and
     performance by Wilmington Trust (in its individual capacity, as Mortgagee,
     Pass Through Trustee or Subordination Agent, as the case may be) of the
     Mortgagee Documents and the Equipment Notes, which taxes, fees or other
     charges would not have been imposed if Wilmington Trust were not a Delaware
     banking corporation and did not perform its obligations as Mortgagee under
     the Trust Indenture in the State of Delaware.

              6. The Equipment Notes have been duly and validly authenticated by
     the Mortgagee in accordance with the Trust Indenture.

              7. To our knowledge, there are no proceedings pending or
     threatened against or affecting Wilmington Trust, the Mortgagee in any
     court or before any governmental authority, agency, arbitration board or
     tribunal which, if adversely determined, individually or in the aggregate,
     would materially and adversely affect the Mortgaged Property or the right,
     power and authority of Wilmington Trust in its individual capacity, or as
     Mortgagee, Pass Through Trustee, or Subordination Agent, as the case may
     be, to enter into or perform its obligations under the Mortgagee Documents
     or which would call into question or challenge the validity of any of the
     Mortgage Documents or the enforceability thereof.

         The foregoing opinions are subject to the following assumptions,
exceptions and qualifications:

         A. The opinions in this letter are limited to the laws of the State of
Delaware as enacted and currently in effect and the federal laws of the United
States of America governing the banking and trust powers of Wilmington Trust as
enacted and currently in effect (other than (i) federal securities laws,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939, as
amended, the Investment Company Act of 1940, as amended, and rules, regulations,
orders, and decisions relating thereto, (ii) Part A of Subtitle VII of Title 49
of the United States Code, as amended, and rules, regulations, orders, and
decisions relating thereto (except as stated in the second sentence in numbered
paragraph 1 above, which opinion is based solely on the Officer's Certificate),
(iii) the Federal Communications Act of 1934, as amended, and rules,
regulations, orders, and decisions relating thereto, (iv) the Employee
Retirement Income Security Act of 1974, as amended, and rules, regulations,
orders, and decisions relating thereto, (v) securities laws of the

<PAGE>

State of Delaware, and rules, regulations, orders, and decisions relating
thereto, (vi) laws, rules, regulations, orders, ordinances, and decisions of any
county, town, municipality, or special political subdivision of the State of
Delaware, and (vii) laws, rules, regulations, orders, and decisions applicable
to the particular nature of the property or activities of the Trusts) and we
have considered and express no opinion on the effect of, concerning matters
involving, or otherwise with respect to any other laws of any jurisdiction, or
rules, regulations, orders, or decisions relating thereto. Insofar as the
foregoing opinions relate to the validity and enforceability of the Transaction
Documents expressed to be governed by the laws of the State of New York, we have
assumed that each such document is legal, valid, binding and enforceable in
accordance with its terms under such laws (as to which we express no opinion).

         B. The foregoing opinions relating to enforceability are subject to (i)
bankruptcy, insolvency, moratorium, reorganization, receivership, fraudulent
conveyance, preferential transfer, liquidation, and similar laws relating to or
affecting rights and remedies of creditors generally, (ii) principles of equity,
including, without limitation, applicable law relating to fiduciary duties
(regardless of whether considered and applied in a proceeding in equity or at
law), (iii) standards of good faith, fair dealing, course of dealing, course of
performance, materiality, and reasonableness that may be applied by a court,
considerations of public policy, and the exercise of judicial discretion, and
(iv) federal or state securities law and public policy considerations relating
to indemnification or contribution.

         C. We have assumed: (i) except as stated in numbered paragraph 1 above,
the due incorporation or due formation, as the case may be, due organization,
and valid existence in good standing of each of the parties (other than natural
persons) to the documents reviewed by us under the laws of all relevant
jurisdictions; (ii) the legal capacity of all relevant natural persons, (iii)
except as stated in numbered paragraph 2 above, the due authorization,
execution, and delivery of each of the documents reviewed by us by each of the
parties thereto; and (iv) except as stated in numbered paragraph 1 above, that
each of such parties had and has the power and authority to execute, deliver,
and perform such documents.

         D. We have assumed that (i) all signatures (other than signatures by
officers of Wilmington Trust, in its individual capacity, or as Mortgagee, the
Pass Through Trustee, or Subordination Agent, as the case may be, on the
Mortgage Documents, as the case may be, on the Transaction Documents and the
Certificates) on all documents reviewed by us are genuine, (ii) all documents
furnished to us as originals are authentic, (iii) all documents furnished to us
as copies or specimens conform to the originals thereof, (iv) all documents
furnished to us in final draft or final or execution form conform to the final,
executed originals of such documents, (v) each document reviewed by us
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, and (vi) except as stated in numbered paragraph 2 above,

<PAGE>

each document reviewed by us constitutes a legal, valid and binding obligation
of each of the parties thereto, enforceable against each of such parties in
accordance with its terms.

         E. We express no opinion concerning (i) ownership of, title to, or any
similar interest in any property, (ii) creation or attachment of any lien,
pledge, mortgage, or security interest, (iii) perfection of any lien, pledge,
mortgage, or security interest, or (iv) priority of any lien, pledge, mortgage,
or security interest.

         F. For purposes of this letter, an opinion that is limited "to our
knowledge" means that, in the course of our representation of Wilmington Trust
as described above, attorneys in this firm who have worked substantively on this
letter and the transactions contemplated by the Mortgagee Documents have not,
without undertaking any investigation or verification of the subject matter of
such opinion, obtained actual knowledge that such opinion is incorrect.

         G. The opinion set forth in paragraph 1 above concerning the
citizenship of Wilmington Trust is based upon an affidavit of Wilmington Trust,
made by an authorized representative, the facts set forth in which we have not
independently verified.

         This letter speaks only as of the date hereof, and we assume no
obligation to advise anyone of any changes in the foregoing subsequent to the
delivery of this letter. We consent to your relying on this letter on the date
hereof in connection with the matters set forth herein. Without our prior
written consent, this letter may not be furnished or quoted to, or relied upon
by, any other person or entity, or any governmental authority, or relied upon
for any other purpose.

         In addition, the opinions in this letter are limited to the opinions
expressly stated in numbered paragraphs 1 through 7 of this letter, and no other
opinions may be inferred beyond such matters expressly stated.

                                       Very truly yours,

<PAGE>

                                   SCHEDULE A

WESTDEUTSCHE LANDESBANK GIROZENTRALE, AS LIQUIDITY PROVIDER

SOUTHWEST AIRLINES CO.

MOODY'S INVESTORS SERVICE, INC.

STANDARD & POOR'S RATINGS SERVICE

<PAGE>

                                    EXHIBIT D

         [Form of Opinion of Special Counsel in Oklahoma City, Oklahoma]

                                October ___, 2001

To the Addressees on
Schedule I Attached Hereto:

                                    Re:      Southwest Airlines Co.;
                                             Our File Number: 5003.0250

Ladies & Gentlemen:

         This opinion is rendered in connection with Section 4.1.2(x)(D), of the
Participation Agreement [N_____], dated as of _________ ___, 2001 (the
"Participation Agreement"), among Southwest Airlines Co. (the "Owner"), as
owner, Wilmington Trust Company, not in its individual capacity except as
expressly provided in the Participation Agreement, but solely as Mortgagee (the
"Mortgagee"), as Subordination Agent under the Intercreditor Agreement and as
Pass Through Trustee under each of the Applicable Pass Through Trust Agreements,
as the Participation Agreement relates to the following described aircraft and
engines:

                                    AIRCRAFT

<Table>
<Caption>
                                                           Serial           U.S. Registration
Manufacturer                         Model                 Number                 Number
------------                         -----                 ------           -----------------
<S>                                 <C>                    <C>              <C>
The Boeing Company                  737-7H4                _____                 N_____
</Table>

hereinafter referred to as the "Aircraft"; and

                                     ENGINES

<Table>
<Caption>
                                                                                Serial
Manufacturer                                Model                               Number
------------                                -----                               ------
<S>                                       <C>                                   <C>
CFM International                         CFM56-7B22                            ______
CFM International                         CFM56-7B22                            ______
</Table>

hereinafter referred to as the "Engines".

<PAGE>

         As contemplated by the Participation Agreement, title to the Aircraft
was conveyed by The Boeing Company to the Owner by Aircraft Bill of Sale (FAA
Form AC 8050-2), dated _______ ___, ____, which Bill of Sale was recorded by the
Federal Aviation Administration (the "FAA") on ________ ___, ____, and assigned
conveyance number __________; the Owner holds legal title to the Aircraft and
the Aircraft has been duly registered with the FAA under the Act (as defined
below) in the name of the Owner pursuant to that Aircraft Registration
Application (FAA AC Form 8050-1), dated _________ ___, ____ (the "Aircraft
Registration Application"); the creation of security interests in the Aircraft
and the Engines is pursuant to the Trust Indenture and Mortgage [N_____], dated
as of October ___, 2001, between the Owner and the Mortgagee, not in its
individual capacity except as expressly stated in the Mortgage, but solely as
Mortgagee, as supplemented by the Trust Indenture and Mortgage Supplement No. 1,
dated October ___, 2001 (hereinafter collectively, the "Trust Indenture").

         This opinion is rendered with respect to matters arising under that
portion of Section 40102 and Section 44101 through Section 44112 of Title 49,
United States Code, "Transportation" (the "Act"), relating to the recordation of
instruments and the registration of the Aircraft pursuant to the Act.

         Except as otherwise defined herein, terms are used in this opinion as
they are defined in the Act.

         This letter confirms that the Trust Indenture was filed with the FAA on
October ___, 2001, at ___:___ __.m., Central _______ Time.

         Based upon examination of the Trust Indenture and the records
maintained by the FAA under the Act (the "Records") as deemed necessary to
render this opinion and as were made available, the undersigned is of the
opinion that as of the time of filing noted above:

         (a)      The Trust Indenture is in due form for recording pursuant to
                  the Act and has been duly filed for recordation with the FAA
                  pursuant to the Act;

         (b)      The Aircraft is duly registered in the name of the Owner
                  pursuant to and in accordance with the Act;

<PAGE>

         (c)      The Owner is the owner of valid legal title to the Aircraft,
                  and the Aircraft and the Engines are free of all liens and
                  encumbrances except those created by the Trust Indenture;

         (d)      The filing of the Trust Indenture for recordation will, upon
                  recordation, accord validity to the Trust Indenture, from the
                  time of filing thereof, as to all persons with respect to the
                  Aircraft and the Engines, thus resulting in the establishment
                  in favor of the Mortgagee of a first priority security
                  interest in and mortgage lien on all right, title and interest
                  of the Owner in, to and under the Aircraft and the Engines,
                  under the terms of the Trust Indenture;

         (e)      Except for the filing of the Trust Indenture for recordation,
                  no further filing or recording, including any filing or
                  recording of any other document in any other place within the
                  United States, is necessary in order to perfect the first
                  priority security interests of the Mortgagee in the Aircraft
                  and the Engines, under the terms of the Trust Indenture; and

         (f)      Neither the execution, delivery and performance of the Trust
                  Indenture by the parties thereto, nor the consummation of any
                  of the transactions contemplated thereby, requires the consent
                  or approval of, or the giving of notice to, or the
                  registration of, or the taking of any other action in respect
                  of the FAA under the Act and the regulations adopted
                  thereunder, except the filings specified elsewhere in this
                  opinion.

         The opinions expressed herein are as to federal laws of the United
States only. Pursuant to Section 44108 of the Act, the validity of any
instrument, the recording of which is provided for by Section 44107 of the Act,
is subject to the laws of the State, the District of Columbia, or the territory
or possession of the United States at which the conveyance, lease or instrument
is delivered (the "Governing Laws"). The undersigned expresses no opinions as to
such Governing Laws and assumes the Trust Indenture and the documents in the
Records are legally sufficient under such Governing Laws to create valid and
enforceable interests of the type they purport to create and to release or
terminate those interests which they purport to release or terminate. No opinion
is expressed as to times when the Aircraft and the Engines are outside the
United States.

         Since the examination was limited to the Records, the opinion does not
cover liens which are perfected without the filing of notice thereof with the
FAA, such as federal tax liens or

<PAGE>

artisans' liens. The opinion is subject to the accuracy of FAA personnel and
contractors in the filing, indexing and recording of the Records and in
searching for encumbrance cross-reference index cards for the Engines. The
opinion does not cover documents, if any, which may have been filed for
recordation but not listed upon the indices of Records available for examination
immediately prior to our examination for the purpose of this opinion.

         The opinions as to title of the Aircraft and the liens upon the
Aircraft and the Engines relate only to the time beginning with United States
registration, and not to times when the Aircraft may have been upon a foreign
aircraft registry.

         The opinion relating to registration of the Aircraft is only as to its
current eligibility for registration and not with respect to events which may
occur in the future which may affect continued eligibility for registration. As
to matters of citizenship, the undersigned has relied upon representations made
by the Owner in the Aircraft Registration Application as maintained by the FAA
in the Records relating to the Aircraft. It is assumed the Aircraft is not
registered under the laws of any other country.

         The undersigned has assumed that all documents are authentic and all
signatures are genuine and properly authorized.

         This opinion is supplied to and may be relied upon by the entities to
whom it is addressed, solely for the purposes described herein.

                                           Very truly yours,
                                       DEBEE GILCHRIST & LIDIA

                                          Jack P. Gilchrist

<PAGE>

                                   SCHEDULE I
                         to Opinion of October ___, 2001

                               Re:      Southwest Airlines Co.;
                                        One (1) Boeing 737-7H4  Aircraft, Serial
                                        Number _____, U.S. Registration Number
                                        N_____; and Two (2) CFM International
                                        CFM56-7B22 Engines, Serial Numbers
                                        ______ and ______;
                                        Our File Number: 5003.0250

ADDRESSEES

Southwest Airlines Co.

Wilmington Trust Company, as Mortgagee

Wilmington Trust Company, as Subordination Agent under the Intercreditor
Agreement

Wilmington Trust Company, as Pass Through Trustee under each of the Applicable
Pass Through Trust Agreements

Westdeutsche Landesbank Girozentrale, New York Branch, as Liquidity Provider

Moody's Investors Service, Inc.

Standard & Poor's Ratings Services

Salomon Smith Barney Inc.

J.P. Morgan Securities Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated<PAGE>
                                                                    EXHIBIT 4.13

--------------------------------------------------------------------------------

                             INTERCREDITOR AGREEMENT
                                    (2001-1)

                                   Dated as of
                                October   , 2001

                                      AMONG

                            WILMINGTON TRUST COMPANY,
                         not in its individual capacity
                         but solely as Trustee under the
                 Southwest Airlines Pass Through Trust 2001-1A-1
                Southwest Airlines Pass Through Trust 2001-1A-2,
                                       and
                  Southwest Airlines Pass Through Trust 2001-1B

                      WESTDEUTCHE LANDESBANK GIROZENTRALE,
                                NEW YORK BRANCH,
                       as Class A-1 Liquidity Provider and
                         as Class A-2 Liquidity Provider

                                       AND

                            WILMINGTON TRUST COMPANY,
                      not in its individual capacity except
                        as expressly set forth herein but
                    solely as Subordination Agent and Trustee

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
ARTICLE I  DEFINITIONS............................................................................................2
     SECTION 1.1.   Definitions...................................................................................2

ARTICLE II  TRUST ACCOUNTS; CONTROLLING PARTY....................................................................18
     SECTION 2.1.   Agreement to Terms of Subordination; Payments from Monies Received Only......................18
     SECTION 2.2.   Trust Accounts...............................................................................18
     SECTION 2.3.   Deposits to the Collection Account and Special Payments Account..............................20
     SECTION 2.4.   Distributions of Special Payments............................................................20
     SECTION 2.5.   Designated Representatives...................................................................22
     SECTION 2.6.   Controlling Party............................................................................23

ARTICLE III  RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED...........................................24
     SECTION 3.1.   Written Notice of Distribution...............................................................24
     SECTION 3.2.   Distribution of Amounts on Deposit in the Collection Account.................................26
     SECTION 3.3.   Distribution of Amounts on Deposit Following a Triggering Event..............................27
     SECTION 3.4.   Other Payments...............................................................................29
     SECTION 3.5.   Payments to the Trustees and the Liquidity Providers.........................................30
     SECTION 3.6.   Liquidity Facilities.........................................................................30

ARTICLE IV  EXERCISE OF REMEDIES.................................................................................37
     SECTION 4.1.   Directions from the Controlling Party........................................................37
     SECTION 4.2.   Remedies Cumulative..........................................................................38
     SECTION 4.3.   Discontinuance of Proceedings................................................................38
     SECTION 4.4.   Right of Certificateholders to Receive Payments Not to Be Impaired...........................38
     SECTION 4.5.   Undertaking for Costs........................................................................38

ARTICLE V  DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC........................................38
     SECTION 5.1.   Notice of Indenture Default or Triggering Event..............................................39
     SECTION 5.2.   Indemnification..............................................................................39
     SECTION 5.3.   No Duties Except as Specified in Intercreditor Agreement.....................................39
     SECTION 5.4.   Notice from the Liquidity Providers and Trustees.............................................40

ARTICLE VI  THE SUBORDINATION AGENT..............................................................................40
     SECTION 6.1.   Authorization; Acceptance of Trusts and Duties...............................................40
     SECTION 6.2.   Absence of Duties............................................................................40
     SECTION 6.3.   No Representations or Warranties as to Documents.............................................40
     SECTION 6.4.   No Segregation of Monies; No Interest........................................................40
     SECTION 6.5.   Reliance; Agents; Advice of Counsel..........................................................41
     SECTION 6.6.   Capacity in Which Acting.....................................................................41
     SECTION 6.7.   Compensation.................................................................................41
</Table>

                                        i
<PAGE>

<Table>
<Caption>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
     SECTION 6.8.   May Become Certificateholder.................................................................41
     SECTION 6.9.   Subordination Agent Required; Eligibility....................................................42
     SECTION 6.10.  Money to Be Held in Trust....................................................................42

ARTICLE VII  INDEMNIFICATION OF SUBORDINATION AGENT..............................................................42
     SECTION 7.1.   Scope of Indemnification.....................................................................42

ARTICLE VIII  SUCCESSOR SUBORDINATION AGENT......................................................................42
     SECTION 8.1.   Replacement of Subordination Agent; Appointment of Successor.................................42

ARTICLE IX  SUPPLEMENTS AND AMENDMENTS...........................................................................43

SECTION 9.1.  Amendments, Waivers, etc...........................................................................43
     SECTION 9.2.   Subordination Agent Protected................................................................45
     SECTION 9.3.   Effect of Supplemental Agreements............................................................45
     SECTION 9.4.   Notice to Rating Agencies....................................................................46

ARTICLE X  MISCELLANEOUS.........................................................................................46
     SECTION 10.1.  Termination of Intercreditor Agreement.......................................................46
     SECTION 10.2.  Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and
                    Subordination Agent..........................................................................46
     SECTION 10.3.  Notices......................................................................................46
     SECTION 10.4.  Severability.................................................................................47
     SECTION 10.5.  No Oral Modifications or Continuing Waivers..................................................47
     SECTION 10.6.  Successors and Assigns.......................................................................47
     SECTION 10.7.  Headings.....................................................................................48
     SECTION 10.8.  Counterpart Form.............................................................................48
     SECTION 10.9.  Subordination................................................................................48
     SECTION 10.10. Governing Law................................................................................49
     SECTION 10.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity.........................49
</Table>

                                       ii
<PAGE>

                             INTERCREDITOR AGREEMENT

                  INTERCREDITOR AGREEMENT dated as of October   , 2001, among
WILMINGTON TRUST COMPANY, a Delaware corporation ("WTC"), not in its individual
capacity but solely as Trustee of each Trust (each as defined below);
WESTDEUTCHE LANDESBANK GIROZENTRALE, a German banking institution organized
under the laws of the State of North Rhine-Westphalia, Germany, acting through
its New York branch ("West LB")("Liquidity Provider"), as Class A-1 Liquidity
Provider and Class A-2 Liquidity Provider; and WILMINGTON TRUST COMPANY, not in
its individual capacity except as expressly set forth herein, but solely as
Subordination Agent and trustee hereunder (in such capacity, together with any
successor appointed pursuant to Article VIII hereof, the "Subordination Agent").

