September 17, 1996 - PARTICIPATION AGREEMENT - 8-K: Current report filing | Southwest Airlines Co. (LUV)

EXHIBIT 4.57

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

PARTICIPATION AGREEMENT

dated as of August 1, 1996

among

SOUTHWEST AIRLINES CO.,
Lessee,

NATIONSBANK, N.A.,
Owner Participant,

WILMINGTON TRUST COMPANY,
in its capacity as
Pass Through Trustee under each
of the Pass Through Trust Agreements

FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,

and

WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee

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

One Boeing Model 737-3H4 Aircraft

SOUTHWEST AIRLINES 1996 TRUST N625SW

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

PARTICIPATION AGREEMENT [N625SW]
-i-

(viii) Registration and Recordation. . . . . . . . . . . 16
(ix) Chief Executive Office; Name. . . . . . . . . . . 16
(x) Securities Laws. . . . . . . . . . . . . . . . . 16
(xi) No Misstatement or Omission. . . . . . . . . . . 17
(xii) Investment Company. . . . . . . . . . . . . . . . 17
(xiii) No Event of Default. . . . . . . . . . . . . . . 17
(xiv) Effective Sale. . . . . . . . . . . . . . . . . . 17
(xv) ERISA. . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . 17
(xvii) Condition of Aircraft. . . . . . . . . . . . . . 18
(xviii) Use of Proceeds. . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals. . . . . . . . . . . . . . . 18
(xx) Section 1110. . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity. . . . . . . . . . . . . . . . . . 18
(i) Indemnity. . . . . . . . . . . . . . . . . . . . 18
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation. . . . . . . . . . . . . . . . . . . 20
(iv) Notice and Contest. . . . . . . . . . . . . . . . 21
(v) Withholdings. . . . . . . . . . . . . . . . . . . 23
(vi) . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . 23
(i) Indemnity. . . . . . . . . . . . . . . . . . . . 23
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . 24
(iii) Notice. . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses
of Trustees . . . . . . . . . . . . . . . . . . . 25
(d) Owner Participant's Indemnity. . . . . . . . . . . . . . 27
(e) Payments. . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Interest on Overdue Amounts. . . . . . . . . . . . . . . 27
(g) Survival. . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 8. Other Representations, Warranties, Covenants and
Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Securities Laws. . . . . . . . . . . . . . . . . . . . . 27
(b) Citizenship. . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of FUNB. . . . . . . . . . . . . . 28
(d) [Intentionally Omitted]. . . . . . . . . . . . . . . . . 29
(e) Actions of Pass Through Trustee. . . . . . . . . . . . . 29
(f) Owner Participant's Representations and Warranties. . . . 29
(g) Lessor Liens. . . . . . . . . . . . . . . . . . . . . . . 30
(h) Indenture Trustee Liens. . . . . . . . . . . . . . . . . 30
(i) Termination Instructions to Owner Trustee. . . . . . . . 31
(j) Excess Payment. . . . . . . . . . . . . . . . . . . . . . 31
(k) Representations and Warranties of Wilmington Trust Company
in Individual Capacity . . . . . . . . . . . . . . . . . 31
(l) Transfers of Equity Interests; Rights of Owner Participant
and Owner Trustee. . . . . . . . . . . . . . . . . . . . 32
(m) Obligations of Trustees. . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture. . . . . . . . . . . . . 34

PARTICIPATION AGREEMENT [N625SW]
-ii-

(o) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) FUNB's Representations and Warranties. . . . . . . . . . 34
(q) Owner Participant's Lease Expenses. . . . . . . . . . . . 36
(r) Lessee's Assumption of Debt. . . . . . . . . . . . . . . 36
(s) [Intentionally Reserved]. . . . . . . . . . . . . . . . . 36
(t) [Intentionally Reserved]. . . . . . . . . . . . . . . . . 36
(u) Lease Adjustments. . . . . . . . . . . . . . . . . . . . 36
(v) Revocation of Trust Agreement. . . . . . . . . . . . . . 36
(w) Trust Agreement Not Terminated. . . . . . . . . . . . . . 37
(x) [Intentionally Reserved]. . . . . . . . . . . . . . . . . 37
(y) Discharge of Trust Indenture. . . . . . . . . . . . . . . 37
(z) Permitted Investments. . . . . . . . . . . . . . . . . . 37
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . 38
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . 39

SECTION 9. Payments to Lessee of Trust Indenture Monies. . . . . . . . . 39

SECTION 10. Other Documents; Amendment. . . . . . . . . . . . . . . . . . 39

SECTION 11. Certain Covenants of Lessee. . . . . . . . . . . . . . . . . . 40
(a) Further Assurances. . . . . . . . . . . . . . . . . . . . 40
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . 40
(c) FAA Filings. . . . . . . . . . . . . . . . . . . . . . . 40
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . 41
(e) Engine Purchase Agreement. . . . . . . . . . . . . . . . 41
(f) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 41
(g) Corporate Existence. . . . . . . . . . . . . . . . . . . 42
(h) No Certificate Ownership. . . . . . . . . . . . . . . . . 42

SECTION 12. Ownership of Aircraft. . . . . . . . . . . . . . . . . . . . . 42

SECTION 13. Notices; Consent to Jurisdiction. . . . . . . . . . . . . . . 42

SECTION 14. Change of Situs of Owner Trust. . . . . . . . . . . . . . . . 43

SECTION 15. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Consents under Lease and Trust Indenture. . . . . . . . . 44
(b) Survival. . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Counterparts; Waivers; Governing Law. . . . . . . . . . . 44
(d) No Recourse Against Owner Trustee. . . . . . . . . . . . 45
(e) Duties Limited. . . . . . . . . . . . . . . . . . . . . . 45
(f) Binding on Parties and Successors. . . . . . . . . . . . 45
(g) Enforceability Representations. . . . . . . . . . . . . . 45
(h) Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . 45
(i) Copies. . . . . . . . . . . . . . . . . . . . . . . . . . 46

SECTION 16. Transaction Costs; Invoices and Payment of Expenses. . . . . . 46

SECTION 17. Optional Redemption of Certificates. . . . . . . . . . . . . . 47

PARTICIPATION AGREEMENT [N625SW]
-iii-

SECTION 18. Section 1110 Compliance. . . . . . . . . . . . . . . . . . . 50

SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1

SCHEDULE II
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2

EXHIBIT A - Form of Guaranty

EXHIBIT B - Form of Assignment and Assumption

EXHIBIT C - Form of Trust Indenture and Security Agreement to be executed on
the Delivery Date

EXHIBIT D - Form of Sale and Lease Agreement to be executed on the Delivery
Date

PARTICIPATION AGREEMENT [N625SW]
-iv-
PARTICIPATION AGREEMENT

THIS PARTICIPATION AGREEMENT dated as of August 1, 1996 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) NATIONSBANK, N.A., a national banking association (the "Owner
Participant"), (iii) FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association, in its individual capacity, only as expressly provided
herein (in such capacity, "FUNB") and otherwise, solely as Owner Trustee under
the Trust Agreement (in such capacity, the "Owner Trustee"), and (iv)
WILMINGTON TRUST COMPANY, a Delaware banking corporation, in its individual
capacity and as Indenture Trustee under the Trust Indenture (the "Indenture
Trustee") and in its capacity as Pass Through Trustee under each of the Pass
Through Trust Agreements ("Pass Through Trustee") and as Holder.

W I T N E S S E T H:

WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, and has sold one such aircraft having U.S. Registration No. N625SW
and Manufacturer's serial number 27701 to Lessee which is the subject of this
Agreement; and

WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and

WHEREAS, on the Delivery Date,

(i) Lessee and the Owner Trustee will enter into a
Purchase Agreement Assignment whereby Lessee agrees to assign to the
Owner Trustee certain rights and interests of Lessee under the Purchase
Agreement with respect to the Aircraft; and

(ii) the Manufacturer will have executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and

WHEREAS, the Indenture Trustee and the Owner Trustee will enter
into the Trust Indenture in the form attached hereto as Exhibit C pursuant to
which the Owner Trustee agrees, among other things, to issue one or more
Certificates as evidence of the Owner Trustee's indebtedness to each Pass
Through Trustee as Holder, which Certificates are to be secured by the mortgage
and security interest in, among other things, the Aircraft, created pursuant to
the Trust Indenture by the Owner Trustee in favor of the Indenture Trustee; and

PARTICIPATION AGREEMENT [N625SW]
-1-
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and

WHEREAS, to facilitate Owner Trustee's sale of the Certificates to the
Pass Through Trustee and the purchase of such Certificates by the applicable
Pass Through Trustee, Lessee will duly authorize the execution and delivery of
one or more Pass Through Trust Agreements as the "issuer' thereunder, as such
term is defined in and solely for purposes of the Securities Act of 1933, as
amended, and of the related Pass Through Certificates as the "obligor"
thereupon, as such term is defined in and solely for purposes of the Trust
Indenture Act of 1939, as amended, and is undertaking to perform certain
administrative and ministerial duties thereunder and is also undertaking to pay
the fees and expenses of the Pass Through Trustee; and

WHEREAS, pending the purchase of the Certificates, the proceeds from the
sale of the Pass Through Certificates will be held in the Escrow Account (as
defined in Section 2.02(b) of the Pass Through Trust Agreement) and thereafter,
on the Delivery Date, applied to effect the purchase of the Certificates and in
turn the purchase of the Aircraft from the Lessee pursuant to the Sale and
Lease Agreement to be executed and delivered by Lessee and Owner Trustee on the
Delivery Date in the form attached hereto as Exhibit D (as completed pursuant
to Section 4(a)(v)(1), the "Lease"); and on the Delivery Date the Owner Trustee
shall execute and deliver the Trust Supplement covering the Aircraft,
supplementing the Trust Agreement and the Trust Indenture; and

WHEREAS, as described in Section 2 hereof, on the Delivery Date
the Owner Trustee and Lessee will enter into the Lease whereby, subject to the
terms and conditions set forth therein, on the Delivery Date the Owner Trustee
will purchase the Aircraft from Lessee and lease the same back to Lessee, and
Lessee will sell the Aircraft to the Owner Trustee and lease the same back from
the Owner Trustee;

NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

SECTION 1. CERTAIN DEFINITIONS; PARTICIPATIONS IN LESSOR'S
COST OF THE AIRCRAFT. (a) The terms "Lessee," "Owner Participant," "Pass
Through Trustee," "Owner Trustee" and "Indenture Trustee" shall have the
further meanings attributed thereto in the form of Lease attached hereto as
Exhibit D, relating to the Aircraft referred to in the first recital herein,
and, except as otherwise defined in this Agreement, terms used herein in
capitalized form shall have the meanings attributed thereto in such form of
Lease or the form of Trust Indenture attached hereto as Exhibit C. The term
"Trust Supplement" has the meaning attributed to the term "Indenture and Trust
Supplement" in the Lease and to the term "Trust Supplement" in the Trust
Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.

PARTICIPATION AGREEMENT [N625SW]
-2-
(b) Subject to the terms and conditions of this Agreement, (i)
each of the Pass Through Trustees agrees to finance, in part, the Owner
Trustee's payment of Lessor's Cost for the Aircraft by making a secured loan to
the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1996,
and (ii) the Owner Participant hereby agrees, in connection with its equity
investment in the beneficial ownership of the Aircraft and the sale of the
Aircraft by Lessee to the Owner Trustee pursuant to the Lessee FAA Bill of Sale
and Lessee Warranty Bill of Sale, as contemplated hereby, to make its equity
investment in the beneficial ownership of the Aircraft on a date to be
designated pursuant to Section 2 hereof, but in no event later than September
30, 1996. Each Pass Through Trustee shall, in accordance with Section 2.01 of
the applicable Pass Through Trust Agreement, execute, authenticate and deliver
Pass Through Certificates, dated a date not later than the Delivery Date and of
the maturities, in the principal amounts, bearing the interest rates and of the
other economic terms specified in the request of the Company delivered pursuant
to such Section 2.01, and deliver such Pass Through Certificates to Morgan
Stanley & Co., Incorporated as representative of the Underwriters (the
"Underwriters") of the public offering of the Pass Through Certificates, as
specified in such request against payment by the Underwriters of an amount
equal to the aggregate principal amount of its Loan. In the case of the Owner
Participant, the amount of its participation to be made as provided above in
the payment of Lessor's Cost and, in the case of each of the Pass Through
Trustees, the amount of its Loan is hereinafter called such Participant's
"Commitment" for the Aircraft. In case any Participant shall default in its
obligation to make the amount of its Commitment available pursuant to Section 2
hereof in respect of the Aircraft, the other Participants shall have no
obligation to make any portion of such amount available or to increase the
amount of its Commitment and the obligation of the nondefaulting Participants
shall remain subject to the terms and conditions set forth in this Agreement.

(c) Owner Participant has delivered to Babcock & Brown
Financial Corporation ("Babcock & Brown") a computer file containing the
parameters for determining (1) the rent schedules, Stipulated Loss Value
schedule, Termination Value schedule, the expiration date of the Base Lease
Term and purchase option dates and amounts to be contained in the Lease, and
(2) the amount of each Participant's Commitment, based on an assumed interest
rate and other assumptions. The parties hereto agree that such parameters will
be adjusted to reflect any differences between (3) the assumptions on which
such computer file is based and (4) the actual interest rates realized on the
issuance of the Pass Through Certificates and the other actual facts and
circumstances in respect of the transactions contemplated by this Agreement for
the purposes of determining (5) the dates and amounts required to complete the
Lease (including the Basic Rent, Stipulated Loss Values and Termination Values)
and (6) the amount of the Owner Participant's Commitment, the amount of each
Loan, the aggregate principal amount of the Certificates, such parameters to be
applied to maintain Net Economic Return and minimize the Net Present Value of
Rents to the extent possible consistent with maintaining Net Economic Return.

(d) In the event that Owner Participant shall for any reason
fail or refuse to make the full amount of its Commitment available to the Owner
Trustee in accordance with the terms of paragraph (b) of this Section 1 (such
Participant, for the purpose of this Agreement, being called a "Defaulting
Participant"), the Owner Trustee shall give, at the earliest practicable time
(which may be the next Business Day), each party hereto telephonic notice (to
be confirmed promptly in writing) of such failure or refusal and the funds
received by the Owner Trustee in connection with the Aircraft will be held in
accordance with the terms of, and for the period provided in, paragraph (b) of
Section 2. In such

PARTICIPATION AGREEMENT [N625SW]
-3-
event the Defaulting Participant will have no further right to participate in
the payment of Lessor's Cost for the Aircraft. Lessee shall have the right to
designate a financial institution (which term, as used in this paragraph (d),
shall mean any banking or financial institution, institutional investor or fund
which is not affiliated with Lessee or with Owner Participant) to be
substituted for the Defaulting Participant; provided, however, that (i) such
substituted financial institution shall sign and deliver an amendment to this
Agreement, in form and substance satisfactory to the Owner Trustee and the
Indenture Trustee whereby such financial institution agrees to be a party to
this Agreement, to be bound by all the terms hereof and to undertake all the
obligations of the Defaulting Participant contained herein, other than
obligations, if any, arising from the aforesaid failure or refusal by such
Defaulting Participant, and (ii) (A) each such substituted financial
institution shall be domiciled in the United States and shall be a citizen of
the United States within the meaning of the Act and shall have the requisite
power and authority to enter into and carry out the transactions contemplated
by this Agreement and the Trust Agreement, (B) such substituted financial
institution shall enter into amendments to the Trust Agreement, in form and
substance satisfactory to the Owner Trustee, and the Indenture Trustee whereby
such substituted financial institution agrees to be a party to the Trust
Agreement, to be bound by all the terms thereof and to undertake all the
obligations of the Defaulting Participant contained therein, and (C) the
substitution of such substituted financial institution as above provided shall
not violate any provisions of the Act or the regulations promulgated
thereunder, or create a relationship which would be in violation thereof and
such substituted financial institution shall so represent in writing to each
other party hereto. No action by Lessee in finding a financial institution to
be substituted as above provided shall be deemed to constitute a waiver or
release of any right which Lessee may have against the Defaulting Participant.
Each financial institution substituted for the Owner Participant pursuant to
this paragraph (d) shall (collectively, if more than one) be deemed the Owner
Participant for all purposes of this Agreement.

SECTION 2. LESSEE'S NOTICE OF DELIVERY DATE. (a) Lessee
agrees to give the Owner Participant, the Owner Trustee, each of the Pass
Through Trustees and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than September 30, 1996, which notice shall specify
the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice.
The Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Owner Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Certificates in the full amount of each Pass Through
Trustee's Commitment.

Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1996 Trust N625SW Certificates which shall be
delivered simultaneously to each of the Pass Through Trustees. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.

PARTICIPATION AGREEMENT [N625SW]
-4-
The Owner Participant agrees to make its Commitment available to
First Union National Bank of North Carolina, Charlotte, North Carolina, Account
No. 465946, ABA No. 053000219, Reference: Southwest Airlines 1996 Trust
N625SW, and the Pass Through Trustees agree to make their Commitment available
to the Indenture Trustee at the Indenture Trustee's account no. 40376-0, at or
before 10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").

(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 1996. In the event that
no Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.

If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time.

"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Pass
Through Trustees, the rate per annum borne by the Series SWA 1996 Trust N625SW
Certificate in respect of which such Participant's Commitment is made
available. "Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published on
the succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Owner
Participant from three federal funds brokers of recognized standing selected by
it; provided, that the "Federal Funds Effective Rate" for any non-Business Day
shall be the "Federal Funds Effective Rate" for the previous Business Day.

FUNB agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Owner
Participant, use reasonable efforts to invest, at the risk, expense and
direction of Lessee, the funds received by it from the Owner Participant in
marketable direct obligations of the United States of America or obligations of
any of its agencies that are guaranteed as to principal and interest by the
United States of America, in any such case having a stated maturity not later
than 91 days from the date of acquisition. Any such investment may be made
through a repurchase agreement in commercially reasonable form with FUNB or a
bank or other financial

PARTICIPATION AGREEMENT [N625SW]
-5-
institution having capital, surplus and undivided profits of at least
$100,000,000; provided, that title to the underlying obligations shall pass to
FUNB and that such underlying securities shall be segregated in a custodial or
trust account of or for the benefit of FUNB. Any such obligations purchased by
FUNB, whether directly or through a repurchase agreement, shall be held in
trust by FUNB (but not as part of the Trust Estate or Trust Indenture Estate)
for the benefit of the Owner Participant. Lessee shall, on the Delayed
Delivery Date or the date the funds furnished by the Owner Participant are
required to be returned to the Owner Participant, as the case may be, reimburse
FUNB for the benefit of the Owner Participant, for any losses incurred on such
investments.

All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the account of the Owner
Participant (such income and profits to be credited against Lessee's obligation
to reimburse the Owner Participant for the loss of use of funds made available
to FUNB) and all other income and profits and all losses on the investment of
such funds shall be for the account of Lessee; and FUNB shall not be liable for
failure to invest such funds or for any losses incurred on such investments
except for its own willful misconduct or negligence.

