exv10w7



 




EXHIBIT
10.7




SOUTHWEST AIRLINES CO.

PROFITSHARING PLAN





 









 








SOUTHWEST AIRLINES CO.

PROFITSHARING PLAN




Table of Contents




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I PURPOSE
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II DEFINITIONS AND CONSTRUCTION
	 	 	2	 
	 
	 	 	 	 
	2.1 Definitions
	 	 	 2	 
	2.2 Construction
	 	 	 8	 
	 
	 	 	 	 
	ARTICLE III ELIGIBILITY AND PARTICIPATION
	 	 	8	 
	 
	 	 	 	 
	3.1 Eligibility Requirements
	 	 	 8	 
	3.2 Notification of Eligibility
	 	 	 8	 
	3.3 Reentry of Prior Members
	 	 	 8	 
	 
	 	 	 	 
	ARTICLE IV CONTRIBUTIONS
	 	 	9	 
	 
	 	 	 	 
	4.1 Company Contributions
	 	 	 9	 
	 
	 	 	 	 
	ARTICLE V ADJUSTMENT OF INDIVIDUAL ACCOUNTS
	 	 	10	 
	 
	 	 	 	 
	5.1 Individual Accounts
	 	 	10	 
	5.2 Method of Adjustment
	 	 	10	 
	 
	 	 	 	 
	ARTICLE VI ALLOCATIONS
	 	 	10	 
	 
	 	 	 	 
	6.1 Company Contribution
	 	 	10	 
	6.2 Allocation of Forfeitures
	 	 	11	 
	6.3 Notification to Members
	 	 	11	 
	6.4 Maximum Annual Addition to Account or Benefit
	 	 	11	 
	 
	 	 	 	 
	ARTICLE VII RETIREMENT
	 	 	13	 
	 
	 	 	 	 
	7.1 Normal or Late Retirement
	 	 	13	 
	7.2 Benefit
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VIII DEATH
	 	 	14	 
	 
	 	 	 	 
	8.1 Death of Member
	 	 	14	 
	8.2 Designation of Beneficiary
	 	 	14	 
	8.3 Benefit
	 	 	14	 
	8.4 No Beneficiary
	 	 	14	 
	 
	 	 	 	 
	ARTICLE IX DISABILITY
	 	 	15	 
	 
	 	 	 	 
	9.1 Disability
	 	 	15	 
	9.2 Benefit
	 	 	15	 
	 
	 	 	 	 
	ARTICLE X TERMINATION OF EMPLOYMENT AND FORFEITURES
	 	 	15	 
	 
	 	 	 	 
	10.1 Eligibility and Benefits
	 	 	15	 
	10.2 Time of Payment
	 	 	16	 
	10.3 Forfeitures
	 	 	16	 
	10.4 Forfeiture for Cause
	 	 	16	 
	 
	 	 	 	 
	ARTICLE XI WITHDRAWALS
	 	 	16	 
	 
	 	 	 	 
	11.1 Withdrawals
	 	 	16	 






i  









 






	 	 	 	 	 
	 	 	 	Page	 
	ARTICLE
XII INVESTMENT OF THE TRUST FUND
	 	 	17	 
	 
	 	 	 	 
	12.1 Member Direction of Investment
	 	 	17	 
	12.2 Conversion of Investments
	 	 	19	 
	 
	 	 	 	 
	ARTICLE XIII ADMINISTRATION
	 	 	20	 
	 
	 	 	 	 
	13.1 Appointment of Committee
	 	 	20	 
	13.2 Committee Powers and Duties
	 	 	20	 
	13.3 Duties and Powers of the Plan Administrator
	 	 	21	 
	13.4 Rules and Decisions
	 	 	22	 
	13.5 Committee Procedures
	 	 	22	 
	13.6 Authorization of Benefit Payments
	 	 	22	 
	13.7 Payment of Expenses
	 	 	22	 
	13.8 Indemnification of Members of the Committee
	 	 	22	 
	 
	 	 	 	 
	ARTICLE XIV NOTICES
	 	 	22	 
	 
	 	 	 	 
	14.1 Notice to Trustee
	 	 	22	 
	14.2 Subsequent Notices
	 	 	23	 
	14.3 Reliance upon Notice
	 	 	23	 
	 
	 	 	 	 
	ARTICLE XV BENEFIT PAYMENTS
	 	 	23	 
	 
	 	 	 	 
	15.1 Method of Payment
	 	 	23	 
	15.2 Time of Payment
	 	 	23	 
	15.3 Cash Out Distribution
	 	 	25	 
	15.4 Minority or Disability Payments
	 	 	26	 
	15.5 Distributions Under Domestic Relations Orders
	 	 	26	 
	15.6 Direct Rollover of Eligible Rollover Distributions
	 	 	27	 
	 
	 	 	 	 
	ARTICLE XVI TRUSTEE
	 	 	28	 
	 
	 	 	 	 
	16.1 Appointment of Trustee
	 	 	28	 
	16.2 Appointment of Investment Manager
	 	 	29	 
	16.3 Responsibility of Trustee and Investment Manager
	 	 	29	 
	16.4 Bonding of Trustee and Investment Manager
	 	 	29	 
	 
	 	 	 	 
	ARTICLE XVII AMENDMENT AND TERMINATION OF PLAN
	 	 	29	 
	 
	 	 	 	 
	17.1 Amendment of Plan
	 	 	29	 
	17.2 Termination of Plan
	 	 	30	 
	17.3 Complete Discontinuance of Contributions
	 	 	30	 
	17.4 Liquidation of Trust Fund
	 	 	30	 
	17.5 Consolidation or Merger
	 	 	30	 
	 