                  WHEREAS, all capitalized terms used herein shall have the
respective meanings referred to in Article I hereof;

                  WHEREAS, pursuant to the Indentures covering 29 Boeing 737-700
aircraft, owned by Southwest, Southwest will issue on a recourse basis up to
(and including) three series of Equipment Notes for general corporate purposes
(and pursuant to the related Indenture, may in the future issue on a recourse
basis a fourth series of Equipment Notes);

                  WHEREAS, pursuant to the Participation Agreements, each Trust
will acquire Equipment Notes having an interest rate equal to the interest rate
applicable to the Certificates to be issued by such Trust;

                  WHEREAS, pursuant to each Trust Agreement relating to a Trust,
the Trust created thereby proposes to issue a single class of Certificates
bearing the interest rate and having the final distribution date described in
such Trust Agreement on the terms and subject to the conditions set forth
therein;

                  WHEREAS, pursuant to the Underwriting Agreement, the
Underwriters propose to purchase the Certificates issued by each Trust in the
aggregate face amount set forth opposite the name of such Trust on Schedule I
thereto on the terms and subject to the conditions set forth therein;

                  WHEREAS, West LB proposes to enter into two separate revolving
credit agreements with the Subordination Agent, as agent for the Trustee of the
Class A-1 Trust and Class A-2 Trust, respectively, for the benefit of the
Certificateholders of such Trust;

                  WHEREAS, it is a condition precedent to the obligations of the
Underwriters under the Underwriting Agreement that the Subordination Agent, the
applicable Trustees and the Liquidity Providers agree to the terms of
subordination set forth in this Agreement in respect of each Class of
Certificates, and the Subordination Agent, the applicable Trustees and the
Liquidity Providers, by entering into this Agreement, hereby acknowledge and
agree to such terms of subordination and the other provisions of this Agreement.

<PAGE>

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

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.1. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

                  (1) the terms used herein that are defined in this Article
         have the meanings assigned to them in this Article, and include the
         plural as well as the singular;

                  (2) all references in this Agreement to designated "Articles",
         "Sections" and other subdivisions are to the designated Articles,
         Sections and other subdivisions of this Agreement;

                  (3) the words "herein", "hereof" and "hereunder" and other
         words of similar import refer to this Agreement as a whole and not to
         any particular Article, Section or other subdivision; and

                  (4) the term "including" shall mean "including without
         limitation".

                  "Acceleration" means, with respect to the amounts payable in
respect of the Equipment Notes issued under any Indenture, such amounts becoming
immediately due and payable by declaration or otherwise. "Accelerate",
"Accelerated" and "Accelerating" have meanings correlative to the foregoing.

                  "Adjusted Expected Distributions" means, with respect to the
Certificates of any Trust on any Current Distribution Date, the sum of (x)
accrued and unpaid interest on such Certificates and (y) the greater of:

                  (A) the difference between (x) the Pool Balance of such
         Certificates as of the immediately preceding Distribution Date (or, if
         the Current Distribution Date is the first Distribution Date, the
         original aggregate face amount of the Certificates of such Trust) and
         (y) the Pool Balance of such Certificates as of the Current
         Distribution Date calculated on the basis that (i) the principal of the
         Non-Performing Equipment Notes held in such Trust has been paid in full
         and such payments have been distributed to the holders of such
         Certificates, (ii) the principal of the Performing Equipment Notes held
         in such Trust has been paid when due (but without giving effect to any
         Acceleration of Performing Equipment Notes) and such payments have been
         distributed to the holders of such Certificates and (iii) the principal
         of any Equipment Notes formerly held in such Trust that have been sold
         pursuant to the terms hereof has been paid in full and such payments
         have been distributed to the holders of such Certificates, and

                                       2
<PAGE>

                  (B) the amount of the excess, if any, of (i) the Pool Balance
         of such Class of Certificates as of the immediately preceding
         Distribution Date (or, if the Current Distribution Date is the first
         Distribution Date, the original aggregate face amount of the
         Certificates of such Trust), over (ii) the Aggregate LTV Collateral
         Amount for such Class of Certificates for the Current Distribution
         Date;

provided that, until the date of the initial LTV Appraisals, clause (B) shall
not apply.

                  For purposes of calculating Adjusted Expected Distributions
with respect to the Certificates of any Trust, any premium paid on the Equipment
Notes held in such Trust that has not been distributed to the Certificateholders
of such Trust (other than such premium or a portion thereof applied to the
payment of interest on the Certificates of such Trust or the reduction of the
Pool Balance of such Trust) shall be added to the amount of Adjusted Expected
Distributions.

                  "Advance", with respect to any Liquidity Facility, means any
Advances as defined in such Liquidity Facility.

                  "Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. For the purposes of this definition, "control" means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities or by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

                  "Aggregate LTV Collateral Amount" for any Class of
Certificates for any Distribution Date means the product of (A)(i) the sum of
the applicable LTV Collateral Amounts for each Aircraft, minus (ii) the Pool
Balance for each Class of Certificates, if any, senior to such Class, after
giving effect to any distribution of principal on such Distribution Date with
respect to such senior Class or Classes, multiplied by (B)(i) in the case of the
Class A-1 Certificates or Class A-2 Certificates, a fraction the numerator of
which equals the Current Pool Balance for the Class A-1 Certificates or Class
A-2 Certificates, as the case may be, and the denominator of which equals the
aggregate Current Pool Balance for the Class A-1 Certificates and Class A-2
Certificates and (ii) in the case of the Class B Certificates, 1.0.

                  "Aircraft" means, with respect to each Indenture, the
"Aircraft" referred to therein.

                  "Appraisal" means a fair market value appraisal (which may be
a "desktop" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.

                  "Appraised Current Market Value" of any Aircraft means the
lower of the average and the median of the three most recent Appraisals of such
Aircraft.

                  "Appraisers" means AvSolutions Inc., BK Associates, Inc. and
Simat, Helliesen & Eichner, Inc.

                                       3
<PAGE>

                  "Available Amount" means, with respect to any Liquidity
Facility on any drawing date, subject to the proviso contained in the first
sentence of Section 3.6(g) hereof, an amount equal to (a) the Stated Amount of
such Liquidity Facility at such time, less (b) the aggregate amount of each
Interest Drawing honored by the Liquidity Provider under such Liquidity Facility
on or prior to such date which has not been reimbursed or reinstated as of such
date; provided that, following a Downgrade Drawing, a Non-Extension Drawing or a
Final Drawing under such Liquidity Facility, the Available Amount of such
Liquidity Facility shall be zero.

                  "Basic Agreement" means the Pass Through Trust Agreement dated
as of October 10, 2001 between Southwest and WTC, not in its individual
capacity, except as otherwise expressly provided therein, but solely as trustee.

                  "Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in
Dallas, Texas, New York, New York, or, so long as any Certificate is
outstanding, the city and state in which any Trustee, the Subordination Agent or
any Loan Trustee maintains its Corporate Trust Office or receives and disburses
funds, and that, solely with respect to draws under any Liquidity Facility, also
is a "Business Day" as defined in such Liquidity Facility.

                  "Cash Collateral Account" means the Class A-1 Cash Collateral
Account or the Class A-2 Cash Collateral Account, as applicable.

                  "Certificate" means a Class A-1 Certificate, a Class A-2
Certificate or a Class B Certificate, as applicable.

                  "Certificateholder" means any holder of one or more
Certificates.

                  "Class" means any class of Certificates, as applicable.

                  "Class A-1 Cash Collateral Account" means an Eligible Deposit
Account in the name of the Subordination Agent maintained at an Eligible
Institution, which shall be the Subordination Agent if it shall so qualify, into
which all amounts drawn under the Class A-1 Liquidity Facility pursuant to
Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited.

                  "Class A-1 Certificateholder" means, at any time, any holder
of one or more Class A-1 Certificates.

                  "Class A-1 Certificates" means the certificates issued by the
Class A-1 Trust, substantially in the form of Exhibit A to the Class A-1 Trust
Agreement, and authenticated by the Class A-1 Trustee, representing fractional
undivided interests in the Class A-1 Trust, and any certificates issued in
exchange therefor or replacement thereof pursuant to the terms of the Class A-1
Trust Agreement.

                  "Class A-1 Liquidity Facility" means, initially, the Revolving
Credit Agreement dated as of the date hereof, between the Subordination Agent,
as agent and trustee for the Class A-1 Trust, and the initial Class A-1
Liquidity Provider, and from and after the replacement of such Revolving Credit
Agreement pursuant hereto, the Replacement Liquidity Facility therefor,

                                       4
<PAGE>

if any, in each case as amended, supplemented or otherwise modified from time to
time in accordance with its terms.

                  "Class A-1 Liquidity Provider" means Westdeutche Landesbank
Girozentrale, acting through its New York branch, together with any Replacement
Liquidity Provider which has issued a Replacement Liquidity Facility to replace
any Class A-1 Liquidity Facility pursuant to Section 3.6(e).

                  "Class A-1 Trust" means the Southwest Airlines Pass Through
Trust 2001-1A-1 created and administered pursuant to the Class A-1 Trust
Agreement.

                  "Class A-1 Trust Agreement" means the Basic Agreement, as
supplemented by the Supplement No. 2001-1A-1 thereto dated as of the date
hereof, governing the creation and administration of the Southwest Airlines Pass
Through Trust 2001-1A-1 and the issuance of the Class A-1 Certificates, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with its terms.

                  "Class A-1 Trustee" means WTC, not in its individual capacity
except as expressly set forth in the Class A-1 Trust Agreement, but solely as
trustee under the Class A-1 Trust Agreement, together with any successor trustee
appointed pursuant thereto.

                  "Class A-2 Cash Collateral Account" means an Eligible Deposit
Account in the name of the Subordination Agent maintained at an Eligible
Institution, which shall be the Subordination Agent if it shall so qualify, into
which all amounts drawn under the Class A-2 Liquidity Facility pursuant to
Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited.

                  "Class A-2 Certificateholder" means, at any time, any holder
of one or more Class A-2 Certificates.

                  "Class A-2 Certificates" means the certificates issued by the
Class A-2 Trust, substantially in the form of Exhibit A to the Class A-2 Trust
Agreement, and authenticated by the Class A-2 Trustee, representing fractional
undivided interests in the Class A-2 Trust, and any certificates issued in
exchange therefor or replacement thereof pursuant to the terms of the Class A-2
Trust Agreement.

                  "Class A-2 Liquidity Facility" means, initially, the Revolving
Credit Agreement dated as of the date hereof, between the Subordination Agent,
as agent and trustee for the Class A-2 Trust, and the initial Class A-2
Liquidity Provider, and from and after the replacement of such Revolving Credit
Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any,
in each case as amended, supplemented or otherwise modified from time to time in
accordance with its terms.

                  "Class A-2 Liquidity Provider" means Westdeutche Landesbank
Girozentrale, acting through its New York branch, together with any Replacement
Liquidity Provider which has issued a Replacement Liquidity Facility to replace
any Class A-2 Liquidity Facility pursuant to Section 3.6(e).

                                       5
<PAGE>

                  "Class A-2 Trust" means the Southwest Airlines Pass Through
Trust 2001-1A-2 created and administered pursuant to the Class A-2 Trust
Agreement.

                  "Class A-2 Trust Agreement" means the Basic Agreement, as
supplemented by the Supplement No. 2001-1A-2 thereto dated as of the date
hereof, governing the creation and administration of the Southwest Airlines Pass
Through Trust 2001-1A-2 and the issuance of the Class A-2 Certificates, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with its terms.

                  "Class A-2 Trustee" means WTC, not in its individual capacity
except as expressly set forth in the Class A-2 Trust Agreement, but solely as
trustee under the Class A-2 Trust Agreement, together with any successor trustee
appointed pursuant thereto.

                  "Class B Cash Collateral Account" means an Eligible Deposit
Account in the name of the Subordination Agent maintained at an Eligible
Institution, which shall be the Subordination Agent if it shall so qualify, into
which all amounts drawn under the Class B Liquidity Facility pursuant to Section
3.6(c), 3.6(d) or 3.6(i) shall be deposited.

                  "Class B Certificateholder" means, at any time, any holder of
one or more Class B Certificates.

                  "Class B Certificates" means the certificates issued by the
Class B Trust, substantially in the form of Exhibit A to the Class B Trust
Agreement, and authenticated by the Class B Trustee, representing fractional
undivided interests in the Class B Trust, and any certificates issued in
exchange therefor or replacement thereof pursuant to the terms of the Class B
Trust Agreement.

                  "Class B Trust" means the Southwest Airlines Pass Through
Trust 2001-1B created and administered pursuant to the Class B Trust Agreement.

                  "Class B Trust Agreement" means the Basic Agreement, as
supplemented by the Supplement No. 2001-1B thereto dated as of the date hereof,
governing the creation and administration of the Southwest Airlines Pass Through
Trust 2001-1B and the issuance of the Class B Certificates, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms.

                  "Class B Trustee" means WTC, not in its individual capacity
except as expressly set forth in the Class B Trust Agreement, but solely as
trustee under the Class B Trust Agreement, together with any successor trustee
appointed pursuant thereto.

                  "Class C Certificates" means any pass through certificates
issued by the Class C Trust representing fractional undivided interests in the
Class C Trust.

                  "Class C Trust" means the Southwest Airlines Pass Through
Trust 2001-1C, if and when established.

                  "Closing Date" means October 30, 2001.

                                       6
<PAGE>

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the Treasury Regulations promulgated thereunder.

                  "Collection Account" means the Eligible Deposit Account
established by the Subordination Agent pursuant to Section 2.2 which the
Subordination Agent shall make deposits in and withdrawals from in accordance
with this Agreement.

                  "Consent Period" has the meaning specified in Section 3.6(d).

                  "Controlling Party" means the Person entitled to act as such
pursuant to the terms of Section 2.6.

                  "Corporate Trust Office" means, with respect to any Trustee,
the Subordination Agent or any Loan Trustee, the office of such Person in the
city at which, at any particular time, its corporate trust business shall be
principally administered.

                  "Current Distribution Date" means a Distribution Date
specified as a reference date for calculating the Expected Distributions or the
Adjusted Expected Distributions with respect to the Certificates of any Trust as
of such Distribution Date.

                  "Current Pool Balance" means the amount described in clause
(B)(i) of the definition of "Adjusted Expected Distributions".

                  "Designated Representatives" means the Subordination Agent
Representatives, the Trustee Representatives and the LP Representatives
identified under Section 2.5.

                  "Distribution Date" means a Regular Distribution Date or a
Special Distribution Date.

                  "Dollars" or "$" means United States dollars.

                  "Downgrade Advance" with respect to any Liquidity Facility,
has the meaning assigned to such term in such Liquidity Facility.

                  "Downgrade Drawing" has the meaning assigned to such term in
Section 3.6(c).

                  "Downgraded Facility" has the meaning assigned to such term in
Section 3.6(c).

                  "Drawing" means an Interest Drawing, a Final Drawing, a
Non-Extension Drawing or a Downgrade Drawing, as the case may be.

                  "Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any U.S. branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution has a long-term unsecured debt
rating from each Rating Agency of at least A-3 or its equivalent. An Eligible
Deposit Account may be maintained with a Liquidity

                                       7
<PAGE>

Provider so long as such Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.

                  "Eligible Institution" means (a) the corporate trust
department of the Subordination Agent or any Trustee, as applicable, or (b) a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any U.S. branch
of a foreign bank), which has a long-term unsecured debt rating from each Rating
Agency of at least A-3 or its equivalent.

                  "Eligible Investments" means (a) investments in obligations
of, or guaranteed by, the United States Government having maturities no later
than 90 days following the date of such investment, (b) investments in open
market commercial paper of any corporation incorporated under the laws of the
United States of America or any state thereof with a short-term unsecured debt
rating issued by Moody's and S&P of at least A-1 and P-1, respectively, having
maturities no later than 90 days following the date of such investment or (c)
investments in negotiable certificates of deposit, time deposits, banker's
acceptances, commercial paper or other direct obligations of, or obligations
guaranteed by, commercial banks organized under the laws of the United States or
of any political subdivision thereof (or any U.S. branch of a foreign bank) with
issuer ratings of at least B/C by Thomson Bankwatch, having maturities no later
than 90 days following the date of such investment; provided, however, that (x)
all Eligible Investments that are bank obligations shall be denominated in U.S.
dollars; and (y) the aggregate amount of Eligible Investments at any one time
that are bank obligations issued by any one bank shall not be in excess of 5% of
such bank's capital surplus; provided further that any investment of the types
described in clauses (a), (b) and (c) above may be made through a repurchase
agreement in commercially reasonable form with a bank or other financial
institution qualifying as an Eligible Institution so long as such investment is
held by a third party custodian also qualifying as an Eligible Institution;
provided further, however, that in the case of any Eligible Investment issued by
a domestic branch of a foreign bank, the income from such investment shall be
from sources within the United States for purposes of the Code. Notwithstanding
the foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by Southwest or any of its Affiliates, and no investment in
the obligations of any one bank in excess of $10,000,000, shall be an Eligible
Investment unless written confirmation shall have been received from each Rating
Agency that the making of such investment will not result in a withdrawal or
downgrading of the ratings of the Certificates.

                  "Equipment Notes" means, at any time, the Series A-1 Equipment
Notes, the Series A-2 Equipment Notes and the Series B Equipment Notes,
collectively, and in each case, any Equipment Notes issued in exchange therefor
or replacement thereof pursuant to the terms of the Indentures.

                  "Expected Distributions" means, with respect to the
Certificates of any Trust on any Current Distribution Date, the sum of (x)
accrued and unpaid interest on such Certificates and (y) the difference between
(A) the Pool Balance of such Certificates as of the immediately preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, the original aggregate face amount of the Certificates of
such Trust), and (B) the Pool Balance of such Certificates as of the Current
Distribution Date calculated on the basis that (i) the principal

                                       8
<PAGE>

of the Equipment Notes held in such Trust has been paid when due (whether at
stated maturity, upon redemption, prepayment, purchase, Acceleration or
otherwise) and such payments have been distributed to the holders of such
Certificates and (ii) the principal of any Equipment Notes formerly held in such
Trust that have been sold pursuant to the terms hereof has been paid in full and
such payments have been distributed to the holders of such Certificates. For
purposes of calculating Expected Distributions with respect to the Certificates
of any Trust, any premium paid on the Equipment Notes held in such Trust which
has not been distributed to the Certificateholders of such Trust (other than
such premium or a portion thereof applied to the payment of interest on the
Certificates of such Trust or the reduction of the Pool Balance of such Trust)
shall be added to the amount of such Expected Distributions.