SECTION 3. INSTRUCTIONS TO THE OWNER TRUSTEE AND INDENTURE
TRUSTEE. Subject to the terms and conditions of this Agreement, the Owner
Trustee and the Indenture Trustee, upon their respective receipts in full of
the Owner Participant's and the Pass Through Trustees' Commitments for the
Aircraft, as provided in Section 2 hereof, together with instructions from such
Participant or its special counsel to release such funds to Lessee, shall
transfer such funds to Lessee and the Owner Trustee shall purchase the Aircraft
from Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to
the Owner Trustee and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard
to items (b) - (f) below):

(a) to pay to Lessee the Lessor's Cost in the manner set forth
in Section 2;

(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;

(c) to accept from Lessee the Lessee Warranty Bill of Sale and
the Lessee FAA Bill of Sale and the invoice with respect to the Aircraft;

(d) to execute an aircraft registration application, the
Lease, the Trust Indenture, a Lease Supplement and a Trust Supplement, in each
case covering the Aircraft;

(e) to borrow the Loan from the Pass Through Trustees to
finance a portion of Lessor's Cost and to issue to the Pass Through Trustees
Series SWA 1996 Trust N625SW Certificates in an aggregate principal amount
equal to the amount borrowed pursuant to the Trust Indenture; and

(f) to take such other action as may be required to be taken
by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.

SECTION 4. CONDITIONS. (A) CONDITIONS PRECEDENT TO THE
PARTICIPATIONS IN THE AIRCRAFT. It is agreed that the respective obligations
of the Participants to participate in the payments

PARTICIPATION AGREEMENT [N625SW]
-6-
of Lessor's Cost are subject to the satisfaction prior to or on the Delivery
Date of the following conditions precedent, except that paragraphs (iii),
(xvii), (xxi) (insofar as it relates to the Pass Through Trustees), (xxii) and
(xxiii) shall not be conditions precedent to the obligation of the Pass Through
Trustees, and paragraphs (iv), (xiii), (xxi) (insofar as it relates to the
Owner Participant) and (xxiv) shall not be conditions precedent to the
obligation of the Owner Participant:

(i) NOTICE. Each Participant shall have received due
notice with respect to such participation pursuant to Section 2 hereof
(or shall have waived such notice either in writing or as provided in
Section 2).

(ii) NO CHANGE IN LAW. No change shall have occurred
after the date of the execution and delivery of this Agreement in
applicable law or regulations thereunder or interpretations thereof by
appropriate regulatory or judicial authorities which, in the opinion of
the Owner Participant or the Pass Through Trustees, as the case may be,
would make it a violation of law or regulations for (x) Lessee, the
Indenture Trustee, any Participant or the Owner Trustee to execute,
deliver and perform the Operative Agreements to which any of them is a
party or (y) the Pass Through Trustees or the Owner Participant to make
their respective Commitments available or, in the case of any Pass
Through Trustee, to acquire a Series SWA 1996 Trust N625SW Certificate
or to realize the benefits of the security afforded by the Trust
Indenture.

(iii) PASS THROUGH TRUSTEES' COMMITMENT. In the case of
the Owner Participant, the Pass Through Trustees shall have made
available the amount of their respective Commitments for the Aircraft in
accordance with Section 1 hereof.

(iv) OWNER PARTICIPANT'S COMMITMENT. In the case of the
Pass Through Trustees, the Owner Participant shall have made available
the amount of its Commitment for the Aircraft in accordance with Section
1 hereof.

(v) AUTHORIZATION, EXECUTION AND DELIVERY OF DOCUMENTS.
The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall each be
satisfactory in form and substance to the Participants and shall be in
full force and effect and executed counterparts shall have been
delivered to each Participant and its respective counsel; provided, that
only the applicable Pass Through Trustee shall receive an executed
original of its Series SWA 1996 Trust N625SW Certificate, only the
Indenture Trustee, acting on behalf of the Holders, shall receive the
original counterpart of the Lease and the initial Lease Supplement, and
only the Lessee and the Owner Participant shall receive copies of the
Tax Indemnity Agreement:

(1) the Lease, with all the blanks in the form
of Lease attached hereto as Exhibit D completed by the insertion
of appropriate dates and amounts conforming to the computer file
referred to in Section 1(c) adjusted as contemplated therein;

(2) a Lease Supplement covering the Aircraft and
dated the Delivery Date;

PARTICIPATION AGREEMENT [N625SW]
-7-
(3) the Tax Indemnity Agreement;

(4) the Trust Agreement;

(5) a Trust Supplement covering the Aircraft and
dated the Delivery Date;

(6) the Bills of Sale;

(7) the Purchase Agreement Assignment;

(8) an acceptance certificate covering the
Aircraft in the form agreed to by the Participants and Lessee
(the "Acceptance Certificate") duly completed and executed by the
Owner Trustee or its agent, which shall be a representative of
Lessee, and by such representative on behalf of Lessee;

(9) the Trust Indenture;

(10) the Series SWA 1996 Trust N625SW
Certificates;

(11) the Manufacturer's Consent; and

(12) the Pass Through Trust Agreements.

(vi) UCC-1'S. Uniform Commercial Code financing
statement or statements covering all of the security interests created
by or pursuant to the Granting Clause of the Trust Indenture and
precautionary Uniform Commercial Code financing statement or statements
with respect to the Lease shall have been executed and delivered, and
all such financing statement or statements shall have been duly filed in
all places necessary or advisable, and any additional Uniform Commercial
Code financing statements deemed advisable by the Owner Participant or
the Pass Through Trustees shall have been executed and delivered by
Lessee, the Indenture Trustee or the Owner Trustee and duly filed.

(vii) PROOF OF CORPORATE ACTION, ETC. Each Participant
and the Indenture Trustee shall have received the following, in each
case in form and substance satisfactory to it:

(1) a certified copy of the Restated Articles of
Incorporation and Bylaws of Lessee and a copy of resolutions of
the board of directors of Lessee or the executive committee
thereof, certified by the Secretary or an Assistant Secretary of
Lessee, duly authorizing the execution, delivery and performance
by Lessee of this Agreement, the Lease, the Purchase Agreement
Assignment, the Lessee Warranty Bill of Sale, the Lessee FAA Bill
of Sale, the Tax Indemnity Agreement and each other document
required to be executed and delivered by Lessee on the Delivery
Date in accordance with the provisions hereof and thereof;

PARTICIPATION AGREEMENT [N625SW]
-8-
(2) such other documents and evidence with
respect to Lessee, the Manufacturer, the Owner Trustee, the
Indenture Trustee and the Participants, as the Pass Through
Trustees or the Owner Participant, or their respective counsel,
may reasonably request in order to establish the authority of
such parties to consummate the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and the compliance with the conditions herein set
forth;

(3) a certificate of Lessee as to the person or
persons authorized to execute and deliver this Agreement, the
other Lessee Documents, and any other documents to be executed on
behalf of Lessee in connection with the transactions contemplated
hereby and as to the signature of such person or persons;

(4) a copy of the Purchase Agreement (to the
Owner Participant and the Indenture Trustee only) certified by
the Treasurer, the Assistant Treasurer or an Assistant Secretary
of Lessee as being a true and accurate copy of the same with all
amendments attached thereto that relate to the Manufacturer's
warranties or related obligations or any right in such Agreement
assigned by Lessee to the Owner Trustee pursuant to the Purchase
Agreement Assignment; and

(5) a copy of the general authorizing
resolutions of the boards of directors (or executive committees)
or other satisfactory evidence of authorization of the Indenture
Trustee (in its individual capacity), FUNB and the Owner
Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its
individual capacity), FUNB and the Owner Participant,
respectively, which authorize the execution, delivery and
performance by the Indenture Trustee (in its individual
capacity), FUNB and the Owner Participant, respectively, of all
of the Operative Agreements to which it is a party, together with
such other documents and evidence with respect to the Indenture
Trustee (in its individual capacity), each Pass Through Trustee
and FUNB as the Owner Participant (or its counsel) may reasonably
request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with
the conditions herein set forth; provided, this clause shall not
be a condition precedent as to any Participant as to documents to
be provided by that Participant.

(viii) GOVERNMENTAL APPROVALS. All appropriate action
required to have been taken by the Federal Aviation Administration, or
any other governmental or political agency, subdivision or
instrumentality of the United States, or any state thereof, prior to the
Delivery Date 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 Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals shall
be in full force and effect on the Delivery Date.

PARTICIPATION AGREEMENT [N625SW]
-9-
(ix) TITLE, REGISTRATION, AIRWORTHINESS, ETC. On the
Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:

(1) the Owner Trustee has good and marketable
title (subject to filing and recording of the Lessee FAA Bill of
Sale with the Federal Aviation Administration in accordance with
the Act) to the Aircraft, free and clear of Liens other than the
rights of Lessee under the Lease and Lease Supplement covering
the Aircraft, the mortgage and security interest created by the
Trust Indenture, the rights of the Owner Participant under the
Trust Agreement and the Trust Supplement and Liens permitted by
clause (d) (solely for taxes not yet due) or (e) of Section 6 of
the Lease;

(2) application for registration of the Aircraft
in the name of the Owner Trustee (together with any required
affidavits), the FAA Bill of Sale and the Lessee FAA Bill of Sale
have been duly filed with the FAA;

(3) the Trust Agreement, the Trust Indenture and
the Trust Supplement and the Lease and the Lease Supplement have
been duly filed with the FAA for recordation pursuant to the Act;

(4) each of the Owner Trustee, as lessor under
the Lease, and the Indenture Trustee, as assignee thereof, is
entitled to the protection of Section 1110 of the United States
Bankruptcy Code in connection with its right to take possession
of the Airframe and Engines in the event of a case under Chapter
11 of the United States Bankruptcy Code in which Lessee is a
debtor; and

(5) the Aircraft has been duly certificated by
the FAA as to type and airworthiness in accordance with the terms
of the Lease and has a current, valid U.S. standard certificate
of airworthiness issued by the FAA.

(x) REPRESENTATIONS AND WARRANTIES ACCURATE; NO EVENT
OF DEFAULT; NO ADVERSE CHANGE. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as though
made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with the
passage of time or the giving of notice or both, constitute) a Lease
Event of Default or an Indenture Event of Default, and (C) no material
adverse change shall have occurred in the consolidated financial
condition of Lessee and its subsidiaries from that shown in the
consolidated financial statements of Lessee and its subsidiaries as of
December 31, 1995.

(xi) OPINIONS OF LESSEE'S COUNSEL. Each Participant
shall have received a favorable opinion, in form and substance
satisfactory to it, addressed to the Participants, the Indenture Trustee
and the Owner Trustee from Deborah Ackerman, Associate General Counsel
for Lessee.

PARTICIPATION AGREEMENT [N625SW]
-10-
(xii) OPINION OF OWNER TRUSTEE'S COUNSEL. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Moore & Van Allen,
PLLC, counsel for the Owner Trustee.

(xiii) OPINIONS OF OWNER PARTICIPANT'S COUNSEL. Each Pass
Through Trustee shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Indenture Trustee, the
Pass Through Trustees, the Owner Trustee and Lessee from (a) Morgan,
Lewis & Bockius LLP, special counsel to the Owner Participant, and (b)
in-house or other counsel for the Owner Participant in a position to
address the Owner Participant's due organization and due authorization
and execution of the Operative Agreements to which the Owner Participant
is a party.

(xiv) OPINION OF OKLAHOMA CITY COUNSEL. Each Participant
shall have received a favorable opinion, in form and substance
satisfactory to it, addressed to the Participants, the Indenture
Trustee, the Owner Trustee and Lessee, from Daugherty, Fowler &
Peregrin, special counsel in Oklahoma City, Oklahoma.

(xv) OPINION OF INDENTURE TRUSTEE'S COUNSEL. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.

(xvi) LESSEE'S BRINGDOWN CERTIFICATE. Each Participant
and the Indenture Trustee shall have received a certificate signed by
the President, any Vice President, the Treasurer or the Assistant
Treasurer of Lessee, dated the Delivery Date, certifying as to the
fulfillment of all conditions in this Section 4(a) insofar as they
relate to Lessee and as to the matters stated in paragraphs (x) (insofar
as it relates to Lessee), (xix) and (xx) (to the knowledge of Lessee,
except in regard to matters relating to the Participants, Indenture
Trustee or the Owner Trustee, in which event such representation shall
be to the knowledge of Lessee without any investigation whatsoever) of
this Section 4(a).

(xvii) APPRAISAL. The Owner Participant shall have
received an opinion, in form and substance reasonably satisfactory to
the Owner Participant, from Aero Economics, Inc., independent aircraft
appraisers, or such other recognized aircraft appraiser selected by the
Owner Participant, to the effect set forth in Schedule II hereto.

(xviii) INSURANCE CERTIFICATES. Each Participant,
the Owner Trustee and the Indenture Trustee shall have received an
independent insurance broker's report and certificates of insurance, in
form and substance reasonably satisfactory to the Participants, as to
the due compliance with the terms of Section 11 of the Lease relating to
insurance with respect to the Aircraft.

(xix) NO EVENT OF LOSS. On the Delivery Date, it shall be
true that no Event of Loss (or event which with the passage of time
would become an Event of Loss) with respect to the Airframe or any
Engine has occurred.

PARTICIPATION AGREEMENT [N625SW]
-11-
(xx) NO PROCEEDINGS. No action or proceeding shall have
been instituted, nor shall action or proceeding be threatened before any
court or governmental agency, nor shall any order, judgment or decree
have been issued or proposed to be issued by any court or governmental
agency at the time of the Delivery Date to set aside, restrain, enjoin
or prevent the completion and consummation of this Agreement or the
transactions contemplated hereby.

(xxi) BRINGDOWN OF OTHER PARTIES' REPRESENTATIONS AND
WARRANTIES. The respective representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true and
accurate on and as of such earlier date) and (a) each Participant shall,
by making its Commitment available as provided in Section 1(b) of this
Agreement, (b) the Indenture Trustee shall, by authenticating the Series
SWA 1996 Trust N625SW Certificates issued on the Delivery Date, and (c)
the Owner Trustee shall, by accepting the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale, be respectively deemed to have
reaffirmed as of the Delivery Date the representations and warranties
made by it (individually or in its trust capacities, as the case may be)
in Section 8 of this Agreement.

(xxii) OPINION OF OWNER PARTICIPANT'S TAX COUNSEL. The
Owner Participant shall have received from Morgan, Lewis & Bockius LLP,
special counsel to the Owner Participant, a favorable opinion, in form
and substance satisfactory to the Owner Participant, with respect to
income tax aspects of the transactions contemplated by the Operative
Agreements.

(xxiii) NO TAX LAW CHANGE. In the opinion of the
Owner Participant and its special counsel, there shall have been, since
two days prior to the date of execution of this Agreement, no amendment,
modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative interpretations,
applicable judicial precedents or Executive Orders of the President of
the United States which would adversely affect the accuracy of the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement.

(xxiv) COPY OF APPRAISAL. The Pass Through Trustees shall
have received a letter from Aero Economics, Inc. to the effect that the
fair market value of the Aircraft on the Delivery Date is not less than
125% of the aggregate amount of the Loans.

Promptly upon the registration of the Aircraft and the recording
of the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement
and the Trust Supplement covering the Aircraft pursuant to the Federal Aviation
Act, Lessee will request Daugherty, Fowler & Peregrin, special counsel in
Oklahoma City, Oklahoma, to deliver to the Owner Participant, the Indenture
Trustee, the Pass Through Trustees, the Owner Trustee and Lessee an opinion as
to the due and valid registration of the Aircraft in the name of the Owner
Trustee, the due recording of the FAA Bill of Sale, the Lessee FAA

PARTICIPATION AGREEMENT [N625SW]
-12-
Bill of Sale, the Trust Indenture, the Lease Supplement, the Trust Supplement,
the Lease and the Trust Agreement and the lack of filing of any intervening
documents with respect to the Aircraft.

(b) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LESSEE. It is
agreed that the obligations of Lessee (A) to participate in the sale of the
Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under the
Lease, and (C) to enter into its other Operative Agreements, are all subject to
the fulfillment to the satisfaction of Lessee prior to or on the Delivery Date
of the following conditions precedent:

(i) The conditions specified in Sections 4(a)(iii),
4(a)(iv), 4(a)(viii), 4(a)(xix) and 4(a)(xx) hereof shall have been
satisfied, unless such nonsatisfaction is the result of the actions of
Lessee.

(ii) Those documents described in Section 4(a)(v) shall
have been duly authorized, executed and delivered by the respective
party or parties thereto (other than Lessee) in the manner specified in
Section 4(a)(v), shall each be satisfactory in form and substance to
Lessee, shall be in full force and effect on the Delivery Date, and an
executed counterpart of each thereof (other than the Series SWA 1996
Trust N625SW Certificate) shall have been delivered to Lessee or its
counsel.

(iii) Lessee shall have received a copy of the general
authorizing resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of authorization of the
Indenture Trustee (in its individual capacity), FUNB and the Owner
Participant, certified as of the Delivery Date by the Secretary or an
Assistant Secretary of the Indenture Trustee (in its individual
capacity), FUNB and the Owner Participant, respectively, which authorize
the execution, delivery and performance by the Indenture Trustee (in its
individual capacity), FUNB and the Owner Participant, respectively, of
all the Operative Agreements to which it is a party, together with such
other documents and evidence with respect to the Indenture Trustee (in
its individual capacity), FUNB and the Owner Participant as Lessee or
its counsel may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement, the
taking of all corporate proceedings in connection therewith and
compliance with the conditions herein set forth.

(iv) The representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true and
accurate on and as of such earlier date).

(v) Lessee shall have received the opinions set forth
in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), and 4(a)(xv), in each case
addressed to Lessee and dated the Delivery Date.

(vi) No change shall have occurred after the date of the
execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.

PARTICIPATION AGREEMENT [N625SW]
-13-
(vii) In the opinion of Lessee and its counsel, there
shall have been, since the date of execution of this Agreement, no
amendment, modification, addition or change in or to the Code (including
for this purpose, any non-Code provisions of legislation affecting the
Code such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or proposed
regulations), Internal Revenue Service Revenue Procedures or Revenue
Rulings, or other administrative interpretations, applicable judicial
precedents or Executive Orders of the President of the United States
which might give rise to an indemnity obligation under any of the
Operative Agreements, or as a result of which any adjustments to the
Lease payments are requested by the Owner Participant which would
adversely affect the accuracy of the Tax Assumptions set forth in
Section 2 of the Tax Indemnity Agreement.

SECTION 5. CONFIDENTIALITY OF PURCHASE AGREEMENT. The Owner
Trustee, the Participants and the Indenture Trustee shall keep the Purchase
Agreement confidential and shall not disclose the same to any Person, except
(A) to prospective and permitted transferees of the Owner Trustee's, the Pass
Through Trustees', the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, in accordance with this
Section 5, (B) to the aforementioned prospective and permitted transferees',
the Owner Trustee's, the Pass Through Trustees', the Owner Participant's or the
Indenture Trustee's counsel or special counsel, independent insurance brokers
or other agents who agree to hold such information confidential, in accordance
with this Section 5, (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation, including
federal or state banking examiners, tax auditors or taxing authorities, or (D)
as may be necessary or desirable for purposes of protecting the interest of any
such Person or for enforcement of any Operative Agreement by the Owner Trustee,
the Pass Through Trustees, the Owner Participant or the Indenture Trustee;
provided, however, that any disclosures of any part of the Purchase Agreement
which are permitted by clause (C) or (D) above shall be made only to the extent
necessary to meet the specific requirements or needs of the Persons to whom
such disclosures are hereby permitted.

SECTION 6. EXTENT OF INTEREST OF HOLDERS. No Holder shall have
any further interest in, or other right with respect to, the mortgage and
security interests created by the Trust Indenture when and if the outstanding
principal amount of, Premium, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under the
Trust Indenture and under such Certificates shall have been paid in full. Each
Holder, by its acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Indenture Estate to the extent available
for distribution to such Holder as provided in Section 2.09 of the Trust
Indenture and that neither the Owner Participant nor the Owner Trustee shall be
personally liable to any Holder for any amounts payable under the Certificates,
the Trust Indenture, hereunder, or under any other Operative Agreement
(including, without limitation, amounts payable as Premium), except as
expressly provided in this Agreement or (in the case of the Owner Trustee) in
the Trust Indenture.

SECTION 7. LESSEE'S REPRESENTATIONS AND WARRANTIES;
INDEMNITIES.

(a) IN GENERAL. Lessee represents warrants, covenants and
agrees that:

(i) ORGANIZATION, CITIZENSHIP, ETC. Lessee (A) is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Texas, (B) is a "citizen of the United States"
(as defined in Section 40102 of Title 49, U.S.C.) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant
to Chapter 447

PARTICIPATION AGREEMENT [N625SW]
-14-
of Title 49, U.S.C. for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo, (C) has the corporate
power and authority to carry on its business as now conducted, to own or
hold under lease its properties and to enter into and perform its
obligations under this Agreement and the other Operative Agreements to
which Lessee is or will be a party, and (D) is duly qualified to do
business as a foreign corporation in good standing in each state in
which the nature of its business makes such qualification necessary or
the failure to be so qualified or so to be in good standing would have a
material adverse effect on its business or operations or would impair
its ability to perform its obligations under the Operative Agreements.

(ii) CORPORATE AUTHORIZATION, ETC. The execution,
delivery and performance of this Agreement and the other Operative
Agreements to which Lessee is or will be a party (A) have been duly
authorized by all necessary corporate action on the part of Lessee, (B)
do not require any shareholder approval, or approval or consent of any
trustee or holders of indebtedness or obligations of Lessee or of any
lessor under any lease to Lessee except such as have been duly obtained,
and (C) do not and will not (1) contravene any law, judgment,
governmental rule, regulation or order applicable to or binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date), or (2) contravene or result
in any breach of, or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens) upon any property of
Lessee under, its articles of incorporation or by-laws, or any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, note or bond purchase agreement, license, bank loan,
credit agreement or other agreement to which Lessee is a party or by
which it or its properties may be bound or affected.

(iii) GOVERNMENTAL APPROVALS. Neither the execution and
delivery by Lessee of this Agreement or the other Operative Agreements
to which Lessee is or will be a party, nor the consummation of any of
the transactions by Lessee contemplated hereby or 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, the FAA, the DOT, the
SEC, any court or any other federal, state or foreign governmental
authority or agency, except for (A) routine filings of copies of such
Operative Agreements with the SEC, (B) the certification referred to in
Section 4(a)(ix)(5), the registration referred to in Section 4(a)(ix)(2)
and the filings and recordings referred to in Sections 4(a)(vi),
4(a)(ix)(1), 4(a)(ix)(2) and 4(a)(ix)(3), and (C) such federal and state
securities law approvals or filings that will be required in connection
with the public offering, if any, of the Certificates.

(iv) VALID AGREEMENTS. This Agreement and the other
Operative Agreements to which Lessee is or will be a party, as and when
entered into, do or will, assuming due authorization, execution and
delivery by the party or parties thereto other than Lessee, constitute
legal, valid and binding obligations of Lessee enforceable against
Lessee in accordance with the respective terms hereof and thereof.

(v) NO PROCEEDINGS. There are no pending or, to
Lessee's knowledge, threatened actions or proceedings before any court
or administrative agency which, having regard to both the size of the
claim and the possibility of an adverse determination, are likely to
materially adversely affect the consolidated financial condition of
Lessee and its

PARTICIPATION AGREEMENT [N625SW]
-15-
subsidiaries, or the ability of Lessee to perform its obligations under
this Agreement and the other Operative Agreements to which Lessee is or
will be a party.

(vi) TAXES. Lessee and its subsidiaries have filed or
caused to be filed all federal, state, local and foreign tax returns
which are required to be filed and have paid or caused to be paid all
taxes shown to be due and payable on such returns or on any assessment
received by Lessee or any of its subsidiaries to the extent that such
taxes have become due and payable (except to the extent being contested
in good faith and by appropriate proceedings and for the payment of
which adequate provisions have been made).

(vii) FINANCIAL CONDITION. The audited consolidated
financial statements of Lessee and its subsidiaries contained in
Lessee's Annual Report to Shareholders for the year ended December 31,
1995 and the unaudited consolidated financial statements of Lessee and
its subsidiaries contained in the Lessee's Quarterly Report on Form 10-Q
for the period ended June 30, 1996 (copies of each of which have been
furnished to each Participant) have been prepared in accordance with
generally accepted accounting principles, present fairly, in all
material respects, the consolidated financial position of Lessee and its
subsidiaries as of such dates and the consolidated results of their
operations and their cash flows for the periods then ended, and since
December 31, 1995, there has been no material adverse change in such
consolidated financial position.

(viii) REGISTRATION AND RECORDATION. Except for (A) the
registration of the Aircraft with the FAA pursuant to the Act in the
name of Owner Trustee, (B) the filing for recordation of the instruments
referred to in Section 4(a)(ix)(2) and (3) and this Agreement, if deemed
necessary due to the incorporation by reference in such other
instruments of terms defined herein, (C) the filing of the UCC financing
statements referred to in Section 4(a)(vi) and continuation statements
at periodic intervals, (D) the taking of possession by the Indenture
Trustee of the original counterparts of the Lease and the initial Lease
Supplement, and (E) the affixation of the nameplate referred to in
Section 7.1.2 of the Lease, no further action, including any filing or
recording of any document (including any financing statement in respect
thereof under Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), is necessary or advisable in order to establish and
perfect the right, title or interest of Owner Trustee in the property
constituting the Trust Estate, or of Indenture Trustee in the property
constituting the Trust Indenture Estate, in any applicable jurisdiction
within the United States of America.

(ix) CHIEF EXECUTIVE OFFICE; NAME. The chief executive
office (as such term is defined in Article 9 of the UCC) of Lessee is
2702 Love Field Drive, Dallas, Texas 75235, and Lessee agrees to give
the Participants, Owner Trustee and Indenture Trustee 10 days' prior
written notice of any relocation of said chief executive office from its
present location or change of its name.

(x) SECURITIES LAWS. Neither Lessee nor anyone acting
on behalf of Lessee has directly or indirectly offered (A) any
beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any similar interest or security, 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
Owner Participant and not more than 21 other leasing companies or other
institutional investors (in the case of such beneficial interest or
securities), or (B)

PARTICIPATION AGREEMENT [N625SW]
-16-
(assuming the accuracy of the representations in Sections 8(a), 8(k)(vi)
and 8(p)(viii)), any interest in the Trust Estate, the Trust Indenture
Estate, the estate created by the Pass Through Trust Agreement or any of
the Certificates, Pass Through Certificates, or any similar interest or
security, in violation of the Securities Act or applicable state
securities laws, or both, and Lessee will take no action which would
constitute or cause such violation.

(xi) NO MISSTATEMENT OR OMISSION. Neither the financial
statements referred to in Section 7(a)(vii) nor any other documents
furnished by Lessee to Owner Trustee, Indenture Trustee or any
Participant in connection with the transactions contemplated by this
Agreement or the other Operative Agreements contains any untrue
statement of a material fact or omits a material fact necessary to make
the statements contained therein (in the case of statements referred to
in Section 7(a)(vii), as of the date made) not misleading; there is no
fact known by Lessee which Lessee has not disclosed to such parties in
writing which materially adversely affects or, so far as Lessee can now
reasonably foresee, will materially adversely affect the ability of
Lessee to carry on its business and perform its obligations under this
Agreement or the other Operative Agreements to which it is a party.

(xii) INVESTMENT COMPANY. Neither Lessee nor any
subsidiary of Lessee is an "investment company" or a company controlled
by an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.

(xiii) NO EVENT OF DEFAULT. No Lease Event of Default or
Lease Default has occurred and is continuing under the Lease.

(xiv) EFFECTIVE SALE. On the Delivery Date, the Aircraft
will be situated in Texas and the sale of the Aircraft by Lessee to
Owner Trustee shall be complete and effective and not voidable or void.

(xv) ERISA. Lessee has never sponsored, maintained or
made contributions to any defined benefit plan subject to the provisions
of Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and (in reliance upon the Participants'
representations in Section 8(o)) the transactions contemplated by this
Agreement do not constitute a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available by statute, regulation or class exemption.
The execution and delivery of this Agreement and the other Operative
Agreements and the consummation of the transactions contemplated hereby
and thereby will not involve any non-exempt prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code
(such representation being made solely in reliance upon and subject to
the accuracy of the representations contained in Section 8(o)).

(xvi) TITLE TO AIRCRAFT, ETC. Good and marketable title
to the Aircraft will be at the time of delivery to Owner Trustee vested
in Lessee free and clear of all Liens other than the rights of Lessee
under the Lease and the Lease Supplement covering the Aircraft, the Lien
of the Trust Indenture, the beneficial interest of the Owner Participant
in the Aircraft and the Liens permitted by clause (d) (solely for taxes
not yet due) or (e) of Section 6 of the Lease; and, subject to the
filing for recordation of the Lessee FAA Bill of Sale in accordance with
the Act, good and marketable title to the Aircraft will have been duly
conveyed by Lessee to Owner

PARTICIPATION AGREEMENT [N625SW]
-17-
Trustee, free and clear of all Liens other than the rights of Lessee
under the Lease and the Lease Supplement covering the Aircraft, the Lien
of the Trust Indenture, the beneficial interest of the Owner Participant
in the Aircraft, and the Liens permitted by clause (d) (solely for taxes
not yet due) or (e) of Section 6 of the Lease.

(xvii) CONDITION OF AIRCRAFT. The Aircraft has been duly
certificated by the FAA as to type and airworthiness, is fully equipped
to operate in commercial service and complies with all material
governmental requirements governing such service; the Aircraft has been
continuously operated and maintained by Lessee (in a manner that would
satisfy the provisions of Sections 7.1.3 and 8.1 of the Lease) since its
delivery to Lessee by Manufacturer, Lessee is unaware of any material
mechanical or structural defects in or damage to the Aircraft since its
delivery to Lessee by Manufacturer and there has not occurred any event
which constitutes or would, with the passage of time or the giving of
notice, or both, constitute an Event of Loss.

(xviii) USE OF PROCEEDS. None of the proceeds from the
issuance of the Certificates or from the acquisition by the Owner
Participant of its beneficial interest in the Trust Estate will be used
directly or indirectly by Lessee so as to result in a violation of
Regulation G or U of the Board of Governors of the Federal Reserve
System.

(xix) NO FEDERAL APPROVALS. No governmental approval in
the United States of any kind is required of the Owner Participant, any
Pass Through Trustee, the Owner Trustee or the Indenture Trustee for
their respective execution of or performance under this Agreement or any
agreement contemplated hereby solely by reason of any fact or
circumstance peculiar to: (a) Lessee (as contrasted to other airlines),
(b) the nature of the Aircraft, or (c) Lessee's proposed operations or
use of the Aircraft.

(xx) SECTION 1110. Owner Trustee, as lessor under the
Lease, and the Indenture Trustee, as assignee thereof, are entitled to
the protection of Section 1110 of the United States Bankruptcy Code in
connection with their right to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor. Lessee acquired the
Aircraft new from the Manufacturer after October 22, 1994, and Lessee
first placed the Aircraft in service after such date.

(b) GENERAL TAX INDEMNITY.

(i) INDEMNITY. Lessee hereby agrees to pay, to
indemnify, and, on written demand, reimburse and hold each Indemnified
Party (which, unless otherwise indicated herein, for purposes of this
Section 7(b) shall include any Affiliate of any Participant, and all
entities which are included in a consolidated, combined or unitary
return with such Indemnified Party except that for purposes of this
Section 7(b)(i) an Indemnified Party shall not include any Holder),
harmless from, any and all license, documentation, recording and
registration fees and any and all taxes (including, without limitation,
sales, use, turnover, value-added, property (tangible and intangible),
ad valorem, consumption, rental, license, excise and stamp taxes),
levies, imposts, duties, charges, assessments or withholdings of any
nature whatsoever together with any and all penalties, fines, additions
to tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state

PARTICIPATION AGREEMENT [N625SW]
-18-
or local government or governmental subdivision or taxing authority in
or of the United States of America (including any possession or
territory of the United States of America), or by any foreign
government, taxing authority or governmental subdivision of a foreign
country, upon, against, or with respect to any Indemnified Party,
Lessee, the Aircraft, Airframe, any Engine, any other engine installed
on the Airframe, Part or any other part thereof or interest therein or
upon or with respect to the purchase, acquisition, acceptance,
rejection, mortgaging, financing, refinancing, manufacture, sale,
transfer of title, ownership, delivery, nondelivery, insuring,
inspection, leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment, redelivery,
modification, rebuilding, importation, exportation, return or other
disposition thereof, or the imposition of any Lien (or the occurrence of
any liability to refund or pay over any amount as a result of any Lien)
thereon, or upon or with respect to the rentals, receipts or earnings
arising therefrom, or upon or with respect to this Agreement, the Trust
Agreement, the Trust Indenture, the Lease, a Lease Supplement, the
Purchase Agreement, the Purchase Agreement Assignment, the Certificates
and each Pass Through Certificate or the issuance, reissuance,
acquisition, redemption, expiration or subsequent transfer thereof under
the Trust Indenture and each Pass Through Trust Agreement, or the
beneficial interests in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant to any
such agreement or instrument or upon or with respect to the property
held by Owner Participant or by the Trust Estate or by Indenture Trustee
under the Trust Indenture or the property held by Pass Through Trustee
under the respective Pass Through Trust Estate, amounts payable with
respect to the Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest, or Premium
on the Certificates or payments of principal of, interest on or any
other amounts payable with respect to each Pass Through Certificate that
are asserted against the Owner Participant, Owner Trustee or Pass
Through Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the Operative
Agreements.

(ii) EXCEPTIONS. The indemnity set forth in Section
7(b)(i) shall not extend in the case of any Indemnified Party to Taxes
(1) on, based on, or measured by, the receipts, gross or net income,
capital or net worth of such Indemnified Party (whether denominated as
franchise, excess profits, conduct of business, capital gains, minimum
and/or alternative minimum taxes) or accumulated earnings, personal
holding company, succession taxes and estate or franchise taxes (other
than taxes which are in the nature of sales or use taxes, value-added
taxes, rental taxes, license taxes, consumption taxes, ad valorem taxes
or property taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by withholding)
(but specifically excluding any excise taxes imposed in connection with
the occurrence of a "prohibited transaction", within the meaning of
Section 406 of ERISA or Section 4975 of the Code, for which an exemption
is not available by statute, regulation or class exemption) or (B) any
state or local government or governmental subdivision or state or local
taxing authority in the United States of America (including any
possession or territory of the United States of America) other than in
the case of (B) any such tax which is a Covered Income Tax, as defined
below; (2) on, based on, or measured by, any fees or compensation
received by Owner Trustee or Indenture Trustee in its individual
capacity for services rendered in connection with the transactions
contemplated hereby; (3) relating to the Aircraft for any period after
the later of (A) the expiration or early termination of the Lease and
the return of the Aircraft in connection therewith in accordance with
the terms thereof and

PARTICIPATION AGREEMENT [N625SW]
-19-
(B) payment in full of Stipulated Loss Value or Termination Value, as
the case may be, and all Rent due and owing in accordance with the
Lease; (4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party or the inaccuracy or breach of any
representation, warranty or covenant of such Indemnified Party contained
in any Operative Agreement; (5) imposed on the income of such
Indemnified Party by a foreign government or taxing authority, except to
the extent such Taxes are imposed by reason of the location, operation,
use or rental of the Aircraft or any Part thereof in such jurisdiction
or the presence of Lessee or Sublessee or other user in such
jurisdiction or the making of payments from such jurisdiction; (6) which
may become payable in connection with the occurrence of a "prohibited
transaction", within the meaning of Section 406(b) of ERISA or Section
4975(c)(1)(E) or (F) of the Code, involving the assets of any "employee
benefit plan" within the meaning of Section 3(3) of ERISA, or of any
"plan" within the meaning of Section 4975(e)(1) of the Code, with
respect to which the Owner Participant is the "plan sponsor" within the
meaning of Section 3(16)(B) of ERISA; and (7) which become payable as a
result of any involuntary disposition attributable to the bankruptcy of
the Owner Participant or Owner Trustee or any voluntary sale, transfer,
mortgaging, pledging or financing by such Indemnified Party of all or a
portion of its interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate, the Lease, or any other Operative Agreement in a
transaction not contemplated by the Operative Agreements (it being
understood that any disposition of the Aircraft or any Part as a result
of a substitution, replacement or modification thereof or thereto by
Lessee shall not be treated as voluntary) unless, in each case, such
transfer shall occur (A) pursuant to the exercise of remedies under
Section 15 of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18
thereof. As used in clause (1)(B) of this Section 7(b)(ii), the term
"Covered Income Tax" means a Tax described in said clause (1)(B) imposed
on an Indemnified Party by any taxing authority (A) in whose
jurisdiction such Indemnified Party (including for this purpose all
entities with which it is combined, integrated or consolidated in such
taxing authority's jurisdiction) did not engage in business, did not
maintain an office or other place of business and was not otherwise
located, if such Tax resulted from the operation of the Aircraft or any
Engine in such jurisdiction or the transactions contemplated by the
Operative Agreements, or (B) in whose jurisdiction such Indemnified
Party in fact is doing business, maintaining an office or other place of
business or is otherwise located, if such circumstance was no factor in
the imposition of such Tax.