                  "Expiry Date" with respect to any Liquidity Facility, shall
have the meaning set forth in such Liquidity Facility.

                  "Facility Office" means, with respect to any Liquidity
Facility, the office of the Liquidity Provider thereunder, presently located at
New York, New York, or such other office as such Liquidity Provider from time to
time shall notify the applicable Trustee as its "Facility Office" under any such
Liquidity Facility.

                  "Fee Letters" means, collectively, (i) the Fee Letter dated as
of the date hereof between West LB and the Subordination Agent with respect to
the initial Class A-1 Liquidity Facility and Class A-2 Liquidity Facility and
(ii) any fee letter entered into between the Subordination Agent and any
Replacement Liquidity Provider in respect of such Liquidity Facilities.

                  "Final Distributions" means, with respect to the Certificates
of any Trust on any Distribution Date, the sum of (x) the aggregate amount of
all accrued and unpaid interest on such Certificates and (y) the Pool Balance of
such Certificates as of the immediately preceding Distribution Date. For
purposes of calculating Final Distributions with respect to the Certificates of
any Trust, any premium paid on the Equipment Notes held in such Trust which has
not been distributed to the Certificateholders of such Trust (other than such
premium or a portion thereof applied to the payment of interest on the
Certificates of such Trust or the reduction of the Pool Balance of such Trust)
shall be added to the amount of such Final Distributions.

                  "Final Drawing" has the meaning assigned to such term in
Section 3.6(i).

                  "Final Legal Distribution Date" means (i) with respect to the
Class A-1 Certificates, November 1, 2007, (ii) with respect to the Class A-2
Certificates, May 1, 2008, and (iii) with respect to the Class B Certificates,
November 1, 2006.

                  "Indenture" means, with respect to the Equipment Notes, each
of the separate trust indenture and mortgages described on Schedule I to this
Agreement, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.

                  "Indenture Default" means, with respect to any Indenture, any
Event of Default (as such term is defined in such Indenture) thereunder.

                                       9
<PAGE>

                  "Interest Drawing" has the meaning assigned to such term in
Section 3.6(a).

                  "Interest Payment Date" means, with respect to any Liquidity
Facility, each date on which interest is due and payable under such Liquidity
Facility on a Downgrade Drawing, Non-Extension Drawing or Final Drawing
thereunder, other than any such date on which interest is due and payable under
such Liquidity Facility only on an Applied Provider Advance (as such term is
defined in such Liquidity Facility).

                  "Investment Earnings" means investment earnings on funds on
deposit in the Trust Accounts net of losses and investment expenses of the
Subordination Agent in making such investments.

                  "Lien" means any mortgage, pledge, lien, charge, claim,
disposition of title, encumbrance, lease, sublease, sub-sublease or security
interest of any kind, including, without limitation, any thereof arising under
any conditional sales or other title retention agreement.

                  "Liquidity Event of Default" with respect to any Liquidity
Facility, has the meaning assigned to such term in such Liquidity Facility.

                  "Liquidity Expenses" means all Liquidity Obligations other
than (i) the principal amount of any Drawings under the Liquidity Facilities and
(ii) any interest accrued on any Liquidity Obligations.

                  "Liquidity Facilities" means, at any time, the Class A-1
Liquidity Facility or the Class A-2 Liquidity Facility.

                  "Liquidity Obligations" means all principal, interest, fees
and other amounts owing to the Liquidity Providers under the Liquidity
Facilities, Section 8.1 of the Participation Agreements or the Fee Letters.

                  "Liquidity Provider" means, at any time, any Class A-1
Liquidity Provider or any Class A-2 Liquidity Provider, as applicable.

                  "Loan Trustee" means, with respect to any Indenture, the
mortgagee thereunder.

                  "LP Incumbency Certificate" has the meaning assigned to such
term in Section 2.5(c).

                  "LP Representatives" has the meaning assigned to such term in
Section 2.5(c).

                  "LTV Appraisals" has the meaning assigned to such term in
Section 4.1(a).

                  "LTV Collateral Amount" of any Aircraft for any Class of
Certificates means, as of any Distribution Date, the lesser of (i) the LTV Ratio
for such Class of Certificates multiplied by the Appraised Current Market Value
of such Aircraft (or with respect to any such Aircraft which has suffered an
Event of Loss under and as defined in the relevant Indenture, the amount of the
insurance proceeds paid to the related Loan Trustee in respect thereof to the
extent then held by such Loan Trustee (and/or on deposit in the Special Payments
Account) or payable to

                                       10
<PAGE>

such Loan Trustee in respect thereof) and (ii) the outstanding principal amount
of the Equipment Notes secured by such Aircraft after giving effect to any
principal payments of such Equipment Notes on or before such Distribution Date.

                  "LTV Ratio" means for each Class of Certificates as of any
Distribution Date, the percentages set forth in the following table:

<Table>
<Caption>
    Class A-1       Class A-2         Class B
  Certificates     Certificates     Certificates
  ------------     ------------     ------------
<S>                <C>              <C>
      53.1%              53.1%           62.1%
</Table>

                  "Minimum Sale Price" means, with respect to any Aircraft or
the Equipment Notes issued in respect of such Aircraft, at any time, the lesser
of (a) 75% of the Appraised Current Market Value of such Aircraft and (b) the
aggregate outstanding principal amount of such Equipment Notes, plus accrued and
unpaid interest thereon.

                  "Moody's" means Moody's Investors Service, Inc.

                  "Non-Controlling Party" means, at any time, any Trustee or
Liquidity Provider which is not the Controlling Party at such time.

                  "Non-Extended Facility" has the meaning assigned to such term
in Section 3.6(d).

                  "Non-Extension Drawing" has the meaning assigned to such term
in Section 3.6(d).

                  "Non-Performing Equipment Note" means an Equipment Note issued
pursuant to an Indenture that is not a Performing Equipment Note.

                  "Officer's Certificate" of any Person means a certification
signed by a Responsible Officer of such Person.

                  "Operative Agreements" means this Agreement, the Liquidity
Facilities, the Indentures, the Underwriting Agreement, the Participation
Agreements, the Fee Letters, the Equipment Notes and the Certificates, together
with all exhibits and schedules included with any of the foregoing.

                  "Outstanding" means, when used with respect to each Class of
Certificates, as of the date of determination, all Certificates of such Class
theretofore authenticated and delivered under the related Trust Agreement,
except:

                  (i) Certificates of such Class theretofore canceled by the
         Registrar (as defined in such Trust Agreement) or delivered to the
         Trustee thereunder or such Registrar for cancellation;

                  (ii) Certificates of such Class for which money in the full
         amount required to make the final distribution with respect to such
         Certificates pursuant to Section 11.01 of such Trust Agreement has been
         theretofore deposited with the related Trustee in trust for

                                       11
<PAGE>

         the holders of such Certificates as provided in Section 4.01 of such
         Trust Agreement pending distribution of such money to such
         Certificateholders pursuant to such final distribution payment; and

                  (iii) Certificates of such Class in exchange for or in lieu of
         which other Certificates have been authenticated and delivered pursuant
         to such Trust Agreement;

provided, however, that in determining whether the holders of the requisite
Outstanding amount of such Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, any Certificates
owned by Southwest or any of its Affiliates shall be disregarded and deemed not
to be Outstanding, except that, in determining whether such Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Certificates that such Trustee knows to be so
owned shall be so disregarded. Certificates so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the applicable Trustee the pledgee's right so to act with
respect to such Certificates and that the pledgee is not Southwest or any of its
Affiliates.

                  "Overdue Scheduled Payment" means any Scheduled Payment which
is not in fact received by the Subordination Agent within five days after the
Scheduled Payment Date relating thereto.

                  "Participation Agreement" means, with respect to each
Indenture, the "Participation Agreement" referred to therein.

                  "Payee" has the meaning assigned to such term in Section
2.4(e).

                  "Performing Equipment Note" means an Equipment Note with
respect to which no payment default has occurred and is continuing (without
giving effect to any Acceleration); provided that in the event of a bankruptcy
proceeding under Title 11 of the United States Code (the "Bankruptcy Code") in
which Southwest is a debtor any payment default existing during the 60-day
period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period
as may apply under Section 1110(b) of the Bankruptcy Code or as may apply for
the cure of such payment default under Section 1110(a)(2)(B) of the Bankruptcy
Code) shall not be taken into consideration until the expiration of the
applicable period.

                  "Performing Note Deficiency" means any time that less than 65%
of the then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.

                  "Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company, trust,
trustee, unincorporated organization or government or any agency or political
subdivision thereof.

                  "Pool Balance" means, with respect to each Trust or the
Certificates issued by any Trust, as of any date, (i) the original aggregate
face amount of the Certificates of such Trust less (ii) the aggregate amount of
all payments made in respect of the Certificates of such Trust other than
payments made in respect of interest or premium thereon or reimbursement of any
costs and

                                       12
<PAGE>

expenses in connection therewith. The Pool Balance for each Trust or for the
Certificates issued by any Trust as of any Distribution Date shall be computed
after giving effect to any special distribution with respect to payment of
principal of the Equipment Notes or payment with respect to other Trust Property
held in such Trust and the distribution thereof to be made on that date.

                  "Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.

                  "PTC Event of Default" means, with respect to each Trust
Agreement, the failure to pay within 10 Business Days of the due date thereof:
(i) the outstanding Pool Balance of the applicable Class of Certificates on the
Final Legal Distribution Date for such Class or (ii) interest due on such
Certificates on any Distribution Date (unless the Subordination Agent shall have
made an Interest Drawing, or a withdrawal from the Cash Collateral Account, with
respect thereto in an aggregate amount sufficient to pay such interest and shall
have distributed such amount to the Trustee entitled thereto).

                  "Rating Agencies" means, collectively, at any time, each
nationally recognized rating agency which shall have been requested to rate the
Certificates and which shall then be rating the Certificates. The initial Rating
Agencies will be Moody's and Standard & Poor's.

                  "Ratings Confirmation" means, with respect to any action
proposed to be taken, a written confirmation from each of the Rating Agencies
that such action would not result in (i) a reduction of the rating for any Class
of Certificates below the then current rating for such Class of Certificates or
(ii) a withdrawal or suspension of the rating of any Class of Certificates.

                  "Regular Distribution Dates" means, for the Class A-1
Certificates, Class A-2 Certificates and Class B Certificates, each May 1 and
November 1, commencing on May 1, 2002, provided, however, that, if any such day
shall not be a Business Day, the related distribution shall be made on the next
succeeding Business Day without additional interest.

                  "Replacement Liquidity Facility" means, for any Liquidity
Facility, an irrevocable revolving credit agreement (or agreements) in
substantially the form of the replaced Liquidity Facility, including
reinstatement provisions, or in such other form (which may include a letter of
credit) as shall permit the Rating Agencies to confirm in writing their
respective ratings then in effect for the related Certificates (before
downgrading of such ratings, if any, as a result of the downgrading of the
applicable Liquidity Provider), in a face amount (or in an aggregate face
amount) equal to the amount of interest payable on the Pool Balances of the
Certificates of such Trust (at the Stated Interest Rate for such Trust, and
without regard to expected future principal payments) on the three Regular
Distribution Dates following the date of replacement of such Liquidity Facility
and issued by a Person (or Persons) having unsecured short-term debt ratings
issued by both Rating Agencies which are equal to or higher than the Threshold
Rating. Without limitation of the form that a Replacement Liquidity Facility
otherwise may have pursuant to the preceding sentence, a Replacement Liquidity
Facility for any Class of Certificates may have a stated expiration date earlier
than 15 days after the Final Legal Distribution Date of such Class of
Certificates so long as such Replacement Liquidity Facility provides for a
Non-Extension Drawing as contemplated by Section 3.6(d) hereof.

                                       13
<PAGE>

                  "Replacement Liquidity Provider" means a Person (or Persons)
who issues a Replacement Liquidity Facility.

                  "Required Amount" means, with respect to each Liquidity
Facility, or the Cash Collateral Account, for any Class, for any day, the sum of
the aggregate amount of interest, calculated at the rate per annum equal to the
Stated Interest Rate for the related Class of Certificates, that would be
payable on such Class of Certificates on each of the three successive Regular
Distribution Dates immediately following such day or, if such day is a Regular
Distribution Date, on such day and the succeeding two Regular Distribution
Dates, in each case calculated on the basis of the Pool Balance of such Class of
Certificates on such date and without regard to expected future payments of
principal on such Class of Certificates.

                  "Responsible Officer" means (i) with respect to the
Subordination Agent and each of the Trustees, any officer in the corporate trust
administration department of the Subordination Agent or such Trustee or any
other officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with a particular subject, and (ii) with respect to each Liquidity Provider, any
authorized officer of such Liquidity Provider.

                  "Scheduled Payment" means, with respect to any Equipment Note,
(i) any payment of principal or interest on such Equipment Note (other than an
Overdue Scheduled Payment) due from the obligor thereon, which payment
represents the installment of principal at the stated maturity of such
installment of principal on such Equipment Note, the payment of regularly
scheduled interest accrued on the unpaid principal amount of such Equipment
Note, or both, or (ii) any payment of interest on the corresponding Class of
Certificates with funds drawn under any Liquidity Facility; provided that any
payment of principal of, premium, if any, or interest resulting from the
redemption or purchase of any Equipment Note shall not constitute a Scheduled
Payment.

                  "Scheduled Payment Date" means, with respect to any Scheduled
Payment, the date on which such Scheduled Payment is scheduled to be made.

                  "Section 2.4(b) Fraction" has the meaning assigned to such
term in Section 2.4(b).

                  "Series A-1 Equipment Notes" means the 5.100% Series A-1
Equipment Notes issued pursuant to any Indenture by Southwest and authenticated
by the Loan Trustee thereunder, and any such Equipment Notes issued in exchange
therefor or replacement thereof pursuant to the terms of such Indenture.

                  "Series A-2 Equipment Notes" means the 5.496% Series A-2
Equipment Notes issued pursuant to any Indenture by Southwest and authenticated
by the Loan Trustee thereunder, and any such Equipment Notes issued in exchange
therefor or replacement thereof pursuant to the terms of such Indenture.

                  "Series B Equipment Notes" means the 6.126% Series B Equipment
Notes issued pursuant to any Indenture by Southwest and authenticated by the
Loan Trustee thereunder, and

                                       14
<PAGE>

any such Equipment Notes issued in exchange therefor or replacement thereof
pursuant to the terms of such Indenture.

                  "Series C Equipment Notes" means equipment notes, if any,
issued pursuant to any Indenture by Southwest and authenticated by the Loan
Trustee thereunder, and designated as "Series C" thereunder, and any such
equipment notes issued in exchange therefor or replacement thereof pursuant to
the terms of such Indenture.

                  "Southwest" means Southwest Airlines Co., a Texas corporation,
and its successors and assigns.

                  "Southwest Bankruptcy Event" means the occurrence and
continuation of any of the following:

                  (a) Southwest shall consent to the appointment of or the
         taking of possession by a receiver, trustee or liquidator of itself or
         of a substantial part of its property, or Southwest shall admit in
         writing its inability to pay its debts generally as they come due, or
         does not pay its debts generally as they become due or shall make a
         general assignment for the benefit of creditors, or Southwest shall
         file a voluntary petition in bankruptcy or a voluntary petition or an
         answer seeking reorganization, liquidation or other relief in a case
         under any bankruptcy laws or other insolvency laws (as in effect at
         such time) or an answer admitting the material allegations of a
         petition filed against Southwest in any such case, or Southwest shall
         seek relief by voluntary petition, answer or consent, under the
         provisions of any other bankruptcy or other similar law providing for
         the reorganization or winding-up of corporations (as in effect at such
         time) or shall seek an agreement, composition, extension or adjustment
         with its creditors under such laws, or Southwest's board of directors
         shall adopt a resolution authorizing corporate action in furtherance of
         any of the foregoing; or

                  (b) an order, judgment or decree shall be entered by any court
         of competent jurisdiction appointing, without the consent of Southwest,
         a receiver, trustee or liquidator of Southwest or of any substantial
         part of its property, or any substantial part of the property of
         Southwest shall be sequestered, or granting any other relief in respect
         of Southwest as a debtor under any bankruptcy laws or other insolvency
         laws (as in effect at such time), and any such order, judgment or
         decree of appointment or sequestration shall remain in force
         undismissed, unstayed and unvacated for a period of 60 days after the
         date of entry thereof; or

                  (c) a petition against Southwest in a case under any
         bankruptcy laws or other insolvency laws (as in effect at such time) is
         filed and not withdrawn or dismissed within 60 days thereafter, or if,
         under the provisions of any law providing for reorganization or
         winding-up of corporations which may apply to Southwest, any court of
         competent jurisdiction assumes jurisdiction, custody or control of
         Southwest or of any substantial part of its property and such
         jurisdiction, custody or control remains in force unrelinquished,
         unstayed and unterminated for a period of 60 days.

                  "Southwest Provisions" has the meaning specified in Section
9.1(a).

                                       15
<PAGE>

                  "Special Distribution Date" means, with respect to any Special
Payment, the date chosen by the Subordination Agent pursuant to Section 2.4(a)
for the distribution of such Special Payment in accordance with this Agreement.

                  "Special Payment" means any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, any Equipment Note or Collateral (as
defined in each Indenture).

                  "Special Payments Account" means the Eligible Deposit Account
created pursuant to Section 2.2 as a sub-account to the Collection Account.

                  "Standard & Poor's" means Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc.

                  "Stated Amount" with respect to any Liquidity Facility, means
the Maximum Commitment (as defined in such Liquidity Facility) of the applicable
Liquidity Provider thereunder.

                  "Stated Expiration Date" has the meaning specified in Section
3.6(d).

                  "Stated Interest Rate" means (i) with respect to the Class A-1
Certificates, 5.100% per annum, (ii) with respect to the Class A-2 Certificates,
5.496% per annum and (iii) with respect to the Class B Certificates, 6.126% per
annum.

                  "Subordination Agent" has the meaning assigned to it in the
preliminary statements to this Agreement.

                  "Subordination Agent Incumbency Certificate" has the meaning
assigned to such term in Section 2.5(a).

                  "Subordination Agent Representatives" has the meaning assigned
to such term in Section 2.5(a).

                  "Tax" and "Taxes" mean any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, loss, damage, liability, expense, additions to tax and
additional amounts or costs incurred or imposed with respect thereto) imposed or
otherwise assessed by the United States of America or by any state, local or
foreign government (or any subdivision or agency thereof) or other taxing
authority, including, without limitation: taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth and similar
charges; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, taxes on goods and services, gains taxes,
license, registration and documentation fees, customs duties, tariffs, and
similar charges.

                  "Termination Notice" with respect to any Liquidity Facility
has the meaning assigned to such term in such Liquidity Facility.

                                       16
<PAGE>

                  "Threshold Rating" means in the case of the Class A-1
Liquidity Provider, the Class A-2 Liquidity Provider and the Class B Liquidity
Provider, the short-term unsecured debt rating of P-1 by Moody's and A-1+ by
Standard & Poor's.

                  "Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

                  "Triggering Event" means (x) the occurrence of an Indenture
Default under all of the Indentures resulting in a PTC Event of Default with
respect to the most senior Class of Certificates then Outstanding, (y) the
Acceleration of all of the outstanding Equipment Notes or (z) the occurrence of
a Southwest Bankruptcy Event.