(iii) CALCULATION. Lessee agrees that, with respect to
any payment or indemnity pursuant to Section 7(b)(i) or Section 7(c)
hereof, such payment or indemnity shall include an amount payable to the
Indemnified Party sufficient to hold such Indemnified Party harmless on
an after-tax basis from all Taxes required to be paid by such
Indemnified Party with respect to such payment or indemnity under the
laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under the
laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not before
Lessee shall have made all payments or indemnities to such Indemnified
Party then due under the Operative Agreements) an amount equal to the
sum of such tax benefit plus any other

PARTICIPATION AGREEMENT [N625SW]
-20-
tax benefit realized by such Indemnified Party as the result of any
payment made pursuant to this proviso; provided, however, that such
payment by an Indemnified Party shall not exceed the aggregate payments
by Lessee to such Indemnified Party under Section 7(b)(i) hereof (but
any such excess shall be carried forward and shall reduce Lessee's
obligation to make any subsequent payments to such Indemnified Party
pursuant to Section 7(b) or 7(c) hereof). Each such Indemnified Party
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 of which it is actually aware or of which it has been given
notice. Any Taxes that are imposed on any Indemnified Party as a result
of the disallowance or reduction of such tax benefit referred to in the
next preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions and
credits attributable first, to all transactions other than leveraged
equipment leasing transactions and then to this transaction and to all
such other leveraged equipment leasing transactions on a pari passu
basis.

If as a result of any Advance (as hereinafter defined) to
an Indemnified Party the aggregate taxes paid or accrued by such
Indemnified Party for any taxable year shall be more than the amount of
such taxes which would have been payable by the Indemnified Party had no
such Advance been made, and if such increase in taxes was not taken into
account in determining the amount of the Advance, then such increase in
taxes will be treated as Taxes for which Lessee must indemnify the
Indemnified Party pursuant to this Section 7(b). Upon the final
determination of any contest pursuant to Section 7(b)(iv) hereof in
respect of any Taxes for which Lessee has made an Advance, the amount of
Lessee's obligation shall be determined under this Section 7(b)(iii) as
if such Advance had not been made. Any obligation of Lessee under this
Section 7(b) and the Indemnified Party's obligation to repay the Advance
will be satisfied first by set off against each other and any difference
owing by either party will be paid within 10 days of such final
determination.

(iv) NOTICE AND CONTEST. If written claim is received by
an Indemnified Party for Taxes, which claim, if sustained, would require
the payment of an indemnity by Lessee pursuant to this Section 7(b),
such Indemnified Party shall notify Lessee of such claim within 15 days
after its receipt; provided, that failure to provide such notice within
15 days will not relieve Lessee of any indemnification obligation
pursuant to this Section 7(b) if such failure does not preclude Lessee
from exercising its contest rights hereunder. Payments due from Lessee
to such Indemnified Party pursuant to this Section 7(b) shall be made
directly to such Indemnified Party within 30 days of written demand by
such Indemnified Party to Lessee. If requested by Lessee in writing
(provided, that Lessee shall have furnished Indemnified Party with a
written opinion of Vinson & Elkins L.L.P. or other independent counsel
selected by Lessee and reasonably satisfactory to Indemnified Party to
the effect that a reasonable basis in law and fact exists under ABA
opinion 85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or

PARTICIPATION AGREEMENT [N625SW]
-21-
permit Lessee, if desired by Lessee, to contest in the name of Lessee)
if permissible under applicable laws, the validity, applicability or
amount of such Taxes by (i) resisting payment thereof if practicable,
(ii) not paying the same except under protest, if protest shall be
necessary and proper, (iii) if payment shall be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings, and (iv) taking such other action as is reasonably
requested by Lessee from time to time. The Indemnified Party shall
determine the method of any contest and (in good faith consultation with
Lessee) control the conduct thereof. Notwithstanding anything contained
in this Section 7(b)(iv), an Indemnified Party will not be required to
contest, or to continue to contest, the validity, applicability or
amount of any Tax (or portion thereof) (w) unless Lessee shall have
acknowledged in writing its obligation to indemnify the Indemnified
Party hereunder in the event the Indemnified Party does not prevail in
such contest, (x) if such contest would result in any material risk of
criminal penalties or any material risk of sale, forfeiture or loss (or
loss of use) of the Aircraft, the Airframe or any Engine or any Part or
any interest therein, (y) if a Lease Event of Default has occurred and
is continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will not
exceed $10,000. The Owner Participant shall not be required to appeal,
or seek leave to appeal, an adverse judicial determination with respect
to such Taxes to the United States Supreme Court. If an Indemnified
Party contests a Tax by making a payment and seeking a refund thereof,
then Lessee shall advance to such Indemnified Party, on an interest-free
basis, an amount equal to the Taxes and any penalties, additions to tax,
fines and interest thereon (which shall collectively be known, only for
the purpose of this Section 7(b), as an "Advance") that are paid by such
Indemnified Party in connection with such contest. Such Advance shall
be repayable to Lessee at the time and in the manner specified in the
last paragraph of Section 7(b)(iii). If any Indemnified Party shall
obtain a refund of all or any part of such Taxes for which an indemnity
was paid by Lessee, such Indemnified Party shall pay Lessee the amount
of such refund as is attributable to the Taxes for which such indemnity
was paid; provided, however, that such amount shall not be payable
before such time as Lessee shall have made all payments or indemnities
to such Indemnified Party then due under this Section 7(b) and under the
Lease. If in addition to such refund such Indemnified Party shall
receive an amount representing interest on the amount of such refund,
Lessee shall be paid that proportion of such interest which is fairly
attributable to Taxes paid with an indemnity payment or Advance by
Lessee prior to the receipt of such refund, reduced by taxes imposed on
such Indemnified Party on receipt of such refund or interest and
increased by any taxes saved by reason of the deductibility of such
payment by the Indemnified Party. Any subsequent determination that
such Indemnified Party was not entitled to all or any portion of any
refund paid to Lessee shall be treated as a Tax indemnifiable under
Section 7(b)(i) without regard to Section 7(b)(ii). Lessee shall not be
deemed to be in default under any of the indemnification provisions
under this Section 7(b) so long as it or any Indemnified Party shall
diligently prosecute such contest; provided, that Lessee shall
nonetheless be required to pay all Advances and expenses required
hereunder. In case any report or return is required to be made with
respect to any obligation of Lessee under this Section 7(b) or arising
out of this Section 7(b), Lessee will either timely make such report or
return in such manner as will show the ownership of the Aircraft in
Owner Trustee, and send a copy of such report or return to Owner Trustee
(except for any report or return that an Indemnified Party has notified
Lessee that the Indemnified Party intends to file or that the
Indemnified Party is required by law to file), or will notify Owner
Trustee of such requirement and prepare and deliver such report or
return to the Indemnified Party in such manner as shall be satisfactory
to such Indemnified Party and Owner Trustee.

PARTICIPATION AGREEMENT [N625SW]
-22-
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.

(v) WITHHOLDINGS. Notwithstanding the exceptions in Section
7(b)(ii), Lessee agrees that each payment of Rent and any amount payable on the
Certificates shall be free of all withholdings (other than a U.S. withholding
tax) of any nature whatsoever except to the extent otherwise required by law,
and in the event that any such withholding is so required, Lessee shall pay an
additional amount of Rent such that after the deduction of all amounts required
to be withheld, the net amount actually received by each Indemnified Party will
equal the amount that would be due absent such withholding. In the event
additional Rent is paid by Lessee to provide for withholdings pursuant to the
preceding sentence in respect of Taxes that are excepted from indemnification
hereunder pursuant to Section 7(b)(ii), the Indemnified Party on whom the Tax
is imposed by way of withholding on payments to such person shall, promptly
upon receipt of notice from Lessee, reimburse Lessee for such additional Rent.
As used in this Section 7(b)(v), a "U.S. withholding tax" shall mean any
withholding tax imposed by the United States of America (A) with respect to
interest payments under any Certificate pursuant to treaty or federal law
imposing withholding tax generally on interest payments to Persons not resident
in the United States or (B) in the nature of backup withholding under section
3406 of the Code and the regulations thereunder, or any successor or similar
provision of the Code, federal tax law or regulations thereunder. All U.S.
withholding taxes with respect to interest payments shall be borne by the
Holder of the relevant Certificate and none of Lessee, Owner Participant,
Indenture Trustee or Owner Trustee shall be responsible for any U.S.
withholding tax with respect to interest payments on such Certificate. Owner
Trustee may (or, if Lessee is making any payment directly to the Holder of any
Certificate or to the Indenture Trustee, Lessee shall) withhold any applicable
U.S. withholding tax from the amount of the interest payment then due and pay
(and, if Lessee is making any payment to the Holder or the Indenture Trustee,
Lessee shall pay) any amount withheld to the appropriate federal taxing
authority; provided, that Lessee shall indemnify and hold the Owner Trustee and
the Owner Participant harmless on an after-tax basis from and against any and
all liability arising from any failure by any Person to withhold any U.S.
withholding taxes with respect to payments required to be made with respect to
the Certificates, and Lessee shall timely prepare and file, or, if required by
applicable law, present to the Owner Trustee for filing, all information
returns required to be prepared with respect to any such withholding tax
payments or otherwise with respect to payments under the Certificates.

(vi) Wherever the phrase "Operative Agreement" or "Operative
Agreements" is used in this Section 7(b), such phrase includes each Pass
Through Trust Agreement.

(c) GENERAL INDEMNITY.

(i) INDEMNITY. Lessee hereby agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to
pay, assume liability for and indemnify, protect, defend, save and keep
harmless each Indemnified Party from and against, on a net after-tax
basis as provided in Section 7(b)(iii), any and all liabilities,
obligations, losses,

PARTICIPATION AGREEMENT [N625SW]
-23-
damages, settlements, claims, actions, suits, penalties, costs, expenses
and disbursements (including but not limited to reasonable legal and
investigative fees and expenses and Transaction Costs to the extent not
required to be paid by Owner Participant pursuant to Section 16 hereof,
and all costs and expenses relating to amendments, supplements, waivers
and consents to and under the Operative Agreements, but excluding
internal overhead costs and expenses such as salaries) of whatsoever
kind and nature, including but not limited to negligence, liability of
an owner, strict or absolute liability, liability without fault and
liability in tort (any of the foregoing being called a "Loss") which may
from time to time be imposed on, incurred by or asserted against any
Indemnified Party or the Aircraft, Airframe, any Engine or any Part or
any portion of the Trust Estate or the Trust Indenture Estate (whether
or not any such Loss is also indemnified or insured against by any other
Person or such Indemnified Party has also indemnified any other Person
against such Loss) in any way relating to or arising out of (a) any
Operative Agreement, the enforcement thereof or any of the transactions
contemplated thereby (including, without limitation, the performance or
observance of all obligations and conditions of Lessee thereunder, or
the falsity of any representations or warranties of Lessee therein or
thereunder or in any document or certificate delivered pursuant
thereto), (b) the purchase, acceptance or rejection of the Aircraft, (c)
the Aircraft, the Airframe, any Engine, any engine or any Part, any data
or any other thing delivered or to be delivered under an Operative
Agreement, including without limitation, the ownership, financing,
refinancing, delivery, nondelivery, lease, sublease, assignment,
registration, reregistration, deregistration, possession, use, non-use,
presence, operation, condition, storage, preparation, installation,
testing, manufacture, design, fitness for use, merchantability,
modification, replacement, substitution, alteration, maintenance,
repair, re-lease, sale, return, transportation, transfer, abandonment or
other disposition thereof or any portion thereof (including, without
limitation, latent and other defects, whether or not discoverable, and
any claim for patent, trademark or copyright infringement, or arising
under environmental control, noise or pollution laws or regulations, and
loss of or damage to any property or the environment or death or injury
to any person), or (d) the offer, sale or delivery of the Certificates,
whether before or after the Delivery Date (the indemnity in this clause
(d) to extend also to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the meaning
of Section 15 of the Securities Act).

(ii) EXCEPTIONS. The indemnity set forth in Section
7(c)(i) shall not extend to any Loss with respect to such Indemnified
Party (A) to the extent that such Loss is caused by acts, omissions or
events which occur after full and final compliance by Lessee with all
the terms of the Operative Agreements, (B) to the extent such Loss is
caused by acts, omissions or events which occur following the earlier
of: (I) return of possession of the Aircraft by Lessee to Lessor and
acceptance on behalf of Lessor or its designee pursuant to the terms of
the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as
Lessor shall be entitled to exercise remedies under such Section 15),
(II) the termination of the Term in accordance with Section 9 of the
Lease, or (III) the transfer of title to the Aircraft to Lessee (or its
designee) pursuant to Section 10.1.4 or Section 18.2 of the Lease, (C)
to the extent that such Loss is a Tax or a loss of tax benefits, whether
or not Lessee is required to indemnify therefor pursuant to Section 7(b)
hereof, (D) to the extent that such Loss is caused by the willful
misconduct or gross negligence of such Indemnified Party (other than
willful misconduct or gross negligence imputed to such Indemnified Party
solely by reason of its interest in the Aircraft) or any material

PARTICIPATION AGREEMENT [N625SW]
-24-
misrepresentation or violation or breach of any obligations of such
Indemnified Party contained in the Operative Agreements then in force
unless such misrepresentation, violation or breach is a result of
Lessee's failure to comply with the terms of any Operative Agreement to
which it is a party, or (E) to the extent such Loss is associated with a
sale, assignment or transfer by such Indemnified Party of its respective
interest in the Aircraft, the Certificates or the transactions
contemplated hereby (other than (1) as required by the Operative
Agreements and (2) during the continuance of a Lease Default (of the
type described in Section 14.1 or 14.5 of the Lease) or a Lease Event of
Default or the exercise of remedies under the Lease). This Section 7(c)
does not constitute a guarantee of the useful life or residual value of
the Aircraft or a guarantee that the Certificates will be paid.

(iii) NOTICE. If any Indemnified Party or Lessee has
knowledge of any Loss for which Lessee is obligated to indemnify under
this Section 7(c), it shall give prompt written notice thereof to Lessee
or such Indemnified Party, as the case may be, but failure to give such
notice shall not relieve Lessee of its obligations hereunder or from any
other obligation that Lessee may have to such Indemnified Party at law
or in equity, and no payment by Lessee to an Indemnified Party pursuant
to this Section 7(c) shall be deemed to constitute a waiver or release
of any right or remedy which Lessee may have against such Indemnified
Party for any actual damages as a result of the failure by such
Indemnified Party to give Lessee such notice.

(iv) RIGHT TO DEFEND; SUBROGATION; FEES AND EXPENSES OF
TRUSTEES. Lessee shall be entitled (and, at the Indemnified Party's
election, shall be obligated), at its sole cost and expense, acting
through counsel selected by Lessee reasonably acceptable to the
respective Indemnified Party, (A) in any judicial or administrative
proceeding that involves solely a claim for which payment or indemnity
is sought under this Section 7(c), to assume responsibility for and
control thereof, (B) in any judicial or administrative proceeding
involving a claim for which payment or indemnity is sought under this
Section 7(c), and other claims related or unrelated to the transactions
contemplated by the Operative Agreements, to assume responsibility for
and the control of such claim for which payment or indemnity is sought
under this Section 7(c) to the extent that the same may be and is
severed from such other claims (and such Indemnified Party shall use its
reasonable best efforts to obtain such severance), and (C) in any other
case, to be consulted by such Indemnified Party with respect to judicial
proceedings subject to the control of such Indemnified Party.
Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to assume responsibility for and control of any such
judicial or administrative proceedings (1) while any Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) or Lease Event
of Default shall have occurred and be continuing, (2) if such
proceedings will involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien) on, the
Aircraft or the Trust Estate or the Trust Indenture Estate or any part
thereof or the loss or impairment of the Lien of the Trust Indenture on
all or any part of the Trust Indenture Estate, (3) if such proceedings
could, in the good faith opinion of the Indemnified Party, entail any
risk of criminal liability or material civil penalty or (4) if in the
written opinion of counsel to such Indemnified Party an actual or
potential material conflict of interest exists making it advisable for
such Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions.

PARTICIPATION AGREEMENT [N625SW]
-25-
The Indemnified Party shall supply Lessee, at Lessee's expense,
with such information within its possession reasonably requested by Lessee as
is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).

Lessee shall supply the Indemnified Party with such information
reasonably requested by the Indemnified Party as is necessary or advisable for
the Indemnified Party to control or participate in any proceeding to the extent
permitted by this Section 7(c).

Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.

In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.

Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs and are payable by the Owner Participant under
Section 16. Lessee agrees that it will pay the reasonable fees and expenses of
any separate owner trustee or co-trustee appointed pursuant to Section 9.02 of
the Trust Agreement as a result of any requirement of law or if otherwise
required by any Operative Agreement or if requested, or consented to, by the
Lessee.

PARTICIPATION AGREEMENT [N625SW]
-26-
(v) Wherever the phrase "Operative Agreement" or
"Operative Agreements" is used in this Section 7(c) such phrase includes
each Pass Through Trust Agreement.

(d) OWNER PARTICIPANT'S INDEMNITY. Owner Participant covenants
and agrees that if (i) Lessee has elected pursuant to Section 9.1 of the Lease
to terminate the Lease by causing the Aircraft to be sold pursuant to Section
9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of the
Lease, given to Lessee written notice of Lessor's election to retain title to
the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
in accordance with Section 9.1 of the Lease on or before the proposed
termination date over the price for which the Aircraft may subsequently be sold
(but disregarding any portion of such bid or such price in excess of the
applicable Termination Value), any additional Rent paid by Lessee (less an
amount representing the fair value to Lessee of its use of the Aircraft for the
period of time in respect of which such Rent was paid) and any reasonable fees
and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.

(e) PAYMENTS. Any payments made pursuant to this Section 7
shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.

(f) INTEREST ON OVERDUE AMOUNTS. If any amount payable by
Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.

(g) SURVIVAL. All indemnities, obligations, adjustments and
payments provided for in this Section 7 shall survive, and remain in full force
and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.

SECTION 8. OTHER REPRESENTATIONS, WARRANTIES, COVENANTS AND
INDEMNITIES. (a) SECURITIES LAWS. The Owner Participant represents that it is
acquiring its interest in the Trust Estate for investment purposes only and not
with a present intent as to any resale or distribution thereof except as
otherwise permitted by Rule 144A under the Securities Act, (subject nonetheless
to any requirement of law that the disposition of its properties shall at all
times be and remain within its control) and that neither it nor anyone acting
on its behalf has directly or indirectly offered any interest in the Trust
Estate or any Certificates or any similar securities for sale to, or solicited
any offer to acquire any

PARTICIPATION AGREEMENT [N625SW]
-27-
of the same from, anyone in a manner which would result in a violation of the
Securities Act or the securities laws, rules and regulations of any state.

(b) CITIZENSHIP. Each of the Owner Participant and FUNB, in
its individual capacity, represents and warrants to the other parties to this
Agreement that it is a "citizen of the United States" as defined in 49 U.S.C.
Section 40102(a)(15)(C). The Owner Participant agrees, solely for the benefit
of Lessee, each Sublessee, the Indenture Trustee and the Holders, that if at
any time (i) it shall not be a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and (ii) the Aircraft shall be, or
would therefore become, ineligible for registration in the name of the Owner
Trustee under the Act and regulations then applicable thereunder (it being
understood that the effect of any such status shall be determined without
giving consideration to any provision of the Act (or any superseding statute)
which permits United States registration of an aircraft based on conditions
which impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days after a Responsible
Company Officer of the Owner Participant shall obtain actual knowledge of such
loss of citizenship (A) effect voting trust or other similar arrangements or
take any other action as may be necessary to prevent any deregistration or to
maintain the United States registration of the Aircraft and (to the extent such
recordation is dependent on the U.S. registration of the Aircraft) the
recordation with the FAA of the Trust Indenture and the Lease, or (B) transfer
its beneficial interest in the Trust Estate in accordance with Section 8(l)
hereof. It is understood that: (1) the Owner Participant shall be liable to
any of the other parties hereto for any damages suffered by any such other
party as the result of the representation and warranty of the Owner Participant
in the first sentence of this Section 8(b) proving to be untrue as of the
Delivery Date; and (2) the Owner Participant shall be liable to Lessee, any
Sublessee and any Holder for any damages which may be incurred by Lessee, any
Sublessee or such Holder as a result of such loss of citizenship by the Owner
Participant and the inability to register (or maintain the registration of) the
Aircraft in the name of the Owner Trustee under the Act and regulations then
applicable thereunder as a result of such loss of citizenship. Each of Lessee
(as provided in Section 11(b)), the Pass Through Trustees, the Owner Trustee
and the Indenture Trustee agrees, upon the request and at the sole expense of
the Owner Participant, to take all reasonable acts requested by the Owner
Participant in complying with its obligations under clause (A) or (B) of the
second sentence of this Section 8(b). FUNB, in its individual capacity, agrees
that if at any time a responsible officer of FUNB shall obtain actual knowledge
that FUNB has ceased to be a "citizen of the United States" within the meaning
of the Act, it will promptly resign as Owner Trustee (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 the Owner Trustee's citizenship would have any
adverse effect on a Holder, Lessee, a Sublessee or the Owner Participant),
effective upon the appointment of a successor Owner Trustee in accordance with
Section 9.01 of the Trust Agreement.

(c) CHIEF EXECUTIVE OFFICE OF FUNB. FUNB in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Charlotte, North Carolina (other than such as may
be maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Charlotte, North Carolina. FUNB in its individual
capacity agrees that it will not change the location of such office to a
location outside of

PARTICIPATION AGREEMENT [N625SW]
-28-
Charlotte, North Carolina, without 10 days' prior written notice to Lessee,
Indenture Trustee, the Pass Through Trustees and the Owner Participant.

(d) [INTENTIONALLY OMITTED].

(e) ACTIONS OF PASS THROUGH TRUSTEE. (i) Each Pass Through
Trustee hereby agrees that, except as otherwise required by applicable
law including, without limitation, any law which requires Pass Through
Trustee to act within its own discretion, it shall not, without the
prior written consent of Owner Trustee, direct Indenture Trustee to take
or refrain from taking any action under the Trust Indenture that
requires the approval, waiver, authorization, direction or consent of,
or notice from, the Holders holding a specified percentage in principal
amount of Outstanding (as defined in the Trust Indenture) Certificates
unless Pass Through Trustee receives a Direction to so direct the
Indenture Trustee from Certificateholders holding the same percentage of
Certificates evidencing Fractional Undivided Interests in the Trust
holding the Certificates.

(ii) Lessee and each Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the extent
relating to the Certificates) shall not be amended without the prior
written consent of Owner Participant.

(iii) Each Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act within
its own discretion, if requested to do so by Owner Trustee or Owner
Participant, Pass Through Trustee shall request a Direction from the
relevant Certificateholders to establish whether Pass Through Trustee,
in its capacity as a Holder, may direct the Indenture Trustee to take or
refrain from taking any action under the Operative Agreements.

(iv) For purposes of this subparagraph (e), the terms
"Direction", "Certificateholders", "Certificates", "Fractional Undivided
Interests" and "Trust" shall have the meanings attributed to them in the
relevant Pass Through Trust Agreement.

(f) OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES. The
Owner Participant represents and warrants as follows:

(i) the Owner Participant is a national banking
association duly organized and validly existing and in good standing
under the laws of its jurisdiction of organization, and has the
corporate power and authority to carry on its business as now conducted,
to own or hold under lease its properties and to enter into and perform
its obligations under the Owner Participant Agreements;

(ii) the Owner Participant Agreements have been duly
authorized by all necessary corporate action on the part of the Owner
Participant, do not require any approval not already obtained of
stockholders of the Owner Participant or any approval or consent not
already obtained of any trustee or holders of any indebtedness or
obligations of the Owner Participant, and have been duly executed and
delivered by the Owner Participant, and, subject to and in reliance upon
the representations made by Lessee in Section 7(a)(xv), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions

PARTICIPATION AGREEMENT [N625SW]
-29-
contemplated thereby by the Owner Participant, nor compliance by the
Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment,
governmental rule, regulation or order applicable to or binding on the
Owner Participant (it being understood that no representation or
warranty is made with respect to laws, rules or regulations relating to
aviation or to the nature of the equipment owned by the Owner Trustee,
other than such laws, rules or regulations relating to the citizenship
requirements of the Owner Participant under applicable aviation law) or
contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien (other than Permitted Liens of the
type described in clause (a) of the definition thereof) upon the Trust
Estate under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, corporate
charter, by-law or other agreement or instrument to which the Owner
Participant is a party or by which it or its properties may be bound or
affected;

(iii) assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto, each of the
Owner Participant Agreements constitutes a legal, valid and binding
obligation of the Owner Participant enforceable against the Owner
Participant in accordance with the terms thereof;

(iv) there are no pending or, to the knowledge of the
Owner Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which, if
determined adversely to the Owner Participant, would materially
adversely affect the financial condition of the Owner Participant or the
ability of the Owner Participant to perform its obligations under the
Owner Participant Agreements;

(v) on the Delivery Date, there will be no Lessor Liens
attributable to the Owner Participant;

(vi) the Owner Participant's net worth (as defined in
Section 8(l)) is at least $75,000,000; and

(vii) there has not occurred any event which constitutes
(or to the best of its knowledge would, with the passage of time or the
giving of notice or both, constitute) an Indenture Event of Default
which has been caused by or relates to the Owner Participant and which
is presently continuing.

(g) LESSOR LIENS. Each of FUNB in its individual capacity and
the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.

(h) INDENTURE TRUSTEE LIENS. Wilmington Trust Company in its
individual capacity covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Agreements to the extent

PARTICIPATION AGREEMENT [N625SW]
-30-
such acts arise or such failure arises from or constitutes gross negligence or
willful misconduct, (iii) claims against the Indenture Trustee relating to
Taxes or Losses which are excluded from the indemnification provided by Section
7 hereof pursuant to said Section 7, or (iv) claims against the Indenture
Trustee arising out of the transfer by the Indenture Trustee of all or any
portion of its interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate or the Operative Agreements other than (A) a transfer of the Aircraft
pursuant to Section 9, 10 or 18 of the Lease or Article 5 or 8 of the Trust
Indenture, (B) any borrowing pursuant to Section 17 hereof, or (C) a transfer
of the Aircraft pursuant to Section 15 of the Lease while a Lease Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.

(i) TERMINATION INSTRUCTIONS TO OWNER TRUSTEE. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.

(j) EXCESS PAYMENT. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which such payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner Participant had not become subject to the recourse liability referred to
in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
such Holder or the Indenture Trustee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of the Owner Trustee (in its
individual capacity) or the Owner Participant under this Agreement or the Trust
Indenture (and any exhibits or annexes thereto).

(k) REPRESENTATIONS AND WARRANTIES OF WILMINGTON TRUST COMPANY
IN INDIVIDUAL CAPACITY. Wilmington Trust Company represents and warrants, in
its individual capacity, as follows:

(i) it is a "citizen of the United States" as defined
in the Act, that it will notify promptly all parties to this Agreement
if in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture Trustee
as provided in Section 9.07 of the Trust Indenture if it should cease to
be a "citizen of the United States";

(ii) it is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into and perform its
obligations under the Trust Indenture, this Agreement and each Pass
Through Trust Agreement and, in its capacity as Indenture Trustee and
Pass Through Trustee, respectively, to authenticate the Certificates and
the Pass Through Certificates;

PARTICIPATION AGREEMENT [N625SW]
-31-
(iii) the Indenture Trustee Agreements, and the
authentication of the Certificates and the Pass Through Certificates
have been duly authorized by all necessary corporate action on its part,
and neither the execution and delivery thereof nor its performance of
any of the terms and provisions thereof will violate any federal or
Delaware law or regulation governing its banking or trust powers or any
judgment or order binding on it or contravene or result in any breach
of, or constitute any default under its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;

(iv) each of the Indenture Trustee Agreements has been
duly executed and delivered by it and, assuming that each such agreement
is the legal, valid and binding obligation of each other party thereto,
is the legal, valid and binding obligation of the Indenture Trustee,
enforceable against it in accordance with its terms;

(v) neither the execution and delivery by it, in its
individual capacity or as Indenture Trustee or Pass Through Trustee, as
the case may be, of this Agreement, and each Pass Through Trust
Agreement or the Trust Indenture nor the consummation of any of the
transactions contemplated hereby or thereby requires the consent or
approval of, the giving of notice to, or the registration with, any
governmental authority or agency pursuant to any law of the State of
Delaware or the United States governing the banking or trust powers of
the Indenture Trustee; and

(vi) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through Certificate,
neither it nor anyone authorized to act on its behalf has directly or
indirectly offered any beneficial interest or security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust
Estate or the Trust Indenture Estate, or any of the Certificates 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 interest or security to, any Person, and it will not
directly or indirectly make any such offer, solicitation or sale.

(l) TRANSFERS OF EQUITY INTERESTS; RIGHTS OF OWNER PARTICIPANT
AND OWNER TRUSTEE. So long as the Aircraft shall be leased to Lessee under the
Lease and so long as the Certificates are outstanding, the Owner Participant
will not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any Person unless (i) the proposed transferee is a "Transferee" (as defined
below) and (ii) the Owner Participant shall have delivered to the Owner
Trustee, Lessee and the Indenture Trustee an opinion (in form, scope and
substance reasonably satisfactory to the Indenture Trustee and Lessee) of
counsel reasonably satisfactory to the Indenture Trustee and Lessee to the
effect that the agreement referred to in clause (O) below and any guaranty
required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of
Exhibit A with respect to the Owner Participant's obligations, in the case of
the Owner Trustee, under the Trust

PARTICIPATION AGREEMENT [N625SW]
-32-
Agreement and, in the case of the Indenture Trustee and Lessee, the Owner
Participant's obligations hereunder, or (C) any other corporation, limited
liability company or limited partnership, provided such obligations are
guaranteed (such guaranty to be substantially in the form of Exhibit A) by the
transferor Owner Participant; provided, however, that unless otherwise
consented to by Lessee any Transferee shall not be an air carrier, an air
freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements
substantially in the form of Exhibit B, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Pass Through Trustees and the Indenture Trustee shall cooperate in
providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not give rise to an Indenture Default or Indenture Event of Default; and
Lessee or the Indenture Trustee may request such Transferee to provide an
opinion of counsel (who shall be reasonably satisfactory to Lessee and the
Indenture Trustee) in form, scope and substance reasonably satisfactory to
Lessee and the Indenture Trustee as to any matter set forth in clause (Q) and
as to such other matters as Lessee or the Indenture Trustee may reasonably
request. Upon any such transfer by the Owner Participant as above provided,
the Transferee shall be deemed the Owner Participant for all purposes hereof
and of the other Operative Agreements and each reference herein to the
transferor Owner Participant shall be deemed for all purposes, with respect to
circumstances existing and requirements arising thereafter, to be to the
Transferee and the transferor Owner Participant shall be relieved of all
obligations of the transferring Owner Participant under the Owner Participant
Agreements arising after the date of such transfer except to the extent fairly
attributable to acts or events occurring prior thereto and not assumed by the
transferee Owner Participant. If the Owner Participant intends to transfer its
interests hereunder, it shall give prior written notice thereof as soon as
practicable, but in no event less than ten (10) Business Days prior thereto, to
the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee and the facts necessary to determine whether
or not the requirements for a Transferee, as set forth herein, are satisfied.
The Owner Participant shall pay, or shall cause the transferee Owner
Participant to pay, all of the reasonable costs and expenses (including,
without limitation, legal fees and expenses) of the other parties hereto
(except the costs and expenses of Lessee if such transfer is effected during
the continuance of a Lease Default (of the type described in Section 14.1 or
14.5 of the Lease) or a Lease Event of Default or in connection with the
exercise of remedies under the Lease), on a net after-tax basis, of any such
transfer. For purposes of this Agreement, "net worth" shall mean the excess of
total tangible assets over total liabilities, each to be determined in
accordance with generally accepted accounting principles consistently applied.

PARTICIPATION AGREEMENT [N625SW]
-33-
(m) OBLIGATIONS OF TRUSTEES. The Indenture Trustee shall be
responsible for the payment, performance and discharge of, and shall fully and
completely pay, perform and discharge, all of its obligations under the Trust
Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.

(n) COMPLIANCE WITH TRUST INDENTURE. FUNB and Wilmington Trust
Company, each in its individual capacity, agrees for the benefit of Lessee to
comply with the terms of the Trust Indenture which it is required to comply
with in its individual capacity.

(o) ERISA. The Owner Participant represents and warrants that
no part of the funds used by it to acquire its interest in the Trust Estate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or of any "plan" within the meaning of Section 4975(e)(1) of the Code, as
interpreted by the Department of Labor. With respect to the initial sale of
the Pass Through Certificates as contemplated by Section 1(b) the Lessee
covenants that it will engage an underwriter that has been issued a Prohibited
Transaction Exemption (such as Prohibited Transaction Exemption 89-89, 90-24 or
90-29 or any other comparable exemption) and that the Lessee will use its best
efforts to structure the sale of the Pass Through Certificates so that the
conditions of such Prohibited Transaction Exemptions are satisfied.

(p) FUNB'S REPRESENTATIONS AND WARRANTIES. FUNB, in its
individual capacity, represents, warrants and covenants that:

(i) each of the Owner Trustee Documents has been duly
executed and delivered by one of its officers who is duly authorized to
execute and deliver such instruments on behalf of the Owner Trustee or
FUNB, as the case may be;

(ii) the Trust Estate is free and clear of Lessor Liens
attributable to FUNB in its individual capacity, and there are no Liens
affecting the title of the Owner Trustee to the Aircraft or resulting
from any act or claim against FUNB in its individual capacity arising
out of any event or condition not related to the ownership, leasing, use
or operation of the Aircraft or to any other transaction contemplated by
this Agreement or any of the other Operative Agreements, including any
Lien resulting from the nonpayment by FUNB in its individual capacity of
any Taxes imposed or measured by its net income;

(iii) there has not occurred any event which constitutes
(or to the best of its knowledge would, with the passage of time or the
giving of notice or both, constitute) an Indenture Event of Default
which has been caused by or relates to FUNB in its individual capacity
and which is presently continuing;

(iv) it is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power
and authority to enter into and perform its obligations under the Trust
Agreement and this Agreement (in its individual capacity), and (assuming
due authorization, execution and delivery of the Trust Agreement by the
Owner Participant) has full right, power and authority to enter

PARTICIPATION AGREEMENT [N625SW]
-34-
into and perform its obligations as Owner Trustee pursuant to the Trust
Agreement under each of the other Owner Trustee Documents;

(v) each of the Trust Agreement and this Agreement (in
its individual capacity) and the Owner Trustee Documents (in its trust
capacity) has been duly authorized by all necessary corporate action on
its part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or North Carolina law or regulation relating to its banking or
trust powers or contravene or result in any breach of, or constitute any
default under, its charter or by-laws or the provisions of any
indenture, mortgage, contract or other agreement to which it is a party
or by which it or its properties may be bound or affected;

(vi) assuming due authorization, execution and delivery
of the Trust Agreement by the Owner Participant, each of the Owner
Trustee Documents has been duly executed and delivered by it and, each
of the Trust Agreement and this Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of FUNB in its individual capacity and as Owner Trustee, as
the case may be, enforceable against such party in accordance with the
terms thereof;

(vii) on the Delivery Date, the Owner Trustee shall have
received whatever title to the Aircraft as was conveyed to it by Lessee;

(viii) neither it nor anyone acting on its behalf has
offered any interest in the Trust Estate or any Certificates or any
similar securities for sale to, or solicited any offer to acquire the
same from, anyone, and no responsible officer or responsible employee of
FUNB has knowledge of any such offer or solicitation, except as set
forth in Section 7(a)(x) hereof;

(ix) assuming due authorization, execution and delivery
of each of the Owner Trustee Documents by each of the parties thereto
(other than the Owner Trustee), each of the Owner Trustee Documents is a
legal, valid and binding obligation of the Owner Trustee, enforceable
against the Owner Trustee in accordance with its respective terms;

(x) there are no proceedings pending or, to the best
knowledge of FUNB, threatened, against FUNB in any court or before any
governmental authority or arbitration board or tribunal which, if
adversely determined, would materially and adversely affect the right,
power and authority of FUNB to enter into or perform its obligations
under the Owner Trustee Documents;

(xi) neither the due execution and delivery of the Owner
Trustee Documents by FUNB, in its individual capacity or as Owner
Trustee under the Trust Agreement, as the case may be, nor the
consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or North Carolina governmental authority
or agency pursuant to any federal or North Carolina law governing the
banking or trust powers of FUNB; and

(xii) no later than sixty (60) days after Lessee shall so
request, Owner Trustee shall execute and deliver to Lessee (on a form to
be supplied by Lessee) a Texas Sales

PARTICIPATION AGREEMENT [N625SW]
-35-
and Use Tax Certificate of Resale reflecting Owner Trustee's Texas or
North Carolina sales tax permit number and Owner Trustee's purchase of
the Aircraft pursuant to the Lease for lease to Lessee thereunder, and,
if necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.

(q) OWNER PARTICIPANT'S LEASE EXPENSES. The Owner Participant
covenants and agrees to pay or cause the Owner Trustee to pay those costs and
expenses specified to be paid by the Owner Participant pursuant to the Lease.