                  "Trust" means any of the Class A-1 Trust, the Class A-2 Trust
or the Class B Trust.

                  "Trust Accounts" has the meaning assigned to such term in
Section 2.2(a).

                  "Trust Agreement" means any of the Class A-1 Trust Agreement,
the Class A-2 Trust Agreement or the Class B Trust Agreement.

                  "Trust Property" with respect to any Trust, has the meaning
set forth in the Trust Agreement for such Trust.

                  "Trustee" means any of the Class A-1 Trustee, the Class A-2
Trustee or the Class B Trustee.

                  "Trustee Incumbency Certificate" has the meaning assigned to
such term in Section 2.5(b).

                  "Trustee Representatives" has the meaning assigned to such
term in Section 2.5(b).

                  "Underwriters" means Salomon Smith Barney Inc., J.P. Morgan
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

                  "Underwriting Agreement" means the Underwriting Agreement
dated October 18, 2001 among the Underwriters and Southwest, relating to the
purchase of the Certificates by the Underwriters, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms.

                  "West LB" has the meaning assigned to such term in the recital
of the parties in this Agreement.

                  "Withdrawal Notice" has the meaning specified in Section
3.6(d).

                                       17
<PAGE>

                  "Written Notice" means, from the Subordination Agent, any
Trustee or Liquidity Provider, a written instrument executed by the Designated
Representative of such Person. An invoice delivered by a Liquidity Provider
pursuant to Section 3.1 in accordance with its normal invoicing procedures shall
constitute Written Notice under such Section.

                  "WTC" has the meaning assigned to such term in the recital of
parties to this Agreement.

                                   ARTICLE II

                        TRUST ACCOUNTS; CONTROLLING PARTY

                  SECTION 2.1. Agreement to Terms of Subordination; Payments
from Monies Received Only. (a) Each Trustee hereby acknowledges and agrees to
the terms of subordination and distribution set forth in this Agreement in
respect of each Class of Certificates and agrees to enforce such provisions and
cause all payments in respect of the Equipment Notes and, in the case of the
Class A-1 Trustee and Class A-2 Trustee, the Liquidity Facilities, to be applied
in accordance with the terms of this Agreement. In addition, each Trustee hereby
agrees to cause the Equipment Notes purchased by the related Trust to be
registered in the name of the Subordination Agent or its nominee, as agent and
trustee for such Trustee, to be held in trust by the Subordination Agent solely
for the purpose of facilitating the enforcement of the subordination and other
provisions of this Agreement.

                  (b) Except as otherwise expressly provided in the next
succeeding sentence of this Section 2.1, all payments to be made by the
Subordination Agent hereunder shall be made only from amounts received by it
that constitute Scheduled Payments, Special Payments, payments under Section 8.1
of the Participation Agreements or Section 2.02 of the Indentures, and only to
the extent that the Subordination Agent shall have received sufficient income or
proceeds therefrom to enable it to make such payments in accordance with the
terms hereof. Each of the Trustees and the Subordination Agent hereby agrees
and, as provided in each Trust Agreement, each Certificateholder, by its
acceptance of a Certificate, and each Liquidity Provider, by entering into the
Liquidity Facility to which it is a party, has agreed to look solely to such
amounts to the extent available for distribution to it as provided in this
Agreement and that none of the Trustees, Loan Trustees nor the Subordination
Agent is personally liable to any of them for any amounts payable or any
liability under this Agreement, any Trust Agreement, any Liquidity Facility or
such Certificate, except (in the case of the Subordination Agent) as expressly
provided herein or (in the case of the Trustees) as expressly provided in each
Trust Agreement or (in the case of the Loan Trustees) as expressly provided in
any Operative Agreement.

                  SECTION 2.2. Trust Accounts. (a) Upon the execution of this
Agreement, the Subordination Agent shall establish and maintain in its name (i)
the Collection Account as an Eligible Deposit Account, bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Trustees, the Certificateholders and the Liquidity Providers, and
(ii) as a sub-account in the Collection Account, the Special Payments Account as
an Eligible Deposit Account, bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of the Trustees, the
Certificateholders and the Liquidity

                                       18
<PAGE>

Providers. The Subordination Agent shall establish and maintain the Cash
Collateral Accounts pursuant to and under the circumstances set forth in Section
3.6(f) hereof. Upon such establishment and maintenance under Section 3.6(f)
hereof, the Cash Collateral Accounts shall, together with the Collection
Account, constitute the "Trust Accounts" hereunder.

                  (b) Funds on deposit in the Trust Accounts shall be invested
and reinvested by the Subordination Agent in Eligible Investments selected by
the Subordination Agent if such investments are reasonably available and have
maturities no later than the earlier of (i) 90 days following the date of such
investment and (ii) the Business Day immediately preceding the Regular
Distribution Date or the date of the related distribution pursuant to Section
2.4 hereof, as the case may be, next following the date of such investment;
provided, however, that following the making of a Downgrade Drawing or a
Non-Extension Drawing under any Liquidity Facility, the Subordination Agent
shall invest and reinvest such amounts in Eligible Investments at the direction
of the Liquidity Provider funding such Drawing; provided further, however, that
upon the occurrence and during the continuation of a Triggering Event, the
Subordination Agent shall invest and reinvest such amounts in accordance with
the written instructions of the Controlling Party. Unless otherwise expressly
provided in this Agreement (including, without limitation, with respect to
Investment Earnings on amounts on deposit in the Cash Collateral Accounts,
Section 3.6(f) hereof), any Investment Earnings shall be deposited in the
Collection Account when received by the Subordination Agent and shall be applied
by the Subordination Agent in the same manner as the other amounts on deposit in
the Collection Account are to be applied and any losses shall be charged against
the principal amount invested, in each case net of the Subordination Agent's
reasonable fees and expenses in making such investments. The Subordination Agent
shall not be liable for any loss resulting from any investment, reinvestment or
liquidation required to be made under this Agreement other than by reason of its
willful misconduct or gross negligence. Eligible Investments and any other
investment required to be made hereunder shall be held to their maturities
except that any such investment may be sold (without regard to its maturity) by
the Subordination Agent without instructions whenever such sale is necessary to
make a distribution required under this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.

                  (c) The Subordination Agent shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (including all income thereon, except as otherwise
expressly provided in Section 3.4(b) with respect to Investment Earnings). The
Trust Accounts shall be held in trust by the Subordination Agent under the sole
dominion and control of the Subordination Agent for the benefit of the Trustees,
the Certificateholders and the Liquidity Providers, as the case may be. If, at
any time, any of the Trust Accounts ceases to be an Eligible Deposit Account,
the Subordination Agent shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, for which a Ratings Confirmation for each Class
of Certificates shall have been obtained) establish a new Collection Account,
Special Payments Account or Cash Collateral Account, as the case may be, as an
Eligible Deposit Account and shall transfer any cash and/or any investments to
such new Collection Account, Special Payments Account or Cash Collateral
Account, as the case may be. So long as WTC is an Eligible Institution, the
Trust Accounts shall be maintained with it as Eligible Deposit Accounts.

                                       19
<PAGE>

                  SECTION 2.3. Deposits to the Collection Account and Special
Payments Account. (a) The Subordination Agent shall, upon receipt thereof,
deposit in the Collection Account all Scheduled Payments received by it.

                  (b) The Subordination Agent shall, on each date when one or
more Special Payments are made to the Subordination Agent as holder of the
Equipment Notes, deposit in the Special Payments Account the aggregate amount of
such Special Payments.

                  SECTION 2.4. Distributions of Special Payments. (a) Notice of
Special Payment. Except as provided in Section 2.4(e) below, upon receipt by the
Subordination Agent, as registered holder of the Equipment Notes, of any notice
of a Special Payment (or, in the absence of any such notice, upon receipt by the
Subordination Agent of a Special Payment), the Subordination Agent shall
promptly give notice thereof to each Trustee and the Liquidity Providers. The
Subordination Agent shall promptly calculate the amount of the redemption or
purchase of Equipment Notes or the amount of any Overdue Scheduled Payment, as
the case may be, comprising such Special Payment under the applicable Indenture
or Indentures and shall promptly send to each Trustee a Written Notice of such
amount and the amount allocable to each Trust. Such Written Notice shall also
set the distribution date for such Special Payment (a "Special Distribution
Date"), which shall be the Business Day which immediately follows the later to
occur of (x) the 15th day after the date of such Written Notice or (y) the date
the Subordination Agent has received or expects to receive such Special Payment.
Amounts on deposit in the Special Payments Account shall be distributed in
accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable.

                  (b) Redemptions and Purchases of Equipment Notes. (i) So long
as no Triggering Event shall have occurred (whether or not continuing), the
Subordination Agent shall make distributions pursuant to this Section 2.4(b) of
amounts on deposit in the Special Payments Account on account of the redemption,
purchase (including, without limitation, a purchase resulting from a sale of the
Equipment Notes permitted by Article IV hereof) or prepayment of all of the
Equipment Notes issued pursuant to an Indenture on the Special Distribution Date
for such Special Payment in the following order of priority:

                  first, such amount as shall be required to pay (A) all accrued
         and unpaid Liquidity Expenses then in arrears plus (B) the product of
         (x) the aggregate amount of all accrued and unpaid Liquidity Expenses
         not in arrears to such Special Distribution Date multiplied by (y) a
         fraction, the numerator of which is the aggregate outstanding principal
         amount of Equipment Notes being redeemed, purchased or prepaid on such
         Special Distribution Date and the denominator of which is the aggregate
         outstanding principal amount of all Equipment Notes (the "Section
         2.4(b) Fraction"), shall be distributed to the Liquidity Providers pro
         rata on the basis of the amount of Liquidity Expenses owed to each
         Liquidity Provider;

                  second, such amount as shall be required to pay (A) all
         accrued and unpaid interest then in arrears on all Liquidity
         Obligations plus (B) the product of (x) the aggregate amount of all
         accrued and unpaid interest on all Liquidity Obligations not in arrears
         to such Special Distribution Date (at the rate provided in the
         applicable Liquidity Facility) multiplied by (y) the Section 2.4(b)
         Fraction, shall be distributed to the Liquidity

                                       20
<PAGE>

         Providers pro rata on the basis of the amount of such Liquidity
         Obligations owed to each Liquidity Provider;

                  third, such amount as shall be required (A) if any Cash
         Collateral Account had been previously funded as provided in Section
         3.6(f), to fund such Cash Collateral Account up to its Required Amount
         shall be deposited in such Cash Collateral Account, (B) if any
         Liquidity Facility shall become a Downgraded Facility or a Non-Extended
         Facility at a time when unreimbursed Interest Drawings under such
         Liquidity Facility have reduced the Available Amount thereunder to
         zero, to deposit into the related Cash Collateral Account an amount
         equal to such Cash Collateral Account's Required Amount shall be
         deposited in such Cash Collateral Account, and (C) if, with respect to
         any particular Liquidity Facility, neither subclause (A) nor subclause
         (B) of this clause "third" are applicable, to pay or reimburse the
         Liquidity Provider in respect of such Liquidity Facility in an amount
         equal to the amount of any unreimbursed Interest Drawings under such
         Liquidity Facility shall be distributed to such Liquidity Provider, pro
         rata on the basis of the amounts of all such deficiencies and/or
         unreimbursed Interest Drawings in respect of each Liquidity Provider;

                  fourth, if, with respect to any particular Liquidity Facility,
         any amounts are to be distributed pursuant to either subclause (A) or
         (B) of clause "third" above, then the Liquidity Provider with respect
         to such Liquidity Facility shall be paid the excess of (x) the
         aggregate outstanding amount of unreimbursed Advances (whether or not
         then due) under such Liquidity Facility over (y) the Required Amount
         for the relevant Class, pro rata on the basis of such amounts in
         respect of each Liquidity Provider;

                  fifth, such amount as shall be required to pay in full
         Expected Distributions to the holders of Class A-1 Certificates on such
         Special Distribution Date shall be distributed to the Class A-1 Trustee
         and such amount as shall be required to pay in full Expected
         Distributions to the holders of Class A-2 Certificates on such Special
         Distribution Date shall be distributed to the Class A-2 Trustee, pro
         rata on the basis of such amounts in respect of each such Class of
         Certificates;

                  sixth, such amount as shall be required to pay in full
         Expected Distributions to the holders of Class B Certificates on such
         Special Distribution Date shall be distributed to the Class B Trustee;
         and

                  seventh, the balance, if any, of such Special Payment shall be
         transferred to the Collection Account for distribution in accordance
         with Section 3.2 hereof.

For the purposes of this Section 2.4(b), clause (x) of the definition of
"Expected Distributions" shall be deemed to read as follows: "(x) accrued, due
and unpaid interest on such Certificates together with (without duplication)
accrued and unpaid interest on a portion of such Certificates equal to the
outstanding principal amount of the Equipment Notes held in such Trust and being
redeemed, purchased or prepaid (immediately prior to such redemption, purchase
or prepayment".

                                       21
<PAGE>

                  (ii) Upon the occurrence of a Triggering Event (whether or not
continuing), the Subordination Agent shall make distributions pursuant to this
Section 2.4(b) of amounts on deposit in the Special Payments Account on account
of the redemption or purchase of all of the Equipment Notes issued pursuant to
an Indenture on the Special Distribution Date for such Special Payment in
accordance with Section 3.3 hereof.

                  (c) Other Special Payments. Except as provided in clause (e)
below, any amounts on deposit in the Special Payments Account other than in
respect of amounts to be distributed pursuant to Section 2.4(b) shall be
distributed on the Special Distribution Date therefor in accordance with Article
III hereof.

                  (d) Investment of Amounts in Special Payments Account. Any
amounts on deposit in the Special Payments Account prior to the distribution
thereof pursuant to Section 2.4(b) or (c) shall be invested in accordance with
Section 2.2(b). Investment Earnings on such investments shall be distributed in
accordance with Section 2.4(b) or (c), as the case may be.

                  (e) Certain Payments. Except for amounts constituting
Liquidity Obligations which shall be distributed as provided in Section 2.4(b),
3.2 or 3.3 (as the case may be), the Subordination Agent will distribute
promptly upon receipt thereof (i) any indemnity payment received by it from
Southwest in respect of any Trustee, Indenture Trustee or any Liquidity
Provider, (collectively, the "Payees") and (ii) any compensation received by it
from Southwest under any Operative Agreement in respect of any Payee, directly
to the Payee entitled thereto.

                  SECTION 2.5. Designated Representatives. (a) With the delivery
of this Agreement, the Subordination Agent shall furnish to each Liquidity
Provider and each Trustee, and from time to time thereafter may furnish to each
Liquidity Provider and each Trustee, at the Subordination Agent's discretion, or
upon any Liquidity Provider's or Trustee's request (which request shall not be
made more than one time in any 12-month period), a certificate (a "Subordination
Agent Incumbency Certificate") of a Responsible Officer of the Subordination
Agent certifying as to the incumbency and specimen signatures of the officers of
the Subordination Agent and the attorney-in-fact and agents of the Subordination
Agent (the "Subordination Agent Representatives") authorized to give Written
Notices on behalf of the Subordination Agent hereunder. Until each Liquidity
Provider and Trustee receives a subsequent Subordination Agent Incumbency
Certificate, it shall be entitled to rely on the last Subordination Agent
Incumbency Certificate delivered to it hereunder.

                  (b) With the delivery of this Agreement, each Trustee shall
furnish to the Subordination Agent, and from time to time thereafter may furnish
to the Subordination Agent, at such Trustee's discretion, or upon the
Subordination Agent's request (which request shall not be made more than one
time in any 12-month period), a certificate (a "Trustee Incumbency Certificate")
of a Responsible Officer of such Trustee certifying as to the incumbency and
specimen signatures of the officers of such Trustee and the attorney-in-fact and
agents of such Trustee (the "Trustee Representatives") authorized to give
Written Notices on behalf of such Trustee hereunder. Until the Subordination
Agent receives a subsequent Trustee Incumbency Certificate, it shall be entitled
to rely on the last Trustee Incumbency Certificate delivered to it hereunder.

                                       22
<PAGE>

                  (c) With the delivery of this Agreement, each Liquidity
Provider shall furnish to the Subordination Agent, and from time to time
thereafter may furnish to the Subordination Agent, at such Liquidity Provider's
discretion, or upon the Subordination Agent's request (which request shall not
be made more than one time in any 12-month period), a certificate (an "LP
Incumbency Certificate") of any Responsible Officer of such Liquidity Provider
certifying as to the incumbency and specimen signatures of any officer,
attorney-in-fact, agent or other designated representative of such Liquidity
Provider (the "LP Representatives" and, together with the Subordination Agent
Representatives and the Trustee Representatives, the "Designated
Representatives") authorized to give Written Notices on behalf of such Liquidity
Provider hereunder. Until the Subordination Agent receives a subsequent LP
Incumbency Certificate, it shall be entitled to rely on the last LP Incumbency
Certificate delivered to it hereunder.

                  SECTION 2.6. Controlling Party. (a) The Trustees and the
Liquidity Providers hereby agree that, with respect to any Indenture at any
given time, the Loan Trustee thereunder will be directed (i) in taking, or
refraining from taking, any action under such Indenture or with respect to the
Equipment Notes issued thereunder, so long as no Indenture Default has occurred
and is continuing thereunder, by the holders of at least a majority of the
outstanding principal amount of such Equipment Notes (provided that, for so long
as the Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent shall act with respect to this clause (i) in accordance with
the directions of the Trustees (in the case of each such Trustee, with respect
to the Equipment Notes issued under such Indenture and held as Trust Property of
such Trust) constituting, in the aggregate, directions with respect to at least
a majority of outstanding principal amount of Equipment Notes), and (ii) after
the occurrence and during the continuance of an Indenture Default thereunder, in
taking, or refraining from taking, any action under such Indenture or with
respect to such Equipment Notes, including exercising remedies thereunder
(including Accelerating the Equipment Notes issued thereunder or foreclosing the
Lien on the Aircraft securing such Equipment Notes), by the Controlling Party.

                  (b) The Person who shall be the "Controlling Party" with
respect to any Indenture upon the occurrence of an Indenture Default thereunder
shall be: (w) the Class A-1 Trustee or Class A-2 Trustee, whichever represents
the Class with the larger principal amount of Certificates outstanding at the
time that such Indenture Default occurs (whether or not any other Indenture
Default shall thereafter occur so long as such initial Indenture Default shall
continue); (x) upon payment of Final Distributions to the holders of
Certificates of such larger Class, the other of the Class A-1 Trustee or Class
A-2 Trustee; (y) upon payment of Final Distributions to the holders of Class A-1
Certificates and Class A-2 Certificates, the Class B Trustee. For purposes of
giving effect to the foregoing, the Trustees (other than the Controlling Party)
irrevocably agree (and the Certificateholders (other than the Certificateholders
represented by the Controlling Party) shall be deemed to agree by virtue of
their purchase of Certificates) that the Subordination Agent, as record holder
of the Equipment Notes, shall exercise its voting rights in respect of the
Equipment Notes as directed by the Controlling Party and any vote so exercised
shall be binding upon the Trustees and all Certificateholders.