(r) LESSEE'S ASSUMPTION OF DEBT. Subject to compliance by
Lessee with all of its obligations under the Operative Agreements, each of the
Owner Trustee, the Indenture Trustee and the Owner Participant covenants and
agrees that, at Lessee's expense on a net after-tax basis (including, without
limitation, reasonable attorneys' fees and expenses of each of such parties),
(i) if Lessee elects to terminate the Lease and to purchase the Aircraft
pursuant to Section 18.2(b) of the Lease, each of such parties will, subject to
due compliance by Lessee with the provisions of said Section 18.2(b), execute
and deliver appropriate documentation to Transfer to Lessee the Aircraft, and
(ii) Lessee, in connection with such purchase, may (if no Lease Event of
Default shall have occurred and be continuing, unless such Lease Event of
Default is waived by the Indenture Trustee) assume (and, as set forth in
Section 18.2(c) of the Lease, receive a credit in an amount equal to the
principal amount of the debt assumed, against the purchase price payable by
Lessee pursuant to Section 18.2(b) of the Lease) the obligations of the Owner
Trustee pursuant to Section 7.03 of the Trust Indenture and the Certificates
(and the Lease, to the extent that the Owner Trustee's obligations thereunder
are incorporated into the Trust Indenture or the Certificates), and in such
event each of the parties shall execute and deliver appropriate documentation
as contemplated by Section 7.03 of the Trust Indenture.

(s) [INTENTIONALLY RESERVED].

(t) [INTENTIONALLY RESERVED].

(u) LEASE ADJUSTMENTS. Section 3.7 of the Lease contemplates
that, under certain circumstances, the Owner Participant will make certain
recalculations and the Owner Participant hereby agrees to promptly take such
actions as may be necessary or desirable to give effect to and to cause the
Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.

(v) REVOCATION OF TRUST AGREEMENT. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the Trust
Indenture is in effect, and (ii) solely for the benefit of Lessee that it will
not revoke or otherwise terminate the Trust Agreement during the Term without
the prior written consent of Lessee, except that, notwithstanding the foregoing
clauses (i) and (ii), or any other provision of the Operative Agreements to the
contrary, the Owner Participant shall have the right to terminate the trusts
set forth in the Trust Agreement without the consent of any other party to the
Operative Agreements, at any time, if in connection therewith the Owner
Participant shall simultaneously create a new trust upon substantially the same
terms and conditions as the trusts so terminated and shall cause the Trust
Estate to be vested in the Owner Trustee under the new trust upon the same
terms and conditions so applied to such terminated trust; provided, however,
that in connection with any such termination (A) none of the creation of such
new trust, the termination of the trust set forth in the Trust Agreement or the
transactions consummated

PARTICIPATION AGREEMENT [N625SW]
-36-
in connection therewith will have any adverse impact on any of Lessee's rights
or the Indenture Trustee's rights under the Operative Agreements (including the
first priority lien status of the Lien of the Trust Indenture), (B) Lessee
shall have no responsibility to indemnify any Indemnified Party under any
provision of any Operative Agreement for any Taxes or other consequences that
in either case would not have been incurred but for such termination and
transfer, (C) the Owner Participant shall indemnify Lessee and the Indenture
Trustee for any costs, expenses, taxes or other consequences that in either
case would not have been incurred but for such termination and transfer, (D)
the Owner Participant shall provide Lessee and the Indenture Trustee with an
opinion in form and substance reasonably satisfactory to them as to the effect
of such termination and transfer, and (E) immediately after such transfer, the
beneficiary of the new trust shall be the same as the beneficiary of the trust
set forth in the Trust Agreement. The Owner Participant further agrees (x)
promptly to provide instructions to the Owner Trustee, upon the request of the
Owner Trustee and as otherwise required under the Trust Agreement, so as to
enable the Owner Trustee to perform its duties and obligations under the
Operative Agreements in accordance with the terms and provisions thereof and
(y) not to remove the institution acting as Owner Trustee, and not to replace
the institution acting as Owner Trustee in the event that such institution
resigns as Owner Trustee, unless the Owner Participant shall have consulted in
good faith with Lessee prior to such removal or replacement; provided, that no
such consultation shall be required if a Lease Event of Default shall have
occurred and be continuing.

(w) TRUST AGREEMENT NOT TERMINATED. Each of the parties hereto
acknowledges that the bankruptcy, death or incapacity of the Owner Participant
will not terminate the Trust Agreement, nor entitle such person's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate, nor
otherwise effect the rights, obligations and liabilities of the parties hereto.
No creditor of the Owner Participant shall obtain legal title to or exercise
legal or equitable remedies with respect to the Trust Estate as a result of the
Owner Participant's status. No transfer, by operation of law or otherwise, of
any right, title and interest of the Owner Participant in and to its beneficial
interest in the Trust Estate shall operate to terminate the Trust Agreement or
the Trusts created thereby.

(x) [INTENTIONALLY RESERVED].

(y) DISCHARGE OF TRUST INDENTURE. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).

(z) PERMITTED INVESTMENTS. The Owner Trustee agrees that (i)
so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by

PARTICIPATION AGREEMENT [N625SW]
-37-
the Indenture Trustee in accordance with the terms of such Section 9.04, shall
be entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such profit, income, interest,
dividend or gain to the Owner Trustee, (ii) any such profit, income, interest,
dividend or gain not theretofore distributed shall, upon discharge of the Trust
Indenture, be paid by the Indenture Trustee to Lessee, unless instructed by the
Owner Participant to distribute such funds to the Owner Participant or the
Owner Trustee to the extent the Owner Participant or the Owner Trustee is owed
any amounts under the Operative Agreements that have not been paid when due,
and (iii) except to the extent the Owner Trustee or Owner Participant is owed
any amounts under the Operative Agreements by Lessee and such amounts are not
paid when due, the Owner Participant may cause the Indenture Trustee to
distribute and apply such profit, income, interest, dividend or gain realized
upon the maturity, sale or other disposition of investment of funds pursuant to
Section 22.1 of the Lease, in satisfaction or partial satisfaction of the
amounts so due.

(aa) SPECIAL PURCHASE OPTION. If Lessee shall have elected both
(i) to assume all of the rights and obligations of Lessor under the Trust
Indenture in accordance with Section 7.03 of the Trust Indenture and (ii) to
pay to Lessor the installments specified in the proviso to Section 18.2(c) of
the Lease, then, as further conditions precedent to those specified in
paragraphs (c) and (d) of Section 18.2 of the Lease to such assumption:

(1) the Indenture Trustee shall have received evidence
reasonably satisfactory to it that the Trust Indenture, after giving
effect to the transactions contemplated by Section 18.2(d) of the Lease,
constitutes a first priority and perfected security interest in the
Aircraft, which evidence shall include an opinion of the tenor
contemplated by Section 7.03(h) of the Trust Indenture; and (2) the
Indenture Trustee and the Owner Trustee shall execute and deliver an
intercreditor agreement that covers the following matters:

(x) the Owner Trustee shall not, notwithstanding
any Lease Event of Default, exercise any remedy accorded to it
pursuant to Section 15 of the Lease until the Trust Indenture
shall have been discharged pursuant to Section 10.01 of the Trust
Indenture;

(y) payment of the Supplemental Rent under the
Lease in respect of the installments specified in Section 18.2(c)
of the Lease, and all other amounts owing to the Owner Trustee
(other than Excluded Payments) (collectively, "Equity Payments"),
shall be fully and unconditionally subordinated to the payment in
full in cash of principal, interest, Premium, if any, and all
other amounts owing to the Holders or the Indenture Trustee under
or in respect of the Certificates or the Trust Indenture
(collectively, "Debt Payments"), all pursuant to such terms of
subordination as shall be effectively and substantively
equivalent to the manner in which Debt Payments are paid or
payable in priority to the Equity Payments, and such other
customary terms of subordination as shall be reasonably required
by the Indenture Trustee; and

(z) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses
(e)(i) and (e)(ii) of Section 8.03 of the Trust Indenture.

PARTICIPATION AGREEMENT [N625SW]
-38-
(bb) TRANSFERS OF DEBT INTERESTS. Except in connection with any
transfer pursuant to Section 17 hereof, or Section 8.03(e)(ii) of the
Indenture, each Holder covenants that it will not transfer its Certificate to
any Person unless such Person represents, warrants and covenants in writing to
such Holder, the Owner Participant and Lessee, either that (a) no part of the
funds used by it to acquire its Certificate constitutes "plan assets" of any
"employee benefit plan" within the meaning of ERISA or any "plan" within the
meaning of Section 4975(e)(1) of the Code, or (b) its purchase or acquisition
of such Certificate will not result in a nonexempt prohibited transaction under
Section 4975 of the Code or Section 406 of ERISA. Any such Person shall
require any transferee of its interest to make the representations, warranties
and covenants in the preceding sentence.

SECTION 9. PAYMENTS TO LESSEE OF TRUST INDENTURE MONIES. The
Owner Participant hereby agrees to instruct the Owner Trustee to promptly
distribute any money received by it pursuant to Section 7.01 or 10.04 of the
Trust Indenture to Lessee to the extent such amounts were paid by Lessee or on
behalf of Lessee and the Owner Trustee or the Owner Participant is not owed any
amounts under any of the Operative Agreements by Lessee (and if the Owner
Trustee or Owner Participant is owed any such amount, the monies received under
Section 7.01 or 10.04 of the Trust Indenture may be applied in satisfaction or
partial satisfaction thereof). Lessee agrees to hold any money received by it
pursuant to the foregoing sentence in trust for the benefit of the Owner
Participant and may, in its discretion, invest and reinvest all money so held
by it in such Permitted Investments as Lessee deems appropriate. Lessee will
apply such money to the payment of previously unclaimed payments with respect
to the Certificates when and as claims for payment are made by the Holders of
such Certificates. So long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing, as compensation for its services pursuant to this Section 9,
Lessee shall be entitled to an annual fee from the Owner Participant in an
amount to be agreed to at the time by Lessee and the Owner Participant but in
no event shall such fee exceed at any time the amount of earnings on the monies
so held in trust distributable at such time to the Owner Participant. Any net
losses on such investment shall be for the account of Lessee. Any net earnings
on such investment shall be distributed from time to time by Lessee to the
Owner Participant after deducting therefrom any portion of such fee then due
and unpaid. Upon the date required by applicable law dealing with unclaimed
property, Lessee will distribute to the Owner Participant any amount held by it
pursuant to this Section 9 and not previously applied to the payment of the
Certificates, after deducting therefrom any portion of such fee then due and
unpaid.

SECTION 10. OTHER DOCUMENTS; AMENDMENT. Lessee acknowledges
receipt of an executed copy of the Trust Agreement and hereby consents in all
respects to the execution and delivery of the Trust Agreement on the date
hereof and the execution and delivery of the Trust Indenture on the Delivery
Date in the form of Exhibit C hereto and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, subject to the execution and
delivery of the Trust Indenture on the Delivery Date, to the extent the same
purports or is stated to bind the Owner Participant, the Trust Indenture (each
as the same may hereafter be amended or supplemented from time to time in
accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) subject to Section 8(v),
agrees with Lessee and the Indenture Trustee not to amend, supplement or
otherwise modify any provision of the Trust Agreement in a manner adversely
affecting such party without the prior written consent of such party. In
addition, unless a Lease Default (of the type referred to in Section 14.1 or
14.5 of the Lease) or Lease Event of Default shall have

PARTICIPATION AGREEMENT [N625SW]
-39-
occurred and be continuing and so long as the Lease has not been terminated,
the Indenture Trustee and the Owner Trustee hereby agree for the benefit of
Lessee that subject to the execution and delivery of the Trust Indenture on the
Delivery Date, without the consent of Lessee they will not (and the Owner
Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Agreements to which Lessee is not a party.
Each Holder agrees that it will not take any action in respect of the Trust
Indenture Estate except through the Indenture Trustee pursuant to the Trust
Indenture or as otherwise permitted by the Trust Indenture.

SECTION 11. CERTAIN COVENANTS OF LESSEE. Lessee covenants and
agrees with the Participants, the Indenture Trustee and the Owner Trustee, in
its capacity as such and in its individual capacity, as follows:

(a) FURTHER ASSURANCES. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, or shall furnish to the Owner Trustee such information as
may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that FUNB's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.

(b) FILING AND RECORDING, ETC. Lessee, at its expense, will,
at the request of any party hereto, take, or cause to be taken, such action
with respect to the recording, filing, rerecording and refiling of the Trust
Agreement, the Lease, all Lease Supplements, the Trust Indenture, all Trust
Supplements and any financing statements or other instruments as are necessary
to maintain, so long as the Trust Indenture or the Lease is in effect, the
perfection of the security interests created by the Trust Indenture and any
security interest that may be claimed to have been created by the Lease and the
ownership interest of the Owner Trustee in the Aircraft. Lessee agrees, upon
the request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of Section 8(b).

(c) FAA FILINGS. Upon the execution and delivery of the
Lessee FAA Bill of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA Bill of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement covering the Aircraft
attached. Lessee agrees to furnish the Participants and the Indenture Trustee
with copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.

PARTICIPATION AGREEMENT [N625SW]
-40-
(d) ANNUAL COMPLIANCE OPINIONS. Lessee will furnish to Owner
Trustee and Indenture Trustee annually after the execution hereof (but not
later than December 1 of each year), commencing with the year 1997, opinions of
counsel for Lessee selected by Lessee and reasonably satisfactory to Owner
Trustee and Indenture Trustee stating that, in the opinion of such counsel,
either (a) such action has been taken (or specifying any action which must be
taken) with respect to the recording, filing, rerecording and refiling of (i)
the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.

(e) ENGINE PURCHASE AGREEMENT. Lessee agrees to furnish the
Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee),
substantially in the form of the Purchase Agreement Assignment, and to use its
best efforts to obtain from the Engine Manufacturer a consent and agreement in
substantially the form of the Manufacturer's Consent.

(f) MERGER. Lessee will not consolidate with or merge into any
other corporation or convey, transfer or lease all or substantially all of its
assets to any Person unless:

(i) the corporation formed by such consolidation or
into which Lessee is merged or the Person which acquires by conveyance,
transfer or lease all or substantially all of the assets of Lessee as an
entirety, as the case may be (the "Successor") shall be (A) a
corporation organized and existing under the laws of the United States
of America or any state thereof or the District of Columbia, (B) a
"citizen of the United States" as defined in the Act, and (C) a United
States certificated air carrier, such that Owner Trustee will have the
benefit of Section 1110 of the United States Bankruptcy Code to the
extent Owner Trustee had such benefit immediately prior to such
consolidation or merger;

(ii) the Successor shall execute and deliver to the
Owner Trustee, the Indenture Trustee and the Participants an agreement
in form reasonably satisfactory to the Owner Trustee, the Indenture
Trustee and each Participant containing an assumption by the Successor
of the due and punctual performance and observance of each covenant and
condition of the Operative Agreements and each Pass Through Trust
Agreement to be performed or observed by Lessee;

(iii) immediately after giving effect to such transaction
and as a result of giving effect to such transaction, no Lease Default
or Lease Event of Default shall have occurred and be continuing;

(iv) Lessee shall have delivered to the Owner Trustee,
the Indenture Trustee and each Participant an Officer's Certificate and
an opinion of counsel to the Successor reasonably satisfactory to the
Owner Trustee, the Indenture Trustee and each Participant, each

PARTICIPATION AGREEMENT [N625SW]
-41-
stating that such consolidation, merger, conveyance, transfer or lease
and the assumption agreement mentioned in subparagraph (ii) above comply
with this Section 11(f) (except that such opinion need not refer to
subparagraph (iii) above), that the agreements entered into to effect
such consolidation, merger, conveyance, transfer or lease and such
assumption agreement are legal, valid and binding obligations of the
Successor, enforceable against the Successor in accordance with their
respective terms (subject to applicable bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity), and that all conditions precedent
herein provided for relating to such transaction have been complied
with; and

(v) the Successor shall make such filings and
recordings with the FAA pursuant to the Act, as shall be necessary or
desirable to evidence such consolidation, merger, conveyance, transfer
or lease with or to such Successor.

Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements and
each Pass Through Trust Agreement with the same effect as if the Successor had
been named as Lessee therein. No such conveyance, transfer or lease of all or
substantially all of the assets of Lessee as an entirety shall have the effect
of releasing Lessee or any successor corporation or Person which shall
theretofore have become such in the manner prescribed in this Section 11(f)
from its liability in respect of any Operative Agreement and each Pass Through
Trust Agreement to which it is a party. Nothing contained herein shall permit
any lease, sublease or other arrangement for the use, operation or possession
of the Aircraft except in compliance with the applicable provisions of the
Lease (or any assignment by Lessee of its rights under the Lease, except in
connection with a transaction in compliance with the express provisions of this
Section 11(f)).

(g) CORPORATE EXISTENCE. Except as permitted by Section 11(f)
hereof, Lessee shall at all times maintain its corporate existence. Lessee
covenants and agrees that it will at all times be a "citizen of the United
States" within the meaning of the Act.

(h) NO CERTIFICATE OWNERSHIP. Lessee agrees that it will not,
at any time, hold any Certificates or Pass Through Certificates.

SECTION 12. OWNERSHIP OF AIRCRAFT. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for all purposes the
Owner Trustee will be the owner of the Aircraft (except that the Owner
Participant will be the owner for income tax purposes and except under the
circumstances contemplated by the proviso to Section 18.2(d) of the Lease) and
Lessee will be the lessee thereof, and each party hereto agrees to characterize
the Lease as a lease for income tax purposes and all other relevant purposes
(subject to the election referred to above).

SECTION 13. NOTICES; CONSENT TO JURISDICTION. (a) Except as
otherwise provided in this Agreement respecting telephone notices, all notices,
demands, instructions and other communications required or permitted to be
given to or made upon any party hereto shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
or by prepaid telex, TWX or telegram (with messenger delivery specified in the
case of a telegram), or by telecopier, or by prepaid courier service, and shall
be deemed to be given for purposes of this Agreement on the day that such
writing is delivered or, if given by certified mail, three (3) Business Days
after being deposited

PARTICIPATION AGREEMENT [N625SW]
-42-
in the mails, in accordance with the provisions of this Section 13(a). Unless
otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telex, TWX
or telecopier numbers) as follows: (A) if to Lessee, the Owner Trustee, the
Pass Through Trustee, the Indenture Trustee or the Owner Participant, to the
respective addresses set forth on Schedule I hereto (and in the case of Owner
Trustee a copy shall be sent to the Owner Participant) or (B) if to a
subsequent Owner Participant, addressed to such subsequent Owner Participant at
such address as such subsequent Owner Participant shall have furnished by
notice to the parties hereto or (C) if to any subsequent Holder, addressed to
such Holder at its address set forth in the Register maintained pursuant to
Section 2.03 of the Trust Indenture.

(b) Each party to this Agreement (individually a "Party" and
collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.

SECTION 14. CHANGE OF SITUS OF OWNER TRUST. The Owner
Participant agrees that if, at any time, the Trust Estate becomes subject to
any Taxes for which it is indemnified pursuant to Section 7(b) hereof and if,
as a consequence thereof, Lessee should request that the situs of the trust be
moved to another state in the United States from the state in which it is then
located, the situs of the trust may be moved and the Owner Participant will
take whatever action may be reasonably necessary to accomplish such removal;
provided, that (A) Lessee shall provide such additional tax indemnification as
the Owner Participant may reasonably request, (B) the rights and obligations
under the Operative Agreements of the Owner Participant shall not be adversely
altered as a result of the taking of such action, or the Owner Participant
shall be indemnified by Lessee to its reasonable satisfaction for any such
alteration, (C) the lien of the Trust Indenture on the Trust Indenture Estate
shall not be adversely affected by such action, and Lessee shall execute and
deliver such documents as may be requested by the Indenture Trustee to continue
the perfection and priority of the lien on the Trust Indenture Estate, (D) the
Owner Participant shall have received an opinion or opinions of counsel
(reasonably satisfactory to the Owner Participant) in scope, form and substance
reasonably satisfactory to the Owner Participant to the effect that (I) the
trust, as thus removed, shall remain a validly established trust and the Trust
Agreement and other Operative Agreements shall remain valid, binding and
enforceable in accordance with their terms, (II) any amendments to the Trust
Agreement necessitated by such removal shall have been duly authorized,
executed and delivered by the parties thereto and shall constitute the legal,
valid and binding obligations of such parties, enforceable in accordance with
their terms, (III) such removal will not result in the imposition of, or
increase in the amount of, any Tax for which Lessee is not required to
indemnify the Owner Participant, the Owner Trustee or the Trust Estate

PARTICIPATION AGREEMENT [N625SW]
-43-
pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not result in any Loss of MACRS Deductions, Transaction
Expense Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), and (V) covering such other matters as the
Owner Participant may reasonably request, (E) if such removal involves the
replacement of the Owner Trustee, the Owner Participant shall have received an
opinion of counsel to such successor Owner Trustee in form and substance
reasonably satisfactory to the Owner Participant covering the matters addressed
by the opinion delivered pursuant to Section 4(a)(xii) hereof, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys' fees and disbursements, registration, recording or filing fees
incurred by the Owner Trustee or Owner Participant, in connection with such
change of situs.

SECTION 15. MISCELLANEOUS.

(a) CONSENTS UNDER LEASE AND TRUST INDENTURE. Each of the
Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.

(b) SURVIVAL. The representations, warranties, indemnities and
agreements of Lessee, the Owner Trustee, the Indenture Trustee, the Owner
Participant, Pass Through Trustee and any Holder provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, Pass
Through Trustees' and any Holder's and the Owner Participant's obligations
under any and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly provided herein or
therein.

(c) COUNTERPARTS; WAIVERS; GOVERNING LAW. 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 instrument. Neither this Agreement nor
any of the terms hereof may be terminated, amended, supplemented, waived or
modified, except by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification is sought; and no such termination, amendment, supplement, waiver
or modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, the Indenture Trustee and the Owner Trustee. The terms of
this Agreement shall be binding upon, and inure to the benefit of and shall be
enforceable by, Lessee, the Participants, the Indenture Trustee and the Owner
Trustee. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE

PARTICIPATION AGREEMENT [N625SW]
-44-
STATE OF NEW YORK. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.

(d) NO RECOURSE AGAINST OWNER TRUSTEE. The parties hereto
agree that all of the statements, representations, covenants and agreements
made by the Owner Trustee (when made in such capacity) contained in this
Agreement and any agreement referred to herein other than the Trust Agreement,
unless expressly otherwise stated, are made and intended only for the purpose
of binding the Trust Estate and establishing the existence of rights and
remedies which can be exercised and enforced against the Trust Estate.
Therefore, anything contained in this Agreement or such other agreements to the
contrary notwithstanding (except for any express provisions that the Owner
Trustee is responsible for or is acting in or making representations or
agreements in its individual capacity), no recourse shall be had with respect
to this Agreement or such other agreements against the Owner Trustee in its
individual capacity or against any institution or person which becomes a
successor trustee or co-trustee or any officer, director, trustee, servant or
direct or indirect parent or controlling person or persons of any of them;
provided, however, that this Section 15(d) shall not be construed to prohibit
any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.

(e) DUTIES LIMITED. No Participant shall have any obligation
or duty to Lessee, to any other Participant or to others with respect to the
transactions contemplated hereby except those obligations or duties of such
Participant expressly set forth in this Agreement and the other Operative
Agreements and no Participant shall be liable for performance by any other
party hereto of such other party's obligations or duties hereunder. Without
limitation of the generality of the foregoing, under no circumstances
whatsoever (except as provided in Section 7(d) hereof) shall any Participant be
liable to Lessee, nor shall any Participant be liable to any other Participant,
for any action or inaction on the part of the Indenture Trustee or the Owner
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by the willful misconduct or gross negligence
of the Indenture Trustee or the Owner Trustee.

(f) BINDING ON PARTIES AND SUCCESSORS. This Agreement shall be
binding upon and shall inure to the benefit of and shall be enforceable
against, the parties hereto and their respective successors and permitted
assigns including each successive holder of the Owner Participant's interest
and each successive holder of any Certificate issued and delivered pursuant to
this Agreement or the Trust Indenture whether or not an express assignment to
such holder of rights and obligations under this Agreement has been made.

(g) ENFORCEABILITY REPRESENTATIONS. Every representation or
warranty contained herein as to the enforceability of any Operative Agreement
shall be deemed to be made subject to the effects of applicable bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights
generally and of general principles of equity.

(h) QUIET ENJOYMENT. So long as no Lease Event of Default
shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee

PARTICIPATION AGREEMENT [N625SW]
-45-

will, through its own actions or breaches of any of its obligations under the
Operative Agreements, interfere in the quiet enjoyment of the Aircraft by
Lessee or any Permitted Sublessee.

(i) COPIES. Lessee shall furnish to the Indenture Trustee
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Owner Trustee under the
Lease, to the extent that the same shall not have been furnished directly to
the Indenture Trustee pursuant to the Lease.

SECTION 16. TRANSACTION COSTS; INVOICES AND PAYMENT OF
EXPENSES. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the initial
issuance of the Pass Through Certificates, the reasonable and actual fees,
expenses and disbursements of (1) Potter Anderson & Corroon, special counsel
for the Indenture Trustee and Pass Through Trustee, (2) Moore & Van Allen,
PLLC, counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the Underwriters to the extent not paid by the Underwriters, and (5) Vinson
& Elkins L.L.P., special counsel for Lessee, but only to the extent of their
expenses and disbursements, (ii) all fees, taxes and other charges payable in
connection with the recording or filing of instruments and financing
statements, (iii) the initial fee and initial reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement, (iv) the initial
fee and initial reasonable and actual disbursements of the Indenture Trustee
under the Trust Indenture and the Pass Through Trustee under the Pass Through
Trust Agreement, (v) the fee and expenses of Aero Economics, Inc. (or of such
other appraiser as shall be acceptable to Lessee and the Owner Participant)
with respect to the appraisal of the Aircraft required on or before the
Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory fees and
expenses of Babcock & Brown Financial Corporation, (vii) the reasonable
out-of-pocket expenses of the Owner Participant relating to the transactions
contemplated hereby, excluding the fees and expenses of Owner Participant's
counsel, (viii) the placement or underwriting fees, commissions and expenses,
if any, in placing the Pass Through Certificates and all costs and expenses
associated with the public offering, pursuant thereto, and (ix) printing and
distribution costs.

(b) Each of the Owner Trustee, the Indenture Trustee, Lessee
and the Participants shall promptly submit to the Owner Participant copies of
invoices of the Transaction Costs as they are received. Lessee shall also be
provided with a copy of any bill for legal expenses, with an opportunity to
review and approve it (such approval not to be unreasonably withheld or
delayed). The Owner Participant agrees to pay such amounts directly or to
transfer to the Owner Trustee from time to time promptly upon receipt of
invoices of Transaction Costs such amount as shall be necessary in order to
enable the Owner Trustee to pay such Transaction Costs. To the extent of funds
received by it, the Owner Trustee agrees to pay all invoices of Transaction
Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, (x) at its option, may pay directly any
Transaction Costs in excess of the percentage of Lessor's Cost set forth in
Section 3.7.1 of the Lease incurred in connection with the closing of this
transaction on the Delivery Date (y) and shall pay the fees of its special
counsel and, (z) in the event that the transactions contemplated hereby shall
not be consummated, Lessee shall pay all Transaction Costs, plus the fees and
expenses of Owner Participant's counsel, except that the fees and expenses
referred to in clause (a) (vii) above, and the fees, expenses and disbursements
of the Owner Participant's counsel, shall be borne by the Owner Participant if
such failure to consummate the transactions results from the failure of the
Owner Participant to close after all conditions precedent to the Owner
Participant's funding (other than those conditions within the control of the
Owner Participant) of its Commitment set forth herein have been satisfied. In
any and all events,

PARTICIPATION AGREEMENT [N625SW]
-46-
Lessee agrees to pay on a net after-tax basis the reasonable out-of-pocket
costs and expenses (including counsel fees) of each Indemnified Party incurred
in connection with the entering into or giving or withholding of any future
waiver, modification, supplement, consent, amendment or other action with
respect to any Operative Agreement which (a) is requested by Lessee, (b)
results from any adjustment pursuant to Section 3.7 of the Lease, or (c) is
necessary to effectuate the intent of any Operative Agreement.

SECTION 17. OPTIONAL REDEMPTION OF CERTIFICATES. (a) Subject
to paragraph (d) below, in the event that Lessee shall have given written
notice to the Owner Trustee, the Indenture Trustee and the Owner Participant
requesting that there be effected a voluntary redemption of the Outstanding
Certificates by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
to conclude an agreement with Lessee as to the terms of such refunding or
refinancing transaction (including the terms of any debt to be issued in
connection with such refunding or refinancing transaction and the documentation
to be executed in connection therewith), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:

(1) within ten (10) Business Days after the reaching of
such agreement, the Owner Participant will deliver to Lessee a
certificate of an authorized representative of the Owner Participant
(the "Refinancing Certificate") setting forth (i) the proposed date on
which the Outstanding Certificates will be redeemed, describing the new
debt to be issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, the "Refinancing Date", which
date shall be determined so as to comply with Section 6.03(a) of the
Trust Indenture) and (ii) the following information: (A) subject to the
limitations set forth in this Section 17, the proposed adjusted ratio of
debt evidenced by the Certificates to the Owner Participant's investment
in the beneficial ownership of the Aircraft (such ratio, the
"Debt/Equity Ratio"), (B) the principal amount of debt to be issued by
the Owner Trustee on the Refinancing Date, and (C) the proposed revised
debt amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and the revised Special
Purchase Price (including any installments thereof). The Refinancing
Certificate shall not provide for a Debt/Equity ratio of more than 4:1.
Within ten (10) Business Days of its receipt of the Refinancing
Certificate, Lessee may demand a verification of the information set
forth in the Refinancing Certificate in the manner described in Section
3.7 of the Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in subparagraphs (2)
through (6) below;

(2) the appropriate parties will enter into a financing
or loan agreement in form and substance reasonably satisfactory to the
Owner Participant, the Owner Trustee and Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt
or the purchase of such debt by a publicly funded entity (or entities)
or the sale of the Owner Trustee's interest in the Trust Estate and/or
the Aircraft and its simultaneous resale to the Owner Trustee) with the
institution or institutions to be named therein (A) providing for (i)
the issuance and sale by the Owner Trustee to such institution or
institutions on the Refinancing Date of debt securities in an aggregate
principal amount specified in the Refinancing Information, which amount
shall be at least equal to the aggregate principal amount of all
Certificates

PARTICIPATION AGREEMENT [N625SW]
-47-
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New Debt
to the redemption of all such Certificates on the Refinancing Date and
the payment of any other amounts payable to the Holders under the
Operative Agreements on the Refinancing Date, and (iii) the payment of
the excess, if any, of such proceeds over the amount necessary to effect
such redemption to the Owner Trustee for payment to the Owner
Participant and (B) pursuant to which the parties to the refinancing
transaction (including the Owner Participant and Lessee but excluding
any public holders of debt) make such representations, warranties and
covenants as the Owner Participant or Lessee may reasonably require;

(3) Lessee and the Owner Trustee will amend the Lease
to provide that (i) Basic Rent payable in respect of the period from and
after the Refinancing Date shall be as provided in the Refinancing
Information, (ii) amounts payable in respect of Stipulated Loss Value
and Termination Value from and after the Refinancing Date shall be as
provided in the Refinancing Information, and (iii) in the event that the
Series SWA 1996 Trust N625SW Certificates shall have been publicly
issued, the early termination notice revocation and payment provisions
shall be modified to comport with the applicable notice and payment
requirements of The Depository Trust Company or any other depository;

(4) the Owner Trustee will enter into an agreement to
provide for the securing thereunder of the New Debt in like manner as
the Certificates and will enter into such amendments and supplements to
the Trust Indenture (or such new indenture or other security agreement)
as may be necessary to effect such security;

(5) unless otherwise agreed to or required by the Owner
Participant to be paid as a Transaction Cost and whether or not such
refunding or refinancing transaction is consummated, Lessee shall pay on
a net after-tax basis all of the reasonable out-of-pocket expenses of
all parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
and any related loan or commitment fees;

(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary redemption under the Trust
Indenture and this Agreement, each Holder of a Certificate being
refinanced or refunded will transfer on the applicable Redemption Date
to the Owner Trustee each Certificate held by it immediately prior to
such refunding or refinancing for cancellation (and the Owner Trustee
shall cancel the same), against simultaneous receipt by such Holder of
payment for the then outstanding principal amount of such Certificate,
accrued and unpaid interest thereon, Premium, if any, together with
payment in full of all other amounts then payable to such Holder and the
Indenture Trustee hereunder or under the Trust Indenture; and

(7) the Owner Participant's obligations under this
Section 17(a) may be discharged by the appointment of an investment
banker satisfactory to Lessee.

(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required

PARTICIPATION AGREEMENT [N625SW]
-48-
by Lessee, contain any restrictions on the sale to Holders who may use ERISA
funding sources. It is expressly understood that the Owner Participant shall
have no obligation hereunder to consent to such public refunding or refinancing
if, in its good faith judgment, such refunding or refinancing increases its or
any of its Affiliates' exposure to (i) liabilities under federal or state
securities laws, (ii) regulation under state or federal securities laws, (iii)
the need to disclose publicly information that is not generally available to
the public, or (iv) being adversely affected in its ability to engage in any
other financing transaction, in each case to a level unacceptable to it in its
reasonable, good faith judgment. Any trustee of public debt shall be (i)
Wilmington Trust Company or (ii) a bank or trust company in the United States
and having a combined capital and surplus of at least $100,000,000, if there be
such an institution willing, able and legally qualified to perform the duties
of trustee upon reasonable or customary terms.

(c) Lessee shall give the Indenture Trustee at least thirty
(30) days' irrevocable written notice of the proposed date of the optional
refunding or refinancing.

(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.

(e) Without the consent of the Owner Participant, there shall
be no more than two optional refundings or refinancings under this Section 17.

(f) Any refunding or refinancing pursuant to this Section 17
shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.

(g) When calculating any of the information required to be set
forth in a Refinancing Certificate, the Owner Participant shall make such
calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Basic Rent,
Stipulated Loss Values, Termination Values and Special Purchase Price on the
Delivery Date (except to the extent such assumptions have been altered since
the Delivery Date in connection with an adjustment to Rent pursuant to Section
3.7 of the Lease).

(h) No refinancing or refunding pursuant to this Section 17
shall be permitted during the continuance of a Lease Default or a Lease Event
of Default.

PARTICIPATION AGREEMENT [N625SW]
-49-
SECTION 18. SECTION 1110 COMPLIANCE. The Participants and
Lessee agree that the transactions contemplated by this Agreement and the other
Operative Agreements are intended to be, shall be and should be construed so as
to be, entitled to the full benefits of 11 U.S.C. Section 1110.

PARTICIPATION AGREEMENT [N625SW]
-50-
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.

SOUTHWEST AIRLINES CO.,
Lessee

By:
-----------------------------------
Treasurer

NATIONSBANK, N.A.,
Owner Participant

By:
-----------------------------------
Vice President

FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, in its individual
capacity only as expressly provided
herein and otherwise solely as Owner
Trustee,

By:
-----------------------------------
Corporate Trust Officer

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

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

WILMINGTON TRUST COMPANY, not in
its individual capacity, except as
otherwise expressly provided herein,
but solely as Pass Through Trustee

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

PARTICIPATION AGREEMENT [N625SW]
SCHEDULE I
Names and Addresses

Lessee: Owner Trustee:
- ------ -------------
Southwest Airlines Co. First Union National Bank of North Carolina
2702 Love Field Drive 230 South Tryon Street, 9th Floor
P.O. Box 36611 Charlotte, NC 28288-1179
Dallas, Texas 75235-1611 Attn: Bond Administration
Attn: Treasurer Telecopy: (704) 383-7316
Telecopy: (214) 792-4022 Payment Instructions:
Payment Instructions: First Union National Bank of North Carolina
Southwest Airlines Co. 230 South Tryon Street, 9th Floor
Bank One Dallas Charlotte, NC 28288-1179
ABA No. 11100614 ABA No. 053000219
Account No. 98120109 Account No. 465946
Reference: N625SW Attn: Bond Administration - Pablo de la Canal
Reference: Southwest Airlines
Owner Participant:
- -----------------
NationsBank, N.A. Indenture Trustee and Pass Through Trustee:
c/o NationsBanc Lease Investments, Inc. ------------------------------------------
NationsBanc Corp. Center, 12th Floor Wilmington Trust Company
101 North Tryon Street Rodney Square North
NC-1007-12-01 1100 North Market Street
Charlotte, NC 28255 Wilmington, Delaware 19890-0001
Telecopy: (704) 386-3271 Attn: Corporate Trust Administration
Attn: Alison Dubbs Telecopy: (302) 651-8882
Payment Instructions: Payment Instructions:
NationsBank of North Carolina Wilmington Trust Company
ABA No. 053000196 Wilmington, Delaware
For the account of ABA No. 031100092
NationsBanc For the account of Southwest Airlines 1996-1
Lease Investments, Inc. Account No. 40376-0
Account No. 001608249 Reference: N625SW
Reference: Southwest Airlines Attn: David A. Vanaskey
Corporate Trust Administration

PARTICIPATION AGREEMENT [N625SW]
S-1
SCHEDULE II

Appraisal

1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.

2. On the Delivery Date, the Aircraft is reasonably estimated to have:

(A) a useful life of at least 125% of the Base Lease Term;

(B) a residual value as of the end of the Base Lease Term of at least
20% of Lessor's Cost (without taking into account any increase or
decrease for inflation or deflation); and

(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on the Special Purchase Option Date.

3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.

4. Such other matters as may reasonably be requested by Owner Participant.

PARTICIPATION AGREEMENT [N625SW]
S-2
EXHIBIT A

TRANSFEREE OP GUARANTY

TRANSFEREE OP GUARANTY, dated as of ________________
by________________ __________, a ____________________ corporation ("Transferee
OP Guarantor") to and for the benefit of the Indenture Trustee, the Owner
Trustee, individually and as Owner Trustee, the Lessee and the Pass Through
Trustees referred to in the Participation Agreement described below
(collectively, together with their permitted successors and assigns,
"Beneficiaries" and, individually, a "Beneficiary").