                  The Subordination Agent shall give Written Notice to all of
the other parties to this Agreement promptly upon a change in the identity of
the Controlling Party. Each of the parties hereto agrees that it shall not
exercise any of the rights of the Controlling Party at such time as it is not
the Controlling Party hereunder; provided, however, that nothing herein

                                       23
<PAGE>

contained shall prevent or prohibit any Non-Controlling Party from exercising
such rights as shall be specifically granted to such Non-Controlling Party
hereunder and under the other Operative Agreements.

                  (c) Notwithstanding the foregoing, at any time after 18 months
from the earlier to occur of (i) the date on which the entire Available Amount
under any Liquidity Facility shall have been drawn (for any reason other than a
Downgrade Drawing or a Non-Extension Drawing) and remain unreimbursed, (ii) the
date on which the entire amount of any Downgrade Drawing or Non-Extension
Drawing shall have become and remain "Applied Downgrade Advances" or "Applied
Non-Extension Advances", as the case may be, under and as defined in such
Liquidity Facility and (iii) the date on which all Equipment Notes shall have
been Accelerated, the Liquidity Provider with the highest outstanding aggregate
amount of Liquidity Obligations owed to it shall have the right to elect, by
Written Notice to the Subordination Agent and each of the Trustees, to become
the Controlling Party hereunder with respect to any Indenture at any time from
and including the last day of such 18-month period.

                  (d) The exercise of remedies by the Controlling Party under
this Agreement shall be expressly limited by Section 4.1(a)(ii) hereof.

                  (e) The Controlling Party shall not be entitled to require or
obligate any Non-Controlling Party to provide funds necessary to exercise any
right or remedy hereunder.

                                   ARTICLE III

                      RECEIPT, DISTRIBUTION AND APPLICATION
                               OF AMOUNTS RECEIVED

                  SECTION 3.1. Written Notice of Distribution. (a) No later than
3:00 P.M. (New York City time) on the Business Day immediately preceding each
Regular Distribution Date (or Special Distribution Date for purposes of Section
2.4(b) hereof, as the case may be), each of the following Persons shall deliver
to the Subordination Agent a Written Notice setting forth the following
information as at the close of business on such Business Day:

                  (i) With respect to the Class A-1 Certificates and the Class
         A-2 Certificates, respectively, the Class A-1 Trustee and the Class A-2
         Trustee, respectively, shall separately set forth the amounts to be
         paid in accordance with clause "fifth" of Section 3.2 or 2.4(b), as the
         case may be, hereof (without giving effect to the pro rata sharing
         therein);

                  (ii) With respect to the Class B Certificates, the Class B
         Trustee shall separately set forth the amounts to be paid in accordance
         with clause "sixth" of Section 3.2 or 2.4(b), as the case may be,
         hereof;

                  (iii) With respect to each Liquidity Facility, the Liquidity
         Provider thereunder shall separately set forth the amounts to be paid
         in accordance with clauses "first", "second", "third" and "fourth" of
         Section 3.2 or 2.4(b), as the case may be, hereof; and

                                       24
<PAGE>

                  (iv) Each Trustee shall set forth the amounts to be paid in
         accordance with clause "seventh" of Section 3.2 hereof.

                  The notices required under this Section 3.1(a) may be in the
form of a schedule or similar document provided to the Subordination Agent by
the parties referenced therein or by any one of them, which schedule or similar
document may state that, unless there has been a prepayment of the Certificates,
such schedule or similar document is to remain in effect until any substitute
notice or amendment shall be given to the Subordination Agent by the party
providing such notice.

                  (b) Following the occurrence of a Triggering Event, the
Subordination Agent shall request the following information from the following
Persons, and each of the following Persons shall, upon the request of the
Subordination Agent, deliver a Written Notice to the Subordination Agent setting
forth for such Person the following information:

                  (i) With respect to the Class A-1 Certificates and the Class
         A-2 Certificates, respectively, the Class A-1 Trustee and Class A-2
         Trustee, respectively, shall separately set forth the amounts to be
         paid in accordance with clauses "first" (to reimburse payments made by
         such Trustee or the Class A-1 Certificateholders and Class A-2
         Certificateholders, as the case may be, pursuant to subclause (ii) or
         (iii) of clause "first" of Section 3.3 hereof, respectively) and
         "seventh" of Section 3.3 hereof (without giving effect to the pro rata
         sharing therein);

                  (ii) With respect to the Class B Certificates, the Class B
         Trustee shall separately set forth the amounts to be paid in accordance
         with clauses "first" (to reimburse payments made by such Trustee or the
         Class B Certificateholders, as the case may be, pursuant to subclause
         (ii) or (iii) of clause "first" of Section 3.3 hereof, respectively)
         and "eighth" of Section 3.3 hereof;

                  (iii) With respect to each Liquidity Facility, the Liquidity
         Provider thereunder shall separately set forth the amounts to be paid
         to it in accordance with subclause (iii) of clause "first" of Section
         3.3 hereof and clauses "second", "third", "fourth" and "fifth" of
         Section 3.3 hereof; and

                  (iv) Each Trustee shall set forth the amounts to be paid in
         accordance with clause "sixth" of Section 3.3 hereof.

                  (c) At such time as a Trustee or a Liquidity Provider shall
have received all amounts owing to it (and, in the case of a Trustee, the
Certificateholders for which it is acting) pursuant to Section 2.4, 3.2 or 3.3
hereof, as applicable, and, in the case of a Liquidity Provider, its commitment
under the related Liquidity Facility shall have terminated or expired, such
Person shall, by a Written Notice, so inform the Subordination Agent and each
other party to this Agreement.

                  (d) As provided in Section 6.5 hereof, the Subordination Agent
shall be fully protected in relying on any of the information set forth in a
Written Notice provided by any Trustee or any Liquidity Provider pursuant to
paragraphs (a) through (c) above and shall have no

                                       25
<PAGE>

independent obligation to verify, calculate or recalculate any amount set forth
in any Written Notice delivered in accordance with such paragraphs.

                  (e) Any Written Notice delivered by a Trustee or a Liquidity
Provider, as applicable, pursuant to Section 3.1(a), 3.1(b) or 3.1(c) hereof, if
made prior to 10:00 A.M. (New York City time) on any Business Day, shall be
effective on the date delivered (or if delivered later on a Business Day or if
delivered on a day which is not a Business Day shall be effective as of the next
Business Day). Subject to the terms of this Agreement, the Subordination Agent
shall as promptly as practicable comply with any such instructions; provided,
however, that any transfer of funds pursuant to any instruction received after
10:00 A.M. (New York City time) on any Business Day may be made on the next
succeeding Business Day.

                  (f) In the event the Subordination Agent shall not receive
from any Person any information set forth in paragraph (a) or (b) above which is
required to enable the Subordination Agent to make a distribution to such Person
pursuant to Section 3.2 or 3.3 hereof, the Subordination Agent shall request
such information and, failing to receive any such information, the Subordination
Agent shall not make such distribution(s) to such Person. In such event, the
Subordination Agent shall make distributions pursuant to clauses "first" through
"eighth" of Section 3.2 and clauses "first" through " eighth" of Section 3.3 to
the extent it shall have sufficient information to enable it to make such
distributions, and shall continue to hold any funds remaining, after making such
distributions, until the Subordination Agent shall receive all necessary
information to enable it to distribute any funds so withheld.

                  (g) On such dates (but not more frequently than monthly) as
any Liquidity Provider or any Trustee shall request, but in any event
automatically at the end of each calendar quarter, the Subordination Agent shall
send to such party a written statement reflecting all amounts on deposit with
the Subordination Agent pursuant to Section 3.1(f) hereof.

                  SECTION 3.2. Distribution of Amounts on Deposit in the
Collection Account. Except as otherwise provided in Sections 2.4, 3.1(f), 3.3,
3.4 and 3.6(b), amounts on deposit in the Collection Account (or, in the case of
any amount described in Section 2.4(c), on deposit in the Special Payments
Account) shall be promptly distributed on each Regular Distribution Date (or, in
the case of any amount described in Section 2.4(c), on the Special Distribution
Date thereof) in the following order of priority and in accordance with the
information provided to the Subordination Agent pursuant to Section 3.1(a)
hereof:

                  first, such amount as shall be required to pay all accrued and
         unpaid Liquidity Expenses owed to each Liquidity Provider shall be
         distributed to the Liquidity Providers pro rata on the basis of the
         amount of Liquidity Expenses owed to each Liquidity Provider;

                  second, such amount as shall be required to pay in full the
         aggregate amount of interest accrued on all Liquidity Obligations (at
         the rate, or in the amount, provided in the applicable Liquidity
         Facility) and unpaid shall be distributed to the Liquidity Providers
         pro rata on the basis of the amount of such Liquidity Obligations owed
         to each Liquidity Provider;

                                       26
<PAGE>

                  third, such amount as shall be required (A) if any Cash
         Collateral Account had been previously funded as provided in Section
         3.6(f), to fund such Cash Collateral Account up to its Required Amount
         shall be deposited in such Cash Collateral Account, (B) if any
         Liquidity Facility shall become a Downgraded Facility or a Non-Extended
         Facility at a time when unreimbursed Interest Drawings under such
         Liquidity Facility have reduced the Available Amount thereunder to
         zero, to deposit into the related Cash Collateral Account an amount
         equal to such Cash Collateral Account's Required Amount shall be
         deposited in such Cash Collateral Account, and (C) if, with respect to
         any particular Liquidity Facility, neither subclause (A) nor subclause
         (B) of this clause "third" is applicable, to pay or reimburse the
         Liquidity Provider in respect of such Liquidity Facility in an amount
         equal to the amount of all Liquidity Obligations then due under such
         Liquidity Facility (other than amounts payable pursuant to clause
         "first" or "second" of this Section 3.2) shall be distributed to such
         Liquidity Provider, pro rata on the basis of the amounts of all such
         deficiencies and/or unreimbursed Liquidity Obligations in respect of
         each Liquidity Provider;

                  fourth, if, with respect to any particular Liquidity Facility,
         any amounts are to be distributed pursuant to either subclause (A) or
         (B) of clause "third" above, then the Liquidity Provider with respect
         to such Liquidity Facility shall be paid the excess of (x) the
         aggregate outstanding amount of unreimbursed Advances (whether or not
         then due) under such Liquidity Facility over (y) the Required Amount
         for the relevant Class, pro rata on the basis of such amounts in
         respect of each Liquidity Provider;

                  fifth, such amount as shall be required to pay in full
         Expected Distributions to the holders of the Class A-1 Certificates on
         such Distribution Date shall be distributed to the Class A-1 Trustee
         and such amount as shall be required to pay in full Expected
         Distributions to the holders of the Class A-2 Certificates on such
         Distribution Date shall be distributed to the Class A-2 Trustee, pro
         rata on the basis of such amounts in respect of each such Class of
         Certificates;

                  sixth, such amount as shall be required to pay in full
         Expected Distributions to the holders of the Class B Certificates on
         such Distribution Date shall be distributed to the Class B Trustee;

                  seventh, such amount as shall be required to pay in full the
         aggregate unpaid amount of fees and expenses payable as of such
         Distribution Date to the Subordination Agent and each Trustee pursuant
         to the terms of this Agreement and the Trust Agreements, as the case
         may be, shall be distributed to the Subordination Agent and such
         Trustee; and

                  eighth, the balance, if any, of any such amount remaining
         thereafter shall be held in the Collection Account for later
         distribution in accordance with this Article III.

                  SECTION 3.3. Distribution of Amounts on Deposit Following a
Triggering Event. Except as otherwise provided in Sections 3.1(f) and 3.6(b)
hereof, upon the occurrence of a Triggering Event and at all times thereafter,
all funds in the Collection Account or the Special

                                       27
<PAGE>

Payments Account shall be promptly distributed by the Subordination Agent
in the following order of priority:

                  first, such amount as shall be required to reimburse (i) the
         Subordination Agent for any out-of-pocket costs and expenses actually
         incurred by it (to the extent not previously reimbursed) in the
         protection of, or the realization of the value of, the Equipment Notes
         or any "Collateral" (as such term is defined in each relevant
         Indenture), shall be applied by the Subordination Agent in
         reimbursement of such costs and expenses, (ii) each Trustee for any
         amounts of the nature described in clause (i) above actually incurred
         by it under the applicable Trust Agreement (to the extent not
         previously reimbursed), shall be distributed to such Trustee, and (iii)
         any Liquidity Provider or Certificateholder for payments, if any, made
         by it to the Subordination Agent or any Trustee in respect of amounts
         described in clause (i) above, shall be distributed to such Liquidity
         Provider or to the applicable Trustee for the account of such
         Certificateholder, in each such case, pro rata on the basis of all
         amounts described in clauses (i) through (iii) above;

                  second, such amount remaining as shall be required to pay all
         accrued and unpaid Liquidity Expenses shall be distributed to each
         Liquidity Provider pro rata on the basis of the amount of Liquidity
         Expenses owed to each Liquidity Provider;

                  third, such amount remaining as shall be required to pay
         accrued and unpaid interest on the Liquidity Obligations as provided in
         the Liquidity Facilities shall be distributed to each Liquidity
         Provider pro rata on the basis of the amount of such accrued and unpaid
         interest owed to each Liquidity Provider;

                  fourth, such amount remaining as shall be required (A) if any
         Cash Collateral Account had been previously funded as provided in
         Section 3.6(f), unless (i) a Performing Note Deficiency exists and a
         Liquidity Event of Default shall have occurred and be continuing with
         respect to the relevant Liquidity Facility or (ii) a Final Drawing
         shall have occurred with respect to such Liquidity Facility, to fund
         such Cash Collateral Account up to its Required Amount (less the amount
         of any repayments of Interest Drawings under such Liquidity Facility
         while subclause (A)(i) above is applicable) shall be deposited in such
         Cash Collateral Account, (B) if any Liquidity Facility shall become a
         Downgraded Facility or a Non-Extended Facility at a time when
         unreimbursed Interest Drawings under such Liquidity Facility have
         reduced the Available Amount thereunder to zero, unless (i) a
         Performing Note Deficiency exists and a Liquidity Event of Default
         shall have occurred and be continuing with respect to the relevant
         Liquidity Facility or (ii) a Final Drawing shall have occurred with
         respect to such Liquidity Facility, to deposit into the related Cash
         Collateral Account an amount equal to such Cash Collateral Account's
         Required Amount (less the amount of any repayments of Interest Drawings
         under such Liquidity Facility while subclause (B)(i) above is
         applicable) shall be deposited in such Cash Collateral Account, and (C)
         if, with respect to any particular Liquidity Facility, neither
         subclause (A) nor subclause (B) of this clause "fourth" are applicable,
         to pay in full the outstanding amount of all Liquidity Obligations then
         due under such Liquidity Facility (other than amounts payable pursuant
         to clause "second" or "third" of this Section 3.3) shall be distributed
         to such Liquidity Provider, pro rata on the

                                       28
<PAGE>

         basis of the amounts of all such deficiencies and/or unreimbursed
         Liquidity Obligations in respect of each Liquidity Provider;

                  fifth, if, with respect to any particular Liquidity Facility,
         any amounts are to be distributed pursuant to either subclause (A) or
         (B) of clause "fourth" above, then the Liquidity Provider with respect
         to such Liquidity Facility shall be paid the excess of (x) the
         aggregate outstanding amount of unreimbursed Advances (whether or not
         then due) under such Liquidity Facility over (y) the Required Amount
         for the relevant Class (less the amount of any repayments of Interest
         Drawings under such Liquidity Facility while subclause (A)(i) or
         (B)(i), as the case may be, of clause "fourth" above is applicable),
         pro rata on the basis of such amounts in respect of each Liquidity
         Provider;

                  sixth, such amount as shall be required to reimburse or pay
         (i) the Subordination Agent for any Tax (other than Taxes imposed on
         compensation paid hereunder), expense, fee, charge or other loss
         incurred by or any other amount payable to the Subordination Agent in
         connection with the transactions contemplated hereby (to the extent not
         previously reimbursed), shall be applied by the Subordination Agent in
         reimbursement of such amount, (ii) each Trustee for any Tax (other than
         Taxes imposed on compensation paid under the applicable Trust
         Agreement), expense, fee, charge, loss or any other amount payable to
         such Trustee under the applicable Trust Agreements (to the extent not
         previously reimbursed), shall be distributed to such Trustee, and (iii)
         each Certificateholder for payments, if any, made by it pursuant to
         Section 5.2 hereof in respect of amounts described in clause (i) above,
         shall be distributed to the applicable Trustee for the account of such
         Certificateholder, in each such case, pro rata on the basis of all
         amounts described in clauses (i) through (iii) above;

                  seventh, such amount remaining as shall be required to pay in
         full Adjusted Expected Distributions on the Class A-1 Certificates
         shall be distributed to the Class A-1 Trustee and such amount remaining
         as shall be required to pay in full Adjusted Expected Distributions on
         the Class A-2 Certificates shall be distributed to the Class A-2
         Trustee, pro rata on the basis of such amounts in respect of each such
         Class of Certificates;and

                  eighth, such amount remaining as shall be required to pay in
         full Adjusted Expected Distributions on the Class B Certificates shall
         be distributed to the Class B Trustee.

                  SECTION 3.4. Other Payments. (a) Any payments received by the
Subordination Agent for which no provision as to the application thereof is made
in this Agreement shall be distributed by the Subordination Agent (i) in the
order of priority specified in Section 3.3 hereof and (ii) to the extent
received or realized at any time after the Final Distributions for each Class of
Certificates have been made, in the manner provided in clause "first" of Section
3.3 hereof.

                  (b) Notwithstanding the priority of payments specified in
Sections 2.4(b)(i), 3.2 and 3.3, in the event any Investment Earnings on amounts
on deposit in any Cash Collateral Account resulting from an Unapplied Provider
Advance are deposited in the Collection Account

                                       29
<PAGE>

or the Special Payments Account, such Investment Earnings shall be used to pay
interest payable in respect of such Unapplied Provider Advance to the extent of
such Investment Earnings.

                  (c) Except as otherwise provided in Section 3.3 hereof, if the
Subordination Agent receives any Scheduled Payment after the Scheduled Payment
Date relating thereto, but prior to such payment becoming an Overdue Scheduled
Payment, then the Subordination Agent shall deposit such Scheduled Payment in
the Collection Account and promptly distribute such Scheduled Payment in
accordance with the priority of distributions set forth in Section 3.2 hereof;
provided that, for the purposes of this Section 3.4(c) only, each reference in
clause "seventh" of Section 3.2 to "Distribution Date" shall be deemed to mean
the actual date of payment of such Scheduled Payment and each reference in
clause "fifth" or "sixth" of Section 3.2 to "Distribution Date" shall be deemed
to refer to such Scheduled Payment Date.

                  SECTION 3.5. Payments to the Trustees and the Liquidity
Providers. Any amounts distributed hereunder to any Liquidity Provider shall be
paid to such Liquidity Provider by wire transfer of funds to the address such
Liquidity Provider shall provide to the Subordination Agent. The Subordination
Agent shall provide a Written Notice of any such transfer to the applicable
Liquidity Provider, as the case may be, at the time of such transfer. Any
amounts distributed hereunder by the Subordination Agent to any Trustee which
shall not be the same institution as the Subordination Agent shall be paid to
such Trustee by wire transfer funds at the address such Trustee shall provide to
the Subordination Agent.

                  SECTION 3.6. Liquidity Facilities. (a) Interest Drawings. If
on any Distribution Date, after giving effect to the subordination provisions of
this Agreement, the Subordination Agent shall not have sufficient funds for the
payment of any amounts due and owing in respect of accrued interest on the Class
A-1 Certificates or the Class A-2 Certificates (at the Stated Interest Rate for
such Class of Certificates), then, prior to 1:00 p.m. (New York City time) on
such Distribution Date, the Subordination Agent shall request a drawing (each
such drawing, an "Interest Drawing") under the Liquidity Facility with respect
to such Class of Certificates in an amount equal to the lesser of (i) an amount
sufficient to pay the amount of such accrued interest (at the Stated Interest
Rate for such Class of Certificates) and (ii) the Available Amount under such
Liquidity Facility, and shall pay such amount to the Trustee with respect to
such Class of Certificates in payment of such accrued interest.

                  (b) Application of Interest Drawings. Notwithstanding anything
to the contrary contained in this Agreement, (i) all payments received by the
Subordination Agent in respect of an Interest Drawing under the Class A-1
Liquidity Facility and all amounts withdrawn by the Subordination Agent from the
Class A-1 Cash Collateral Account, and payable in each case to the Class A-1
Certificateholders or the Class A-1 Trustee, shall be promptly distributed to
the Class A-1 Trustee and (ii) all payments received by the Subordination Agent
in respect of an Interest Drawing under the Class A-2 Liquidity Facility and all
amounts withdrawn by the Subordination Agent from the Class A-2 Cash Collateral
Account, and payable in each case to the Class A-2 Certificateholders or the
Class A-2 Trustee, shall be promptly distributed to the Class A-2 Trustee.

                  (c) Downgrade Drawings. (i) If at any time any relevant debt
rating of any Liquidity Provider is lower than the applicable Threshold Rating
(the Liquidity Facility issued by

                                       30
<PAGE>

the downgraded Liquidity Provider, a "Downgraded Facility"), such Liquidity
Provider shall provide notice to Southwest, the Subordination Agent, the Class
A-1 Trustee and the Class A-2 Trustee.

                  (ii) If at any time any Liquidity Facility becomes a
Downgraded Facility, the Subordination Agent shall request a Downgrade Drawing
thereunder in accordance with Section 3.6(c)(iii), unless the Liquidity Provider
under such Downgraded Facility or Southwest arranges for a Replacement Liquidity
Provider to issue and deliver a Replacement Liquidity Facility to the
Subordination Agent within 10 days (or, in the case of a downgrade by Standard &
Poor's of the short-term unsecured debt rating of such Liquidity Provider from
A-1+ to A-1, 45 days) after such downgrading (but not later than the expiration
date of such Downgraded Facility).

                  (iii) If a Downgraded Facility has not been replaced in
accordance with the terms of Section 3.6(c)(ii), the Subordination Agent shall,
on the 10th day (or the 45th day) referred to in Section 3.6(c)(ii)(or if such
10th day (or such 45th day) is not a Business Day, on the next succeeding
Business Day) (or, if earlier, the expiration date of such Downgraded Facility),
request a drawing in accordance with and to the extent permitted by such
Downgraded Facility (such drawing, a "Downgrade Drawing") of the Available
Amount thereunder. Amounts drawn pursuant to a Downgrade Drawing shall be
maintained and invested as provided in Section 3.6(f) hereof. The applicable
Liquidity Provider may also arrange for a Replacement Liquidity Provider to
issue and deliver a Replacement Liquidity Facility at any time after such
Downgrade Drawing so long as such Downgrade Drawing has not been reimbursed in
full to such Liquidity Provider.

                  (d) Non-Extension Drawings. If any Liquidity Facility with
respect to any Class of Certificates is scheduled to expire on a date (the
"Stated Expiration Date") prior to the date that is 15 days after the Final
Legal Distribution Date for such Class of Certificates, then, no earlier than
the 60th day and no later than the 40th day prior to the then Stated Expiration
Date, the Subordination Agent shall request that such Liquidity Provider extend
the Stated Expiration Date until the earlier of (i) the date which is 15 days
after such Final Legal Distribution Date and (ii) the date that is the day
immediately preceding the 364th day occurring after the last day of the
applicable Consent Period (as hereinafter defined) (unless the obligations of
such Liquidity Provider under such Liquidity Facility are earlier terminated in
accordance with such Liquidity Facility). Whether or not the Liquidity Provider
has received a request from the Subordination Agent, such Liquidity Provider
shall advise the Subordination Agent, no earlier than the 40th day and no later
than the 25th day prior to the Stated Expiration Date then in effect for such
Liquidity Facility (such period, with respect to such Liquidity Facility, the
"Consent Period"), whether, in its sole discretion, it agrees to extend such
Stated Expiration Date. If (A) on or before the date on which such Consent
Period ends, such Liquidity Facility shall not have been replaced in accordance
with Section 3.6(e) and (B) the applicable Liquidity Provider fails irrevocably
and unconditionally to advise the Borrower on or before the date on which such
Consent Period ends that such Stated Expiration Date then in effect shall be so
extended for such Liquidity Facility, the Subordination Agent shall, on the date
on which such Consent Period ends (or as soon as possible thereafter), in
accordance with the terms of the expiring Liquidity Facility (a "Non-Extended
Facility"), request a drawing under such expiring Liquidity Facility (such
drawing, a "Non-Extension Drawing") of all available and undrawn amounts
thereunder. Amounts drawn

                                       31
<PAGE>

pursuant to a Non-Extension Drawing shall be maintained and invested in
accordance with Section 3.6(f) hereof.

                  (e) Issuance of Replacement Liquidity Facility. (i) At any
time, Southwest may, at its option, with cause or without cause, arrange for a
Replacement Liquidity Facility to replace any Liquidity Facility for any Class
of Certificates (including any Replacement Liquidity Facility provided pursuant
to Section 3.6(e)(ii) hereof); provided, however, that the initial Liquidity
Provider for any Liquidity Facility relating to a Trust shall not be replaced by
Southwest as a Liquidity Provider with respect to such Liquidity Facility prior
to the fifth anniversary of the Closing Date unless (A) there shall have become
due to such initial Liquidity Provider, or such initial Liquidity Provider shall
have demanded, amounts pursuant to Section 3.01, 3.02 or 3.03 of any applicable
Liquidity Facility and the replacement of such initial Liquidity Provider would
reduce or eliminate the obligation to pay such amounts or Southwest determines
in good faith that there is a substantial likelihood that such initial Liquidity
Provider will have the right to claim any such amounts (unless such initial
Liquidity Provider waives, in writing, any right it may have to claim such
amounts), which determination shall be set forth in a certificate delivered by
Southwest to such initial Liquidity Provider setting forth the basis for such
determination and accompanied by an opinion of outside counsel selected by
Southwest and reasonably acceptable to such initial Liquidity Provider verifying
the legal conclusions, if any, of such certificate relating to such basis,
provided that, in the case of any likely claim for such amounts based upon any
proposed, or proposed change in, law, rule, regulation, interpretation,
directive, requirement, request or administrative practice, such opinion may
assume the adoption or promulgation of such proposed matter, (B) it shall become
unlawful or impossible for such initial Liquidity Provider (or its Facility
Office) to maintain or fund its LIBOR Advances as described in Section 3.10 of
any Liquidity Facility, (C) the short-term unsecured debt rating of such initial
Liquidity Provider is downgraded by Standard & Poor's from A-1+ to A-1 and there
is a resulting downgrade in the rating by any Rating Agency of any Class of
Certificates, (D) any Liquidity Facility of such initial Liquidity Provider
shall become a Downgraded Facility or a Non-Extended Facility or a Downgrade
Drawing or a Non-Extension Drawing shall have occurred under any Liquidity
Facility of such initial Liquidity Provider or (E) such initial Liquidity
Provider shall have breached any of its payment (including, without limitation,
funding) obligations under any Liquidity Facility in respect of which it is the
Liquidity Provider. If such Replacement Liquidity Facility is provided at any
time after a Downgrade Drawing or Non-Extension Drawing has been made, all funds
on deposit in the relevant Cash Collateral Account will be returned to the
Liquidity Provider being replaced.

                  (ii) If any Liquidity Provider shall determine not to extend
any of its Liquidity Facilities in accordance with Section 3.6(d), then such
Liquidity Provider may, at its option, arrange for a Replacement Liquidity
Facility to replace such Liquidity Facility during the period no earlier than 40
days and no later than 25 days prior to the then effective Stated Expiration
Date of such Liquidity Facility. In addition, so long as West LB is the
Liquidity Provider for any Liquidity Facility relating to a Trust, at any time
after a Non-Extension Drawing has been made under any such Liquidity Facility or
at any time after West LB has extended the Stated Expiration Date under any such
Liquidity Facility to the date that is 15 days after the applicable Final Legal
Distribution Date in accordance with the provisions of such Liquidity Facility,
the Liquidity Provider thereunder may, at its option, arrange for a Replacement
Liquidity Facility to replace such Liquidity Facility.

                                       32
<PAGE>

                  (iii) No Replacement Liquidity Facility arranged by Southwest
or a Liquidity Provider in accordance with clause (i) or (ii) above or pursuant
to Section 3.6(c), respectively, shall become effective and no such Replacement
Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative
Agreements, unless and until (A) each of the conditions referred to in
sub-clauses (iv)(x) and (z) below shall have been satisfied, (B) if such
Replacement Liquidity Facility shall materially adversely affect the rights,
remedies, interests or obligations of the Class A-1 Certificateholders, the
Class A-2 Certificateholders or the Class B Certificateholders under any of the
Operative Agreements, the applicable Trustee shall have consented, in writing,
to the execution and issuance of such Replacement Liquidity Facility and (C) in
the case of a Replacement Liquidity Facility arranged by a Liquidity Provider
under Section 3.6(e)(ii) or pursuant to Section 3.6(c), such Replacement
Liquidity Facility is acceptable to Southwest.

                  (iv) In connection with the issuance of each Replacement
Liquidity Facility, the Subordination Agent shall (x) prior to the issuance of
such Replacement Liquidity Facility, obtain written confirmation from each
Rating Agency that such Replacement Liquidity Facility will not cause a
reduction of any rating then in effect for any Class of Certificates by such
Rating Agency (without regard to any downgrading of any rating of any Liquidity
Provider being replaced pursuant to Section 3.6(c) hereof), (y) pay all
Liquidity Obligations then owing to the replaced Liquidity Provider (which
payment shall be made first from available funds in the applicable Cash
Collateral Account as described in clause (ix) of Section 3.6(f) hereof, and
thereafter from any other available source, including, without limitation, a
drawing under the Replacement Liquidity Facility) and (z) cause the issuer of
the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility
to the Subordination Agent, together with a legal opinion opining that such
Replacement Liquidity Facility is an enforceable obligation of such Replacement
Liquidity Provider.

                  (v) Upon satisfaction of the conditions set forth in clauses
(iii) and (iv) of this Section 3.6(e) with respect to a Replacement Liquidity
Facility, (w) the replaced Liquidity Facility shall terminate, (x) the
Subordination Agent shall, if and to the extent so requested by Southwest or the
Liquidity Provider being replaced, execute and deliver any certificate or other
instrument required in order to terminate the replaced Liquidity Facility, shall
surrender the replaced Liquidity Facility to the Liquidity Provider being
replaced and shall execute and deliver the Replacement Liquidity Facility and
any associated Fee Letters, (y) each of the parties hereto shall enter into any
amendments to this Agreement necessary to give effect to (1) the replacement of
the applicable Liquidity Provider with the applicable Replacement Liquidity
Provider and (2) the replacement of the applicable Liquidity Facility with the
applicable Replacement Liquidity Facility and (z) the applicable Replacement
Liquidity Provider shall be deemed to be a Liquidity Provider with the rights
and obligations of a Liquidity Provider hereunder and under the other Operative
Agreements and such Replacement Liquidity Facility shall be deemed to be a
Liquidity Facility hereunder and under the other Operative Agreements.

                  (f) Cash Collateral Accounts; Withdrawals; Investments. In the
event the Subordination Agent shall draw all available amounts under the Class
A-1 Liquidity Facility or the Class A-2 Liquidity Facility, pursuant to Section
3.6(c), 3.6(d) or 3.6(i) hereof, or in the event amounts are to be deposited in
the Cash Collateral Account pursuant to subclause (B) of clause "third" of
Section 2.4(b), subclause (B) of clause "third" of Section 3.2 or subclause (B)
of clause "fourth" of Section 3.3, amounts so drawn or to be deposited, as the
case may be, shall be

                                       33
<PAGE>

deposited by the Subordination Agent in the Class A-1 Cash Collateral Account or
the Class A-2 Cash Collateral Account, respectively. All amounts on deposit in
each Cash Collateral Account shall be invested and reinvested in Eligible
Investments in accordance with Section 2.2(b) hereof.

                  On each Interest Payment Date (or, in the case of any Special
Distribution Date with respect to a distribution pursuant to Section 2.4(b)
hereof occurring prior to the occurrence of a Triggering Event, on such Special
Distribution Date), Investment Earnings on amounts on deposit in each Cash
Collateral Account (or, in the case of any Special Distribution Date with
respect to a distribution pursuant to Section 2.4(b) hereof occurring prior to
the occurrence of a Triggering Event, a fraction of such Investment Earnings
equal to the Section 2.4(b) Fraction) shall be deposited in the Collection
Account (or, in the case of any Special Distribution Date with respect to a
distribution pursuant to Section 2.4(b) hereof occurring prior to the occurrence
of a Triggering Event, the Special Payments Account) and applied on such
Interest Payment Date (or Special Distribution Date, as the case may be) in
accordance with Section 2.4, 3.2, 3.3 or 3.4 (as applicable). The Subordination
Agent shall deliver a written statement to Southwest and the Liquidity Provider
one day prior to each Interest Payment Date and Special Distribution Date
setting forth the aggregate amount of Investment Earnings held in the Cash
Collateral Accounts as of such date. In addition, from and after the date funds
are so deposited, the Subordination Agent shall make withdrawals from such
account as follows:

                  (i) on each Distribution Date, the Subordination Agent shall,
         to the extent it shall not have received funds to pay accrued and
         unpaid interest due and owing on the Class A-1 Certificates (at the
         Stated Interest Rate for the Class A-1 Certificates) from any other
         source, withdraw from the Class A-1 Cash Collateral Account, and pay to
         the Class A-1 Trustee, an amount equal to the lesser of (x) an amount
         necessary to pay accrued and unpaid interest (at the Stated Interest
         Rate for the Class A-1 Certificates) on such Class A-1 Certificates and
         (y) the amount on deposit in the Class A-1 Cash Collateral Account;

                  (ii) on each Distribution Date, the Subordination Agent shall,
         to the extent it shall not have received funds to pay accrued and
         unpaid interest due and owing on the Class A-2 Certificates (at the
         Stated Interest Rate for the Class A-2 Certificates) from any other
         source, withdraw from the Class A-2 Cash Collateral Account, and pay to
         the Class A-2 Trustee, an amount equal to the lesser of (x) an amount
         necessary to pay accrued and unpaid interest (at the Stated Interest
         Rate for the Class A-2 Certificates) on such Class A-2 Certificates and
         (y) the amount on deposit in the Class A-2 Cash Collateral Account;

                  (iii) on each date on which the Pool Balance of the Class A-1
         Trust shall have been reduced by payments made to the Class A-1
         Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the
         Subordination Agent shall withdraw from the Class A-1 Cash Collateral
         Account such amount as is necessary so that, after giving effect to the
         reduction of the Pool Balance on such date (and any reduction in the
         amounts on deposit in the Class A-1 Cash Collateral Account resulting
         from a prior withdrawal of amounts on deposit in the Class A-1 Cash
         Collateral Account on such date) and any transfer of Investment
         Earnings from such Cash Collateral Account to the Collection Account or
         the Special Payments Account on such date, an amount equal to the sum
         of the Required Amount (with respect to the Class A-1 Liquidity
         Facility) plus Investment Earnings on

                                       34
<PAGE>

         deposit in such Cash Collateral Account (after giving effect to any
         such transfer of Investment Earnings) will be on deposit in the Class
         A-1 Cash Collateral Account and shall first, pay such withdrawn amount
         to the Class A-1 Liquidity Provider until the Liquidity Obligations
         (with respect to the Class A-1 Certificates) owing to such Liquidity
         Provider shall have been paid in full, and second, deposit any
         remaining withdrawn amount in the Collection Account;

                  (iv) on each date on which the Pool Balance of the Class A-2
         Trust shall have been reduced by payments made to the Class A-2
         Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the
         Subordination Agent shall withdraw from the Class A-2 Cash Collateral
         Account such amount as is necessary so that, after giving effect to the
         reduction of the Pool Balance on such date (and any reduction in the
         amounts on deposit in the Class A-2 Cash Collateral Account resulting
         from a prior withdrawal of amounts on deposit in the Class A-2 Cash
         Collateral Account on such date) and any transfer of Investment
         Earnings from such Cash Collateral Account to the Collection Account or
         the Special Payments Account on such date, an amount equal to the sum
         of the Required Amount (with respect to the Class A-2 Liquidity
         Facility) plus Investment Earnings on deposit in such Cash Collateral
         Account (after giving effect to any such transfer of Investment
         Earnings) will be on deposit in the Class A-2 Cash Collateral Account
         and shall first, pay such withdrawn amount to the Class A-2 Liquidity
         Provider until the Liquidity Obligations (with respect to the Class A-2
         Certificates) owing to such Liquidity Provider shall have been paid in
         full, and second, deposit any remaining withdrawn amount in the
         Collection Account;

                  (v) if a Replacement Liquidity Facility for any Class of
         Certificates shall be delivered to the Subordination Agent following
         the date on which funds have been deposited into the Cash Collateral
         Account for such Class of Certificates, the Subordination Agent shall
         withdraw all amounts on deposit in such Cash Collateral Account and
         shall pay such amounts to the replaced Liquidity Provider until all
         Liquidity Obligations owed to such Person shall have been paid in full,
         and shall deposit any remaining amount in the Collection Account; and

                  (vi) following the payment of Final Distributions with respect
         to any Class of Certificates, on the date on which the Subordination
         Agent shall have been notified by the Liquidity Provider for such Class
         of Certificates that the Liquidity Obligations owed to such Liquidity
         Provider have been paid in full, the Subordination Agent shall withdraw
         all amounts on deposit in the Cash Collateral Account in respect of
         such Class of Certificates and shall deposit such amount in the
         Collection Account.

                  (g) Reinstatement. With respect to any Interest Drawing under
the Liquidity Facility for any Trust, upon the reimbursement of the applicable
Liquidity Provider for all or any part of the amount of such Interest Drawing,
together with any accrued interest thereon, the Available Amount of such
Liquidity Facility shall be reinstated by an amount equal to the amount of such
Interest Drawing so reimbursed to the applicable Liquidity Provider but not to
exceed the Stated Amount for such Liquidity Facility; provided, however, that
such Liquidity Facility shall not be so reinstated in part or in full at any
time if (x) both a Performing Note Deficiency exists and a Liquidity Event of
Default shall have occurred and be continuing with

                                       35
<PAGE>

         respect to the relevant Liquidity Facility or (y) a Final Drawing shall
         have occurred with respect to such Liquidity Facility. In the event
         that, with respect to any particular Liquidity Facility, (i) funds are
         withdrawn from any Cash Collateral Account pursuant to clause (i), (ii)
         or (iii) of Section 3.6(f) hereof or (ii) such Liquidity Facility shall
         become a Downgraded Facility or a Non-Extended Facility at a time when
         unreimbursed Interest Drawings under such Liquidity Facility have
         reduced the Available Amount thereunder to zero, then funds received by
         the Subordination Agent at any time other than (x) any time when a
         Liquidity Event of Default shall have occurred and be continuing with
         respect to such Liquidity Facility and a Performing Note Deficiency
         exists or (y) any time after a Final Drawing shall have occurred with
         respect to such Liquidity Facility shall be deposited in such Cash
         Collateral Account as and to the extent provided in clause "third" of
         Section 2.4(b), clause "third" of Section 3.2 or clause "fourth" of
         Section 3.3, as applicable, and applied in accordance with Section
         3.6(f) hereof.