WITNESSETH:

WHEREAS, _________________ a _____________ [corporation] ("Transferor"),
is Owner Participant under that certain Participation Agreement, dated as of
_______________ among Southwest Airlines Co., as Lessee, NationsBank, N.A., as
Owner Participant [and Transferor's predecessor in interest], Wilmington Trust
Company, as the Pass Through Trustees, First Union National Bank of North
Carolina, in its individual capacity only as expressly provided therein and
otherwise solely as Owner Trustee, and Wilmington Trust Company, in its
individual capacity and as Indenture Trustee (the "Participation Agreement");

WHEREAS, Transferor wishes to transfer, except to the extent expressly
reserved to Transferor, all of its right, title and interest in and to the
Participation Agreement, the Trust Estate and the other Operative Agreements to
which Transferor is a party, and all proceeds therefrom as set forth in the
Assignment and Assumption Agreement dated the date hereof between Transferor
and ________________________, a _______________________corporation
("Transferee"); and

WHEREAS, the terms of the Participation Agreement provide that the
aforementioned transfer is conditioned upon the execution and delivery of this
Guaranty by Transferee OP Guarantor;

NOW, THEREFORE, Transferee OP Guarantor hereby agrees with and for the
benefit of Beneficiaries as follows:

1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Sale and Lease
Agreement, dated as of August 1, 1996 between the Owner Trustee and Lessee, and
the rules of usage set forth therein shall apply hereto.

2. Guaranty. (a) Transferee OP Guarantor hereby unconditionally and
irrevocably guarantees, as primary obligor and not as a surety, to
Beneficiaries and their respective successors, endorsees, transferees and
assigns, the prompt and complete payment by Transferee when due (whether at the
stated maturity, by acceleration or otherwise) of, and the faithful performance
of and compliance with, all payment obligations of Transferee under the
Participation Agreement and each other Operative Agreement to which Owner
Participant is a party or by which it is bound (collectively, the "Relevant
Documents"), strictly in accordance with the terms thereof and the timely
performance of all other obligations of Transferee thereunder (such payment and
other obligations, the "Obligations"), and Transferee OP Guarantor further
agrees to pay all expenses (including, all fees and disbursements of

PARTICIPATION AGREEMENT [N625SW]
A-1
counsel) that may be paid or incurred by Beneficiaries in enforcing any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, Transferee OP Guarantor
under this Guaranty.

(b) No payment or payments made by Transferee, Transferee OP
Guarantor, any other guarantor or any other Person or received or collected by
any Beneficiary from Transferee, Transferee OP Guarantor, any other guarantor
or any other person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of Transferee OP Guarantor hereunder until the
Obligations are paid and performed in full.

(c) If for any reason any Obligation (whether affirmative or negative
in character) shall not be observed or performed or paid promptly when due and
payable, Transferee OP Guarantor shall promptly perform or observe or cause to
be performed or observed each such Obligation or undertaking and shall
forthwith pay such amount at the place and to the person or entity entitled
thereto pursuant to the Relevant Documents regardless of whether or not any
Beneficiary or anyone on behalf of any Beneficiary shall have instituted any
suit, action or proceeding or exhausted its remedies or taken any steps to
enforce any rights against Transferee or any other person or entity to compel
any such performance or to collect all or any part of such amount pursuant to
the provisions of the Relevant Documents or at law or in equity, or otherwise,
and regardless of any other condition or contingency.

3. No Subrogation. Notwithstanding any payment or payments made by
Transferee OP Guarantor hereunder or any set-off or application of funds of
Transferee OP Guarantor by any Beneficiary, Transferee OP Guarantor shall not
be entitled to be subrogated to any of the rights of any Beneficiary against
Transferee or any collateral, security or guarantee or right of set-off held by
any Beneficiary for the payment of the Obligations, nor shall Transferee OP
Guarantor seek or be entitled to seek any reimbursement from Transferee in
respect of payments made by Transferee OP Guarantor hereunder, unless all
amounts and performance then owing to Beneficiaries by Transferee on account of
the Obligations shall have been paid and performed in full.

4. Amendments, etc., with respect to the Obligations; Waiver of
Rights. The Transferee OP Guarantor shall remain fully obligated hereunder
notwithstanding that, without any reservation of rights against the Transferee
OP Guarantor and without notice to or further assent by the Transferee OP
Guarantor, any demand for payment or performance of any of the Obligations made
by any Beneficiary may be rescinded by such party and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by any Beneficiary and any Relevant Document, and/or
any collateral security document or other guarantee or document in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the parties thereto may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by any
Beneficiary for the payment or performance of the Obligations may be sold,
exchanged, waived, surrendered or released. No Beneficiary shall have any
obligation to protect, secure, perfect or insure any lien at any time held by
it as security for the Obligations or for this Guaranty or any property subject
thereto. When making any demand hereunder against the Transferee OP Guarantor,
a Beneficiary may, but shall be under no obligation to, make a similar demand
on the Transferee or any other guarantor, and any failure by a Beneficiary to
make any such demand or to

PARTICIPATION AGREEMENT [N625SW]
A-2
collect any payments from the Transferee or any such other guarantor or any
release of the Transferee or such other guarantor shall not relieve the
Transferee OP Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. For
purposes hereof, "demand" shall include the commencement and continuance of any
legal proceedings.

5. Guaranty Absolute and Unconditional. The Transferee OP Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Beneficiary upon
this Guaranty or acceptance of this Guaranty; the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guaranty; and all
dealings between the Transferee or the Transferee OP Guarantor and any
Beneficiary shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guaranty. The Transferee OP Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Transferee or the Transferee OP Guarantor with
respect to the Obligations. The Transferee OP Guarantor understands and agrees
that this Guaranty shall be construed as a continuing, absolute and
unconditional guarantee of payment and performance (and not merely of
collectibility) without regard to (a) the validity, regularity or
enforceability of any Relevant Document, any of the Obligations or any
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by any Beneficiary, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Transferee OP
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Transferee for the Obligations, or of the Transferee
OP Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Transferee OP Guarantor,
any Beneficiary may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Transferee or any other person or
entity or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Beneficiary to
pursue such other rights or remedies or to collect any payments from the
Transferee or any such other person or entity or to realize upon any such
collateral security or guarantee or exercise any such right of offset, or any
release of the Transferee or any such other person or entity or any such
collateral security, guarantee or right of offset, shall not relieve the
Transferee 0P Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Transferee OP Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the
Beneficiaries, and their respective successors, endorsees, transferees and
assigns, until all of the Obligations and the obligations of the Transferee OP
Guarantor under this Agreement shall have been satisfied by payment and
performance in full. The Transferee OP Guarantor further agrees that, without
limiting the generality of this Guaranty, if any Beneficiary (or any assignee
thereof) shall be prevented by applicable law from exercising its remedies (or
any of them) against the Transferee under any Operative Document, such
Beneficiary (or any assignee thereof) shall be entitled to receive hereunder
from the Transferee OP Guarantor, upon demand therefor, the sums that would
have otherwise been due from the Transferee had such remedies been able to be
exercised.

PARTICIPATION AGREEMENT [N625SW]
A-3
6. Reinstatement. This Guaranty shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
or any of the Obligations is rescinded or must otherwise be restored or
returned by any Beneficiary upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Transferee or the Transferee OP Guarantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Transferee or the
Transferee OP Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made. The Transferee OP Guarantor
shall not commence any "case" (as defined in Title 11 of the United States
Code) against the Transferee.

7. Payments. The Transferee OP Guarantor hereby guarantees that
payments hereunder shall be paid without set-off, counterclaim, deduction or
withholding, except as required by applicable law, and shall be made in
Dollars, provided, if any withholding Taxes are so imposed under applicable
law, the Transferee OP Guarantor shall pay an additional amount such that the
net amount actually received by the Person entitled thereto, free of
withholding, will equal the amount then due absent such withholding.

8. Representations and Warranties. The Transferee OP Guarantor
hereby represents and warrants that:

(a) it is a [corporation] duly organized and validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and
to enter into and perform its obligations under this Guaranty;

(b) this Guaranty has been duly authorized by all necessary
corporate action on the part of the Transferee OP Guarantor, does not
require any approval not already obtained of stockholders of the
Transferee OP Guarantor or any approval or consent not already obtained
of any trustee or holders of any indebtedness or obligations of the
Transferee OP Guarantor, and has been duly executed and delivered by the
Transferee OP Guarantor;

(c) this Guaranty constitutes a legal, valid and binding
obligation of the Transferee OP Guarantor enforceable in accordance with
its terms;

(d) there are no pending or, to the knowledge of the
Transferee OP Guarantor, threatened actions or proceedings against the
Transferee OP Guarantor before any court or administrative agency which,
if determined adversely to the Transferee OP Guarantor, would materially
adversely affect the financial condition of the Transferee OP Guarantor
or the ability of the Transferee OP Guarantor to perform its obligations
under this Guaranty;

(e) its net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000; and

(f) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving
of notice or both, constitute) an Indenture Event of Default which has
been caused by or relates to the Transferee OP Guarantor and which is
presently continuing.

PARTICIPATION AGREEMENT [N625SW]
A-4
9. Severability. Any provision of this Guaranty that 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.

10. No Waiver; Cumulative Remedies . No Beneficiary shall by any act
(except by a written instrument pursuant to Section 12 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of any Beneficiary, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by a Beneficiary of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that such Beneficiary would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.

11. Integration. This Guaranty represents the entire agreement of
Transferee OP Guarantor with respect to the subject matter hereof and there are
no promises or representations by any Beneficiary relative to the subject
matter hereof not reflected herein.

12. Amendments and Waivers. None of the terms or provisions of this
Guaranty may be waived, amended or supplemented or otherwise modified except by
a written instrument executed by Transferee OP Guarantor and each Beneficiary.

13. Section Headings. The Section headings used in this Guaranty are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

14. Successors and Assigns. This Guaranty shall be binding upon the
successors and assigns of Transferee OP Guarantor and shall inure to the
benefit of Beneficiaries and their respective successors and assigns.

15. GOVERNING LAW. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.

16. Notices. All notices and other communications required under the
terms and conditions hereof shall be given and shall be effective in accordance
with the provisions of Section 13(a) of the Participation Agreement; provided
that notices to the Transferee OP Guarantor shall be sent to
_______________________.

PARTICIPATION AGREEMENT [N625SW]
A-5
IN WITNESS WHEREOF, the undersigned has caused this Transferee OP
Guaranty to be duly executed and delivered by its duly authorized officer as of
the day and the year first above written.

[NAME OF TRANSFEREE OP GUARANTOR]

By:
-----------------------------------

Title:
--------------------------------

PARTICIPATION AGREEMENT [N625SW]
A-6
EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _______, between
____________________ __, a ______________ [corporation] ("Assignor") and
______________________________, a _______ ________[corporation] ("Assignee")
(the "Agreement").

WITNESSETH:

WHEREAS, the parties hereto desire to effect (a) the transfer by
Assignor to Assignee of all of the right, title and interest of the Assignor
(except as reserved below) in, under and with respect to, among other things,
(i) the Participation Agreement, dated as of August 1, 1996, among Southwest
Airlines Co., as Lessee, NationsBank, N.A., as Owner Participant, Wilmington
Trust Company, as Pass Through Trustee, First Union National Bank of North
Carolina, in its individual capacity only as expressly provided therein and
otherwise solely as Owner Trustee, and Wilmington Trust Company, in its
individual capacity and as Indenture Trustee, as the same may be amended,
modified or supplemented from time to time (the "Participation Agreement"),
(ii) the Trust Agreement identified in the Participation Agreement, (iii) the
Trust Estate (as defined in the Trust Agreement) and (iv) the proceeds
therefrom and (b) the assumption by Assignee of the obligations of Assignor
accruing thereunder;

NOW, THEREFORE, it is hereby agreed as follows:

1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Sale and Lease
Agreement, dated as of August 1, 1996 between the Owner Trustee and Lessee, and
the rules of usage set forth therein shall apply hereto.

2. Assignment. Assignor does hereby sell, convey, assign, transfer and
set over unto Assignee, as of the date hereof, all of its right, title and
interest in, under and with respect to the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement, the Trust Estate or any other contract,
agreement, document or instrument relating to the Trust Estate by which
Assignor is bound, and any proceeds therefrom, together with all other
documents and instruments evidencing any of such right, title and interest,
except such rights of Assignor as have accrued to Assignor prior to the date
hereof (including the right to receive any amounts due or accrued to Assignor
under the Trust Agreement as of a date prior to such date and the right to
receive any indemnity payment pursuant to the Participation Agreement or the
Tax Indemnity Agreement with respect to events occurring prior to such date).

3. Assumption. Assignee hereby undertakes, for the benefit of
Assignor, Indenture Trustee, Owner Trustee, Pass Through Trustee and Lessee and
their successors and assigns, all of the duties and obligations of Assignor
whenever accrued (other than duties and obligations of Assignor required to be
performed by it on or prior to the date hereof under the Participation
Agreement, the Trust Agreement, the Tax Indemnity Agreement or any other
contract, agreement, document or other instrument relating to the Trust Estate
to which Assignor is a party or by which it is bound) pursuant to the
Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement or
any other contract, agreement, document or other instrument relating to the
Trust Estate to which Assignor is a party or by which it is bound, and hereby
confirms that it shall be deemed a party to the Participation Agreement, the
Trust Agreement, the Tax Indemnity Agreement and each other contract,
agreement, document or other

PARTICIPATION AGREEMENT [N625SW]
B-1
instrument relating to the Trust Estate to which Assignor is a party or by
which it is bound as if therein named as Owner Participant.

4. Release of Assignor. Except for liabilities not assumed as provided
in Section 3 hereof and except to the extent applicable as a condition to the
continued enforcement of any rights thereunder retained by Assignor, upon the
execution of this Assignment and Assumption Agreement, Assignor shall have no
further duty or obligation under the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement or under any other contract, agreement,
document or other instrument relating to the Trust Estate to which Assignor is
a party or by which it is bound; provided, however, that Assignor shall in no
event be released from any liability on account of any breach by it of any
representations or warranties, covenants or obligations set forth in the
Participation Agreement or for any fraudulent or willful misconduct engaged in
by it on or prior to the date hereof; provided further, that Assignor shall
remain liable for, and shall indemnify and hold harmless the Pass Through
Trustees from and against any reduction in the amount payable out of the Trust
Estate to the Pass Through Trustees, and any other losses, costs or expenses
incurred by the Pass Through Trustees to the extent that any such reduction,
loss, cost or expense shall result from the imposition or enforcement of any
Lien or any claim against the Trust Estate by a taxing authority because of the
nonpayment by Assignor of taxes imposed on or measured by its income or gross
receipts by such taxing authority arising from the assignment hereunder.

5. Appointment as Attorney-in-Fact. In furtherance of the within
assignment, Assignor hereby constitutes and appoints Assignee, and its
successors and assigns, the true and lawful attorneys of Assignor, with full
power of substitution, in the name of Assignee or in the name of Assignor but
on behalf of and for the benefit of and at the expense of Assignee, to collect
for the account of Assignee all items sold, transferred or assigned to Assignee
pursuant hereto; to institute and prosecute, in the name of Assignor or
otherwise, but at the expense of Assignee, all proceedings that Assignee may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the items sold, transferred or assigned; to defend and
compromise at the expense of Assignee any and all actions, suits or proceedings
as to title to or interest in any of the property acquired by Assignee; and to
do all such acts and things in relation thereto at the expense of Assignee as
Assignee shall reasonably deem advisable. Assignor hereby acknowledges that
this appointment is coupled with an interest and is irrevocable by Assignor in
any manner or for any reason.

6. Payments. Assignor hereby covenants and agrees to pay over to
Assignee, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Assignor that, under Section 2 hereof, belong to Assignee, and
Assignee hereby covenants and agrees to pay over to Assignor, if and when
received following the date hereof, any amounts (including any sums payable as
interest in respect thereof) paid to or for the benefit of Assignee that, under
Section 2 hereof, belong to Assignor.

7. Representations and Warranties. Assignee represents and warrants
that:

(a) it is a [corporation] duly organized and validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority to carry on its business as now conducted, to
own or hold under lease its properties and to enter into and perform its
obligations under this Agreement and the Owner Participant Agreements;

PARTICIPATION AGREEMENT [N625SW]
B-2
(b) this Agreement has been duly authorized by all necessary corporate
action on the part of the Assignee, does not require any approval not already
obtained of stockholders of the Assignee or any approval or consent not already
obtained of any trustee or holders of any indebtedness or obligations of the
Assignee, and has been duly executed and delivered by the Assignee;

(c) assuming that this Agreement and each of the Owner Participant
Agreements is the legal, valid and binding obligation of each other party
thereto, this Agreement and each such Owner Participant Agreement constitute
the legal, valid and binding obligations of the Assignee enforceable in
accordance with their respective terms;

(d) subject to and in reliance upon the representations made by the
Lessee in Section 7(a)(xv) of the Participation Agreement, and compliance with
the covenants of Section 8(bb) of the Participation Agreement, neither the
execution and delivery by the Assignee of this Agreement, nor the consummation
of the transactions contemplated hereby or by the Owner Participant Agreements,
nor compliance by the Assignee with any of the terms and provisions hereof or
of the Owner Participant Agreements will contravene any United States federal
or state law, judgment, governmental rule, regulation or order applicable to or
binding on the Assignee (it being understood that no representation or warranty
is made with respect to laws, rules or regulations relating to aviation or to
the nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a) of the
definition thereof) upon the Trust Estate under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Assignee is a party or by which it or its properties may be bound or
affected;

(e) there are no pending or, to the knowledge of the Assignee,
threatened actions or proceedings against the Assignee before any court or
administrative agency which, if determined adversely to the Assignee, would
materially adversely affect the financial condition of the Assignee or the
ability of the Assignee to perform its obligations under this Agreement or the
Owner Participant Agreements;

(f) on the Delivery Date, there will be no Lessor Liens attributable to
the Assignee;

(g) the Assignee's net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000;

(h) there has not occurred any event which constitutes (or to the best
of its knowledge would, with the passage of time or giving of notice or both,
constitute) an Indenture Event of Default which has been caused by or relates
to the Assignee and which is presently continuing;

(i) it is a permitted Transferee under Section 8(l)(A) of the
Participation Agreement;

(j) it is a "citizen of the United States" within the meaning of 49
U.S.C. Section 40102(a)(15)(C) [or it has, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), entered
into a voting trust or similar arrangement which permits the registration of
the Aircraft under the Act in the name of the Owner Trustee without any
restriction on the operation of the Aircraft]; and

PARTICIPATION AGREEMENT [N625SW]
B-3
(k) it has the full power and authority to enter into the transactions
contemplated by the Owner Participant Agreements.

8. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

PARTICIPATION AGREEMENT [N625SW]
B-4

IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Assumption Agreement as of the day and year first above written.

[ASSIGNOR]

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

[ASSIGNEE]

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

PARTICIPATION AGREEMENT [N625SW]
B-5