                  (h) Reimbursement. The amount of each drawing under the
Liquidity Facilities shall be due and payable, together with interest thereon,
on the dates and at the rates, respectively, provided in the Liquidity
Facilities.

                  (i) Final Drawing. Upon receipt from a Liquidity Provider of a
Termination Notice with respect to any Liquidity Facility, the Subordination
Agent shall, not later than the date specified in such Termination Notice, in
accordance with the terms of such Liquidity Facility, request a drawing under
such Liquidity Facility of all available and undrawn amounts thereunder (a
"Final Drawing"). Amounts drawn pursuant to a Final Drawing shall be maintained
and invested in accordance with Section 3.6(f) hereof.

                  (j) Reduction of Stated Amount. Promptly following each date
on which the Required Amount of the Liquidity Facility for a Class of
Certificates is reduced as a result of a reduction in the Pool Balance with
respect to such Certificates, the Stated Amount of such Liquidity Facility shall
automatically reduce to an amount equal to the Required Amount with respect to
such Liquidity Facility (as calculated by the Subordination Agent after giving
effect to such payment).

                  (k) Relation to Subordination Provisions. Interest Drawings
under the Liquidity Facilities and withdrawals from the Cash Collateral
Accounts, in each case, in respect of interest on the Certificates of any Class,
will be distributed to the Trustee for such Class of Certificates,
notwithstanding Sections 2.4, 3.2 and 3.3 hereof.

                  (l) Assignment of Liquidity Facility. The Subordination Agent
agrees not to consent to the assignment by any Liquidity Provider of any of its
rights or obligations under any Liquidity Facility or any interest therein,
unless (i) Southwest shall have consented to such assignment and (ii) each
Rating Agency shall have provided a Ratings Confirmation in respect of such
assignment; provided, that the Subordination Agent shall consent to such
assignment if the conditions in the foregoing clauses (i) and (ii) are
satisfied, and the foregoing is not intended to and shall not be construed to
limit the rights of the initial Liquidity Provider under Section 3.6(e)(ii).

                                       36
<PAGE>

                                   ARTICLE IV

                              EXERCISE OF REMEDIES

                  SECTION 4.1. Directions from the Controlling Party. (a) (i)
Following the occurrence and during the continuation of an Indenture Default
under any Indenture, the Controlling Party shall direct the Subordination Agent,
which in turn shall direct the Loan Trustee under such Indenture, in the
exercise of remedies available to the holders of the Equipment Notes issued
pursuant to such Indenture, including, without limitation, the ability to vote
all such Equipment Notes in favor of Accelerating such Equipment Notes in
accordance with the provisions of such Indenture. If the Equipment Notes issued
pursuant to any Indenture have been Accelerated following an Indenture Default
with respect thereto, the Controlling Party may direct the Subordination Agent
to sell, assign, contract to sell or otherwise dispose of and deliver all (but
not less than all) of such Equipment Notes to any Person at public or private
sale, at any location at the option of the Controlling Party, all upon such
terms and conditions as it may reasonably deem advisable in accordance with
applicable law.

                  (ii) Notwithstanding the foregoing, so long as any
Certificates remain Outstanding, during the period ending on the date which is
nine months after the earlier of (x) the Acceleration of the Equipment Notes
issued pursuant to any Indenture or (y) the occurrence of a Southwest Bankruptcy
Event, without the consent of each Trustee, no Aircraft subject to the Lien of
such Indenture or such Equipment Notes may be sold if the net proceeds from such
sale would be less than the Minimum Sale Price for such Aircraft or such
Equipment Notes.

                  (iii) At the request of the Controlling Party, the
Subordination Agent may from time to time during the continuance of an Indenture
Default (and before the occurrence of a Triggering Event) commission LTV
Appraisals with respect to the Aircraft subject to such Indenture.

                  (iv) After a Triggering Event occurs and any Equipment Note
becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain
Appraisals with respect to all of the Aircraft (the "LTV Appraisals") as soon as
practicable and additional LTV Appraisals on or prior to each anniversary of the
date of such initial LTV Appraisals; provided that if the Controlling Party
reasonably objects to the appraised value of the Aircraft shown in such LTV
Appraisals, the Controlling Party shall have the right to obtain or cause to be
obtained substitute LTV Appraisals (including any LTV Appraisals based upon
physical inspection of the Aircraft).

                  (b) Following the occurrence and during the continuance of an
Indenture Default under any Indenture, the Controlling Party shall take such
actions as it may reasonably deem most effectual to complete the sale or other
disposition of the relevant Aircraft or Equipment Notes. In addition, in lieu of
any sale, assignment, contract to sell or other disposition, the Controlling
Party may maintain possession of such Equipment Notes and continue to apply
monies received in respect of such Equipment Notes in accordance with Article
III hereof. In addition, in lieu of such sale, assignment, contract to sell or
other disposition, or in lieu of such maintenance of possession, the Controlling
Party may, subject to the terms and conditions of the related Indenture,
instruct the Loan Trustee under such Indenture to foreclose on the Lien on the
related Aircraft.

                                       37
<PAGE>

                  SECTION 4.2. Remedies Cumulative. Each and every right, power
and remedy given to the Trustees, the Liquidity Providers, the Controlling Party
or the Subordination Agent specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may, subject always to the terms and conditions
hereof, be exercised from time to time and as often and in such order as may be
deemed expedient by any Trustee, any Liquidity Provider, the Controlling Party
or the Subordination Agent, as appropriate, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by any Trustee, any Liquidity Provider, the
Controlling Party or the Subordination Agent in the exercise of any right,
remedy or power or in the pursuit of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default or to be an
acquiescence therein.

                  SECTION 4.3. Discontinuance of Proceedings. In case any party
to this Agreement (including the Controlling Party in such capacity) shall have
instituted any Proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, entry or otherwise, and such Proceeding shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Person instituting such Proceeding, then and in every such case
each such party shall, subject to any determination in such Proceeding, be
restored to its former position and rights hereunder, and all rights, remedies
and powers of such party shall continue as if no such Proceeding had been
instituted.

                  SECTION 4.4. Right of Certificateholders to Receive Payments
Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding
but subject to each Trust Agreement, the right of any Certificateholder or any
Liquidity Provider, respectively, to receive payments hereunder (including
without limitation pursuant to Section 2.4, 3.2 or 3.3 hereof) when due, or to
institute suit for the enforcement of any such payment on or after the
applicable Distribution Date, shall not be impaired or affected without the
consent of such Certificateholder or such Liquidity Provider, respectively.

                  SECTION 4.5. Undertaking for Costs. In any Proceeding for the
enforcement of any right or remedy under this Agreement or in any Proceeding
against any Controlling Party or the Subordination Agent for any action taken or
omitted by it as Controlling Party or Subordination Agent, as the case may be, a
court in its discretion may require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. The provisions of
this Section do not apply to a suit instituted by the Subordination Agent, a
Liquidity Provider or a Trustee or a suit by Certificateholders holding more
than 10% of the original principal amount of any Class of Certificates.

                                       38
<PAGE>

                                    ARTICLE V

                       DUTIES OF THE SUBORDINATION AGENT;
                          AGREEMENTS OF TRUSTEES, ETC.

                  SECTION 5.1. Notice of Indenture Default or Triggering Event.
(a) In the event the Subordination Agent shall have actual knowledge of the
occurrence of an Indenture Default or a Triggering Event, as promptly as
practicable, and in any event within 10 days after obtaining knowledge thereof,
the Subordination Agent shall transmit by mail or courier to the Rating
Agencies, the Liquidity Providers and the Trustees notice of such Indenture
Default or Triggering Event, unless such Indenture Default or Triggering Event
shall have been cured or waived. For all purposes of this Agreement, in the
absence of actual knowledge on the part of a Responsible Officer, the
Subordination Agent shall not be deemed to have knowledge of any Indenture
Default or Triggering Event unless notified in writing by one or more Trustees,
one or more Liquidity Providers or one or more Certificateholders.

                  (b) Other Notices. The Subordination Agent will furnish to
each Liquidity Provider and Trustee, promptly upon receipt thereof, duplicates
or copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Subordination Agent as
registered holder of the Equipment Notes or otherwise in its capacity as
Subordination Agent to the extent the same shall not have been otherwise
directly distributed to such Liquidity Provider or Trustee, as applicable,
pursuant to the express provision of any other Operative Agreement.

                  SECTION 5.2. Indemnification. The Subordination Agent shall
not be required to take any action or refrain from taking any action under
Section 5.1 (other than the first sentence thereof) or Article IV hereof unless
the Subordination Agent shall have been indemnified (to the extent and in the
manner reasonably satisfactory to the Subordination Agent) against any
liability, cost or expense (including counsel fees and expenses) which may be
incurred in connection therewith. The Subordination Agent shall not be under any
obligation to take any action under this Agreement and nothing contained in this
Agreement shall require the Subordination Agent to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. The
Subordination Agent shall not be required to take any action under Section 5.1
(other than the first sentence thereof) or Article IV hereof, nor shall any
other provision of this Agreement be deemed to impose a duty on the
Subordination Agent to take any action, if the Subordination Agent shall have
been advised by counsel that such action is contrary to the terms hereof or is
otherwise contrary to law.

                  SECTION 5.3. No Duties Except as Specified in Intercreditor
Agreement. The Subordination Agent shall not have any duty or obligation to take
or refrain from taking any action under, or in connection with, this Agreement,
except as expressly provided by the terms of this Agreement; and no implied
duties or obligations shall be read into this Agreement against the
Subordination Agent. The Subordination Agent agrees that it will, in its
individual capacity and at its own cost and expense (but without any right of
indemnity in respect of any such cost or expense under Section 5.2 or 7.1
hereof) promptly take such action as may be necessary to duly discharge all
Liens on any of the Trust Accounts or any monies deposited therein which result

                                       39
<PAGE>

from claims against it in its individual capacity not related to its activities
hereunder or any other Operative Agreement.

                  SECTION 5.4. Notice from the Liquidity Providers and Trustees.
If any Liquidity Provider or Trustee has notice of an Indenture Default or a
Triggering Event, such Person shall promptly give notice thereof to all other
Liquidity Providers and Trustees and to the Subordination Agent, provided,
however, that no such Person shall have any liability hereunder as a result of
its failure to deliver any such notice.

                                   ARTICLE VI

                             THE SUBORDINATION AGENT

                  SECTION 6.1. Authorization; Acceptance of Trusts and Duties.
Each of the Class A-1 Trustee and the Class A-2 Trustee hereby designates and
appoints the Subordination Agent as the agent and trustee of such Trustee under
the applicable Liquidity Facility and authorizes the Subordination Agent to
enter into the applicable Liquidity Facility as agent and trustee for such
Trustee. Each of the Liquidity Providers and all the Trustees hereby designates
and appoints the Subordination Agent as the Subordination Agent under this
Agreement. WTC hereby accepts the duties hereby created and applicable to it as
the Subordination Agent and agrees to perform the same but only upon the terms
of this Agreement and agrees to receive and disburse all monies received by it
in accordance with the terms hereof. The Subordination Agent shall not be
answerable or accountable under any circumstances, except (a) for its own
willful misconduct or gross negligence (or ordinary negligence in the handling
of funds), (b) as provided in Sections 2.2 or 5.3 hereof and (c) for liabilities
that may result from the material inaccuracy of any representation or warranty
of the Subordination Agent made in its individual capacity in any Operative
Agreement. The Subordination Agent shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Subordination Agent, unless
it is proved that the Subordination Agent was negligent in ascertaining the
pertinent facts.

                  SECTION 6.2. Absence of Duties. The Subordination Agent shall
have no duty to see to any recording or filing of this Agreement or any other
document, or to see to the maintenance of any such recording or filing.

                  SECTION 6.3. No Representations or Warranties as to Documents.
The Subordination Agent in its individual capacity does not make nor shall be
deemed to have made any representation or warranty as to the validity, legality
or enforceability of this Agreement or any other Operative Agreement or as to
the correctness of any statement contained in any thereof, except for the
representations and warranties of the Subordination Agent, made in its
individual capacity, under any Operative Agreement to which it is a party. The
Certificateholders, the Trustees and the Liquidity Providers make no
representation or warranty hereunder whatsoever.

                  SECTION 6.4. No Segregation of Monies; No Interest. Any monies
paid to or retained by the Subordination Agent pursuant to any provision hereof
and not then required to be distributed to any Trustee or any Liquidity Provider
as provided in Articles II and III hereof or deposited into one or more Trust
Accounts need not be segregated in any manner except to the

                                       40
<PAGE>

extent required by such Articles II and III and by law, and the Subordination
Agent shall not (except as otherwise provided in Section 2.2 hereof) be liable
for any interest thereon; provided, however, that any payments received or
applied hereunder by the Subordination Agent shall be accounted for by the
Subordination Agent so that any portion thereof paid or applied pursuant hereto
shall be identifiable as to the source thereof.

                  SECTION 6.5. Reliance; Agents; Advice of Counsel. The
Subordination Agent shall not incur liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. As to the Pool
Balance of any Trust as of any date, the Subordination Agent may for all
purposes hereof rely on a certificate signed by any Responsible Officer of the
applicable Trustee, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. As to any fact or matter relating to the Liquidity
Providers or the Trustees the manner of ascertainment of which is not
specifically described herein, the Subordination Agent may for all purposes
hereof rely on a certificate, signed by any Responsible Officer of the
applicable Liquidity Provider or Trustee, as the case may be, as to such fact or
matter, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. The Subordination Agent shall assume, and shall be
fully protected in assuming, that each of the Liquidity Providers and each of
the Trustees are authorized to enter into this Agreement and to take all action
to be taken by them pursuant to the provisions hereof, and shall not inquire
into the authorization of each of the Liquidity Providers and each of the
Trustees with respect thereto. In the administration of the trusts hereunder,
the Subordination Agent may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys
and may consult with counsel, accountants and other skilled persons to be
selected and retained by it, and the Subordination Agent shall not be liable for
the acts or omissions of any agent appointed with due care or for anything done,
suffered or omitted in good faith by it in accordance with the advice or written
opinion of any such counsel, accountants or other skilled persons.

                  SECTION 6.6. Capacity in Which Acting. The Subordination Agent
acts hereunder solely as agent and trustee herein and not in its individual
capacity, except as otherwise expressly provided in the Operative Agreements.

                  SECTION 6.7. Compensation. The Subordination Agent shall be
entitled to reasonable compensation, including expenses and disbursements, for
all services rendered hereunder and shall have a priority claim to the extent
set forth in Article III hereof on all monies collected hereunder for the
payment of such compensation, to the extent that such compensation shall not be
paid by others. The Subordination Agent agrees that it shall have no right
against any Trustee or Liquidity Provider for any fee as compensation for its
services as agent under this Agreement. The provisions of this Section 6.7 shall
survive the termination of this Agreement.

                  SECTION 6.8. May Become Certificateholder. The institution
acting as Subordination Agent hereunder may become a Certificateholder and have
all rights and benefits of a Certificateholder to the same extent as if it were
not the institution acting as the Subordination Agent.

                                       41
<PAGE>

                  SECTION 6.9. Subordination Agent Required; Eligibility. There
shall at all times be a Subordination Agent hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State or the District of Columbia having a combined capital
and surplus of at least $100,000,000 (or the obligations of which, whether now
in existence or hereafter incurred, are fully and unconditionally guaranteed by
a corporation organized and doing business under the laws of the United States
of America, any State thereof or of the District of Columbia and having a
combined capital and surplus of at least $100,000,000), if there is such an
institution willing and able to perform the duties of the Subordination Agent
hereunder upon reasonable or customary terms. Such corporation shall be a
citizen of the United States and shall be authorized under the laws of the
United States or any State thereof or of the District of Columbia to exercise
corporate trust powers and shall be subject to supervision or examination by
federal, state or District of Columbia authorities. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of any of the aforesaid supervising or examining authorities, then,
for the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.

                  In case at any time the Subordination Agent shall cease to be
eligible in accordance with the provisions of this Section, the Subordination
Agent shall resign immediately in the manner and with the effect specified in
Section 8.1.

                  SECTION 6.10. Money to Be Held in Trust. All Equipment Notes,
monies and other property deposited with or held by the Subordination Agent
pursuant to this Agreement shall be held in trust for the benefit of the parties
entitled to such Equipment Notes, monies and other property. All such Equipment
Notes, monies or other property shall be held in the Trust Department of the
institution acting as Subordination Agent hereunder.

                                   ARTICLE VII

                     INDEMNIFICATION OF SUBORDINATION AGENT

                  SECTION 7.1. Scope of Indemnification. The Subordination Agent
shall be indemnified hereunder to the extent and in the manner described in
Section 8.1 of the Participation Agreements. The indemnities contained in such
Section of such agreements shall survive the termination of this Agreement.

                                  ARTICLE VIII

                          SUCCESSOR SUBORDINATION AGENT

                  SECTION 8.1. Replacement of Subordination Agent; Appointment
of Successor. The Subordination Agent may resign at any time by so notifying the
Trustees and the Liquidity Providers. The Controlling Party may remove the
Subordination Agent for cause by so notifying the Subordination Agent and may
appoint a successor Subordination Agent. The Controlling Party shall remove the
Subordination Agent if:

                  (1) the Subordination Agent fails to comply with Section 6.9
         hereof;

                                       42
<PAGE>

                  (2) the Subordination Agent is adjudged bankrupt or insolvent;

                  (3) a receiver or other public officer takes charge of the
         Subordination Agent or its property; or

                  (4) the Subordination Agent otherwise becomes incapable of
         acting.

                  If the Subordination Agent resigns or is removed or if a
vacancy exists in the office of Subordination Agent for any reason (the
Subordination Agent in such event being referred to herein as the retiring
Subordination Agent), the Controlling Party shall promptly appoint a successor
Subordination Agent.

                  A successor Subordination Agent shall deliver (x) a written
acceptance of its appointment as Subordination Agent hereunder to the retiring
Subordination Agent and (y) a written assumption of its obligations hereunder
and under each Liquidity Facility to each party hereto, upon which the
resignation or removal of the retiring Subordination Agent shall become
effective, and the successor Subordination Agent shall have all the rights,
powers and duties of the Subordination Agent under this Agreement. The successor
Subordination Agent shall mail a notice of its succession to the Liquidity
Providers and the Trustees. The retiring Subordination Agent shall promptly
transfer its rights under each of the Liquidity Facilities and all of the
property held by it as Subordination Agent to the successor Subordination Agent.

                  If a successor Subordination Agent does not take office within
60 days after the retiring Subordination Agent resigns or is removed, the
retiring Subordination Agent or one or more of the Trustees may petition any
court of competent jurisdiction for the appointment of a successor Subordination
Agent.

                  If the Subordination Agent fails to comply with Section 6.9
hereof (to the extent applicable), one or more of the Trustees or one or more of
the Liquidity Providers may petition any court of competent jurisdiction for the
removal of the Subordination Agent and the appointment of a successor
Subordination Agent.

                  Notwithstanding the foregoing, no resignation or removal of
the Subordination Agent shall be effective unless and until a successor has been
appointed. No appointment of a successor Subordination Agent shall be effective
unless and until the Rating Agencies shall have delivered a Ratings
Confirmation.

                                   ARTICLE IX

                           SUPPLEMENTS AND AMENDMENTS

                  SECTION 9.1. Amendments, Waivers, etc. (a) This Agreement may
not be supplemented, amended or modified without the consent of each Trustee
(acting, except in the case of any amendment pursuant to Section 3.6(e)(v)(y)
hereof with respect to any Replacement Liquidity Facility or any amendment
contemplated by the last sentence of this Section 9.1(a), with the consent of
holders of Certificates of the related Class evidencing interests in the related
Trust aggregating not less than a majority in interest in such Trust or as
otherwise authorized

                                       43
<PAGE>

pursuant to the relevant Trust Agreement), the Subordination Agent and, subject
to clause (ii) of the proviso in Section 9.1(c), each Liquidity Provider;
provided, however, that this Agreement may be supplemented, amended or modified
without the consent of (x) any Trustee if such supplement, amendment or
modification (i) is in accordance with Section 9.1(c) or 9.1(d) hereof or (ii)
cures an ambiguity or inconsistency or does not materially adversely affect such
Trustee or the holders of the related Class of Certificates and (y) any
Liquidity Provider if such supplement, amendment or modification is in
accordance with Section 9.1(d) hereof; provided further, however, that, if such
supplement, amendment or modification (A) would (x) directly or indirectly
modify or supersede, or otherwise conflict with, Section 2.2(b), Section 3.6(e),
Section 3.6(f) (other than the last sentence thereof), Section 3.6(l), the last
sentence of this Section 9.1(a) or Section 9.1(c), the second sentence of
Section 10.6 or this proviso (collectively, the "Southwest Provisions") or (y)
otherwise adversely affect the interests of a potential Replacement Liquidity
Provider or of Southwest with respect to its ability to replace any Liquidity
Facility or with respect to its payment obligations under any Operative
Agreement or (B) is made pursuant to the last sentence of this Section 9.1(a) or
pursuant to Section 9.1(c), then such supplement, amendment or modification
shall not be effective without the additional written consent of Southwest.
Notwithstanding the foregoing, without the consent of each Certificateholder and
each Liquidity Provider, no supplement, amendment or modification of this
Agreement may (i) reduce the percentage of the interest in any Trust evidenced
by the Certificates issued by such Trust necessary to consent to modify or amend
any provision of this Agreement or to waive compliance therewith or (ii) except
as provided in Section 9.1(c) or the last sentence of this Section 9.1(a),
modify Section 2.4, 3.2 or 3.3 hereof, relating to the distribution of monies
received by the Subordination Agent hereunder from the Equipment Notes or
pursuant to the Liquidity Facilities. Nothing contained in this Section shall
require the consent of a Trustee at any time following the payment of Final
Distributions with respect to the related Class of Certificates. If the
Replacement Liquidity Facility for any Liquidity Facility in accordance with
Section 3.6(e) hereof is to be comprised of more than one instrument as
contemplated by the definition of the term "Replacement Liquidity Facility",
then each of the parties hereto agrees to amend this Agreement to incorporate
appropriate mechanics for multiple Liquidity Facilities for an individual Trust.

                  (b) In the event that the Subordination Agent, as the
registered holder of any Equipment Notes, receives a request for its consent to
any amendment, modification, consent or waiver under such Equipment Notes, the
Indenture pursuant to which such Equipment Notes were issued, or the related
Participation Agreement or other related document, (i) if no Indenture Default
shall have occurred and be continuing with respect to such Indenture, the
Subordination Agent shall request directions with respect to each Series of such
Equipment Notes from the Trustee of the Trust which holds such Equipment Notes
and shall vote or consent in accordance with the directions of such Trustee and
(ii) if any Indenture Default shall have occurred and be continuing with respect
to such Indenture, the Subordination Agent will exercise its voting rights as
directed by the Controlling Party, subject to Sections 4.1 and 4.4 hereof;
provided that no such amendment, modification or waiver shall, without the
consent of each Liquidity Provider, reduce the amount of principal or interest
payable by Southwest under any Equipment Note issued under any Indenture in
respect of an Aircraft.

                  (c) If, with respect to any Aircraft, Class C Certificates are
issued, this Agreement shall be amended by written agreement of Southwest and
the Subordination Agent to

                                       44
<PAGE>
provide for the subordination of such Class C Certificates to the Class A-1
Certificates, the Class A-2 Certificates and the Class B Certificates
substantially in the same manner as the Class B Certificates are subordinated
hereunder to the Class A-1 Certificates and the Class A-2 Certificates. No such
amendment shall materially adversely affect any Trustee. The amendment to this
Agreement to give effect to the issuance of any Class C Certificates shall
include, without limitation:

                  (i) the trustee of the Class C Trust shall be added as a party
         to this Agreement;

                  (ii) the definitions of "Cash Collateral Account",
         "Certificate", "Class", "Equipment Notes", "Final Legal Distribution
         Date", "Liquidity Facilities", "Liquidity Provider", "LTV Ratio",
         "Stated Interest Rate", "Trust", "Trust Agreement" and "Controlling
         Party" shall be revised, as appropriate, to reflect the issuance of the
         Class C Certificates (and the subordination thereof); and

                  (iii) the provisions of this Agreement governing payments with
         respect to Certificates and related notices, including, without
         limitation, Sections 2.4, 3.1, 3.2, 3.3 and 3.6(e), shall be revised to
         provide for distributions on the Class C Certificates after payment of
         all relevant distributions on the Class C Certificates.

If, with respect to any Aircraft, Series C Equipment Notes are issued to any
Person other than the Class C Trust, this Agreement shall be amended by written
agreement of Southwest and the Subordination Agent to (i) provide for each
holder of a Series C Equipment Note to be bound by the provisions of Section
2.6(a) hereof so that the Controlling Party, among other things, shall be
entitled to direct the Loan Trustee as provided therein (and such Series C
Equipment Notes shall make effective provision therefor so as to bind each
holder thereof to such provisions of Section 2.6(a) hereof) and (ii) to revise
the definitions of "Controlling Party" and "Equipment Notes", as appropriate, to
reflect the issuance of the Series C Equipment Notes (and the prior rights, as
against the holders of such Series C Equipment Notes, of the Class A-1 Trustee,
the Class A-2 Trustee and the Class B Trustee to be such "Controlling Party").
No such amendment shall materially adversely affect any Trustee.

                  SECTION 9.2. Subordination Agent Protected. If, in the
reasonable opinion of the institution acting as the Subordination Agent
hereunder, any document required to be executed pursuant to the terms of Section
9.1 affects any right, duty, immunity or indemnity with respect to it under this
Agreement or any Liquidity Facility, the Subordination Agent may in its
discretion decline to execute such document.

                  SECTION 9.3. Effect of Supplemental Agreements. Upon the
execution of any amendment, consent or supplement hereto pursuant to the
provisions hereof, this Agreement shall be and be deemed to be and shall be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Agreement
of the parties hereto and beneficiaries hereof shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
agreement shall be and be deemed to be and shall be part of the terms and
conditions of this Agreement for any and all purposes. In executing or

                                       45
<PAGE>

accepting any supplemental agreement permitted by this Article IX, the
Subordination Agent shall be entitled to receive, and shall be fully protected
in relying upon, an opinion of counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement.

                  SECTION 9.4. Notice to Rating Agencies. Promptly following its
receipt of each amendment, consent, modification, supplement or waiver
contemplated by this Article IX, the Subordination Agent shall send a copy
thereof to each Rating Agency.

                                    ARTICLE X

                                  MISCELLANEOUS

                  SECTION 10.1. Termination of Intercreditor Agreement.
Following payment of Final Distributions with respect to each Class of
Certificates and the payment in full of all Liquidity Obligations to the
Liquidity Providers and provided that there shall then be no other amounts due
to the Certificateholders, the Trustees, the Liquidity Providers and the
Subordination Agent hereunder or under the Trust Agreements, and that the
commitment of the Liquidity Providers under the Liquidity Facilities shall have
expired or been terminated, this Agreement and the trusts created hereby shall
terminate and this Agreement shall be of no further force or effect. Except as
aforesaid or otherwise provided, this Agreement and the trusts created hereby
shall continue in full force and effect in accordance with the terms hereof.

                  SECTION 10.2. Intercreditor Agreement for Benefit of Trustees,
Liquidity Providers and Subordination Agent. Subject to the second sentence of
Section 10.6 and the provisions of Section 4.4, nothing in this Agreement,
whether express or implied, shall be construed to give to any Person other than
the Trustees, the Liquidity Providers and the Subordination Agent any legal or
equitable right, remedy or claim under or in respect of this Agreement.

                  SECTION 10.3. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Agreement to be made, given, furnished or filed shall be in writing, mailed by
certified mail, postage prepaid, or by confirmed telecopy and

                  (i)      if to the Subordination Agent, addressed to at its
                           office at:

                           WILMINGTON TRUST COMPANY
                           One Rodney Square
                           1100 N. Market Street
                           Wilmington, DE 19890-0001
                           Attention: Corporate Trust Administration
                           Telecopy: (302) 651-8882

                                       46
<PAGE>

                  (ii)     if to any Trustee, addressed to it at its office at:

                           WILMINGTON TRUST COMPANY
                           One Rodney Square
                           1100 N. Market Street
                           Wilmington, DE 19890-0001
                           Attention: Corporate Trust Administration
                           Telecopy: (302) 651-8882

                  (iii)    if to the initial Class A-1 Liquidity Provider and
                           initial Class A-2 Liquidity Provider, addressed to it
                           at its office at:

                           Westdeutsche Landesbank Girozentrale
                           New York Branch
                           1211 Avenue of the Americas
                           New York, New York 10036

                           Attention: Transportation Finance Global Structured
                                      Finance / Americas
                           Telecopy: 212-869-7634

                           with a copy of any Notice of Borrowing to:

                           Attention: Rhaiza Villafranca, Loan Administration
                           Telecopy: (212) 302-7946

Whenever any notice in writing is required to be given by any Trustee or
Liquidity Provider or the Subordination Agent to any of the other of them, such
notice shall be deemed given and such requirement satisfied when such notice is
received. Any party hereto may change the address to which notices to such party
will be sent by giving notice of such change to the other parties to this
Agreement. A copy of any notice given hereunder shall be provided to Southwest
by the Subordination Agent at the address referred to in the Participation
Agreements.

                  SECTION 10.4. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                  SECTION 10.5. No Oral Modifications or Continuing Waivers. No
terms or provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party or
other Person against whom enforcement of the change, waiver, discharge or
termination is sought and any other party or other Person whose consent is
required pursuant to this Agreement and any waiver of the terms hereof shall be
effective only in the specific instance and for the specific purpose given.

                  SECTION 10.6. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
each of the parties hereto and

                                       47
<PAGE>

the successors and assigns of each, all as herein provided. In addition, the
Southwest Provisions shall inure to the benefit of Southwest and its successors
and assigns, and (without limitation of the foregoing) Southwest is hereby
constituted, and agreed to be, an express third party beneficiary of the
Southwest Provisions.

                  SECTION 10.7. Headings. The headings of the various Articles
and Sections herein and in the table of contents hereto are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

                  SECTION 10.8. Counterpart Form. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.

                  SECTION 10.9. Subordination. (a) As between the Liquidity
Providers, on the one hand, and the Trustees and the Certificateholders, on the
other hand, and as among the Trustees and the related Certificateholders, this
Agreement shall be a subordination agreement for purposes of Section 510 of the
United States Bankruptcy Code, as amended from time to time.

                  (b) Notwithstanding the provisions of this Agreement, if prior
to the payment in full to the Liquidity Providers of all Liquidity Obligations
then due and payable, any party hereto shall have received any payment or
distribution in respect of Equipment Notes or any other amount under the
Indentures or other Operative Agreements which, had the subordination provisions
of this Agreement been properly applied to such payment, distribution or other
amount, would not have been distributed to such Person, then such payment,
distribution or other amount shall be received and held in trust by such Person
and paid over or delivered to the Subordination Agent for application as
provided herein.

                  (c) If any Trustee, any Liquidity Provider or the
Subordination Agent receives any payment in respect of any obligations owing
hereunder (or, in the case of the Liquidity Providers, in respect of the
Liquidity Obligations), which is subsequently invalidated, declared
preferential, set aside and/or required to be repaid to a trustee, receiver or
other party, then, to the extent of such payment, such obligations (or, in the
case of the Liquidity Providers, such Liquidity Obligations) intended to be
satisfied shall be revived and continue in full force and effect as if such
payment had not been received.

                  (d) The Trustees (on behalf of themselves and the holders of
Certificates), the Liquidity Providers and the Subordination Agent confirm that
the payment priorities specified in Sections 2.4, 3.2 and 3.3 shall apply in all
circumstances, notwithstanding the fact that the obligations owed to the
Trustees and the holders of Certificates are secured by certain assets and the
Liquidity Obligations may not be so secured. The Trustees expressly agree (on
behalf of themselves and the holders of Certificates) not to assert priority
over the holders of Liquidity Obligations due to their status as secured
creditors in any bankruptcy, insolvency or other legal proceeding.

                                       48
<PAGE>

                  (e) Each of the Trustees (on behalf of themselves and the
holders of Certificates), the Liquidity Providers and the Subordination Agent
may take any of the following actions without impairing its rights under this
Agreement:

                  (i) obtain a Lien on any property to secure any amounts owing
         to it hereunder, including, in the case of the Liquidity Providers, the
         Liquidity Obligations,

                  (ii) obtain the primary or secondary obligation of any other
         obligor with respect to any amounts owing to it hereunder, including,
         in the case of the Liquidity Providers, any of the Liquidity
         Obligations,

                  (iii) renew, extend, increase, alter or exchange any amounts
         owing to it hereunder, including, in the case of the Liquidity
         Providers, any of the Liquidity Obligations, or release or compromise
         any obligation of any obligor with respect thereto,

                  (iv) refrain from exercising any right or remedy, or delay in
         exercising such right or remedy, which it may have, or

                  (v) take any other action which might discharge a subordinated
         party or a surety under applicable law;

provided, however, that the taking of any such actions by any of the Trustees,
the Liquidity Providers or the Subordination Agent shall not prejudice the
rights or adversely affect the obligations of any other party under this
Agreement.

                  SECTION 10.10. Governing Law. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

                  SECTION 10.11. Submission to Jurisdiction; Waiver of Jury
Trial; Waiver of Immunity.

                  (a) Each of the parties hereto hereby irrevocably and
         unconditionally:

                  (i) submits for itself and its property in any legal action or
         proceeding relating to this Agreement or any other Operative Agreement,
         or for recognition and enforcement of any judgment in respect hereof or
         thereof, to the nonexclusive general jurisdiction of the courts of the
         State of New York, the courts of the United States of America for the
         Southern District of New York, and the appellate courts from any
         thereof;

                  (ii) consents that any such action or proceeding may be
         brought in such courts, and waives any objection that it may now or
         hereafter have to the venue of any such action or proceeding in any
         such court or that such action or proceeding was brought in an
         inconvenient court and agrees not to plead or claim the same;

                  (iii) agrees that service of process in any such action or
         proceeding may be effected by mailing a copy thereof by registered or
         certified mail (or any substantially

                                       49
<PAGE>

         similar form of mail), postage prepaid, to each party hereto at its
         address set forth in Section 10.3 hereof, or at such other address of
         which the other parties shall have been notified pursuant thereto; and

                  (iv) agrees that nothing herein shall affect the right to
         effect service of process in any other manner permitted by law or shall
         limit the right to sue in any other jurisdiction.

                  (b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED,
including, without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each of the parties
warrants and represents that it has reviewed this waiver with its legal counsel,
and that it knowingly and voluntarily waives its jury trial rights following
consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

                  (c) Each Liquidity Provider hereby waives any immunity it may
have from the jurisdiction of the courts of the United States of America or of
any State and waives any immunity any of its properties located in the United
States of America may have from attachment or execution upon a judgment entered
by any such court under the United States Foreign Sovereign Immunities Act of
1976 or any similar successor legislation.

                                       50
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written, and acknowledge that
this Agreement has been made and delivered in the City of New York, and this
Agreement has become effective only upon such execution and delivery.

                                       WILMINGTON TRUST COMPANY,
                                       not in its individual capacity but solely
                                       as Trustee for each of the Trusts

                                       By
                                         ---------------------------------------
                                       Name:
                                       Title:

                                       WESTDEUTCHE LANDESBANK GIROZENTRALE, New
                                       York Branch, as Class A-1 Liquidity
                                       Provider and Class A-2 Liquidity Provider

                                       By
                                         ---------------------------------------
                                       Name:
                                       Title:

                                       By
                                         ---------------------------------------
                                       Name:
                                       Title:

                                       WILMINGTON TRUST COMPANY, not in its
                                       individual capacity except as expressly
                                       set forth herein but solely as
                                       Subordination Agent and trustee

                                       By
                                         ---------------------------------------
                                       Name:
                                       Title:

<PAGE>

                                   Schedule I

                                   Indentures

1.       Trust Indenture and Mortgage (N700GS) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

2.       Trust Indenture and Mortgage (N701GS) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

3.       Trust Indenture and Mortgage (N703SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

4.       Trust Indenture and Mortgage (N706SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

5.       Trust Indenture and Mortgage (N712SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

6.       Trust Indenture and Mortgage (N798SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

7.       Trust Indenture and Mortgage (N713SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

8.       Trust Indenture and Mortgage (N714CB) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

9.       Trust Indenture and Mortgage (N715SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

10.      Trust Indenture and Mortgage (N716SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

11.      Trust Indenture and Mortgage (N719SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

12.      Trust Indenture and Mortgage (N720WN) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

13.      Trust Indenture and Mortgage (N707SA) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

14.      Trust Indenture and Mortgage (N742SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

15.      Trust Indenture and Mortgage (N726SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

<PAGE>

16.      Trust Indenture and Mortgage (N745SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

17.      Trust Indenture and Mortgage (N727SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

18.      Trust Indenture and Mortgage (N728SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

19.      Trust Indenture and Mortgage (N729SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

20.      Trust Indenture and Mortgage (N770SA) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

21.      Trust Indenture and Mortgage (N772SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

22.      Trust Indenture and Mortgage (N782SA) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

23.      Trust Indenture and Mortgage (N789SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

24.      Trust Indenture and Mortgage (N791SW) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

25.      Trust Indenture and Mortgage (N400WN) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

26.      Trust Indenture and Mortgage (N797MX) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

27.      Trust Indenture and Mortgage (N403WN) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

28.      Trust Indenture and Mortgage (N405WN) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

29.      Trust Indenture and Mortgage (N406WN) between Southwest Airlines Co.
         and Wilmington Trust Company, in its individual capacity and as
         Mortgagee.

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