	 	 	 	 
	ARTICLE XVIII GENERAL PROVISIONS
	 	 	31	 
	 
	 	 	 	 
	18.1 No Employment Contract
	 	 	31	 
	18.2 Manner of Payment
	 	 	31	 
	18.3 Nonalienation of Benefits
	 	 	31	 
	18.4 Titles for Convenience Only
	 	 	31	 
	18.5 Validity of Plan
	 	 	31	 
	18.6 Plan Binding
	 	 	32	 
	18.7 Return of Contributions
	 	 	32	 
	18.8 Missing Members or Beneficiaries
	 	 	32	 
	18.9 Voting Rights
	 	 	32	 
	18.10 Preretirement Diversification Rights
	 	 	34	 
	18.11 Qualified Military Service
	 	 	36	 
	 
	 	 	 	 
	ARTICLE XIX TOP-HEAVY RULES
	 	 	37	 
	 
	 	 	 	 
	19.1 Definitions
	 	 	37	 
	19.2 Determination of Top-Heavy Status
	 	 	38	 






ii  









 






	 	 	 	 	 
	 	 	Page	 
	19.3 Minimum Company Contribution
	 	 	38	 
	 
	 	 	 	 
	ARTICLE XX FIDUCIARY PROVISIONS
	 	 	39	 
	 
	 	 	 	 
	20.1 General Allocation of Duties
	 	 	39	 
	20.2 Fiduciary Duty
	 	 	40	 
	20.3 Fiduciary Liability
	 	 	40	 
	20.4 Co-Fiduciary Liability
	 	 	40	 
	20.5 Delegation and Allocation
	 	 	41	 






iii  









 






SOUTHWEST AIRLINES CO.

PROFITSHARING PLAN




PREAMBLE




     WHEREAS, SOUTHWEST AIRLINES CO., a corporation formed under the laws of the State of Texas
(the “Company”) has previously adopted a plan and trust designated as the Southwest Airlines Co.
ProfitSharing Plan (the “Prior Plan”), effective January 1, 1973, which was subsequently amended
and restated in its entirety, effective January 1, 1986, again amended and restated in its
entirety, effective January 1, 1991, and again amended and restated in its entirety, effective
January 1, 1996, as amended from time to time thereafter;



     WHEREAS, the Company now desires to continue the plan by again amending and restating the
Prior Plan to implement certain provisions of, and for compliance with, the Pension Protection Act
of 2006, to incorporate amendments that have previously been made to the plan, to change the
designation of the plan from an employee stock ownership plan and a money purchase defined
contribution plan to a profit sharing plan, and to reflect certain other operational and
administrative practices;



     NOW, THEREFORE, in consideration of the premises and to carry out the purposes and intent as
set forth above, the Prior Plan is hereby restated and amended in its entirety, superseded and
replaced by this plan (hereinafter referred to as the “Plan”), effective January 1, 2008, except as
otherwise specifically provided herein. There will be no gap or lapse in time or effect between
such plans, and the existence of a qualified plan and trust shall be continuous and uninterrupted.



     The terms and conditions of this restated Plan are as follows:



ARTICLE I

PURPOSE




     The purpose of this Plan is to reward Employees of the Company for their loyal and faithful
service, to provide the Employees with a retirement benefit, and to provide funds for their
beneficiaries in the event of death or disability. The benefits provided by this Plan will be paid
from a Trust Fund established by the Company and will be in addition to the benefits Employees are
entitled to receive under any other programs of the Company and under the Social Security Act.



     This Plan and the separate related Trust forming a part hereof are established and shall be
maintained for the exclusive benefit of the Members hereunder and their Beneficiaries. No part of
the Trust Fund can ever revert to the Company, except as hereinafter provided, or be used for or
diverted to purposes other than the exclusive benefit of the Members of this Plan and their
Beneficiaries.



 1 









 





ARTICLE II

DEFINITIONS AND CONSTRUCTION




     2.1 Definitions. Where the following words and phrases appear in this Plan, they
shall have the respective meanings set forth below, unless their context clearly indicates to the
contrary:




     (a) Affiliate. A member of a controlled group of corporations (as defined in
Section 414(b) of the Code), a group of trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c) of the Code), or an affiliated
service group (as defined in Section 414(m) of the Code) of which the Company is a member,
or any entity otherwise required to be aggregated with the Company pursuant to Section
414(o) of the Code and the regulations issued thereunder.




     (b) Allocation Date. The date on which Company Contributions and forfeitures
are to be allocated, such date to be the last day of each Plan Year.




     (c) Annual Compensation. The total amounts paid by the Company or any Eligible
Affiliate to an Employee as remuneration for personal services rendered during each Plan
Year, including expense allowances (to the extent includible in the gross income of the
Employee) and any amounts not includible in the gross income of the Employee pursuant to
Sections 402(e)(3), 125(a), or 132(f)(4) of the Code, but excluding (1) director’s fees;
(2) expense reimbursements and nontaxable expense allowances; (3) prizes and awards; (4)
expatriate bonuses; (5) items of imputed income; (6) contributions made by the Company under
this Plan or any other employee benefit plan or program it maintains, such as group
insurance, hospitalization or like benefits; (7) amounts realized or recognized from
qualified or nonqualified stock options or when restricted stock or property held by the
Employee either becomes freely transferable or is no longer subject to a substantial risk of
forfeiture; (8) Company contributions to a plan of deferred compensation that are not
included in the Employee’s gross income for the taxable year in which contributed, or any
distributions from a deferred compensation plan; (9) amounts, if any, paid to an Employee in
lieu of a Company Contribution to this Plan in the event that such Company Contribution
would constitute an annual addition, as defined in Section 415(c)(2) of the Code, in excess
of the limitations under Section 415(c) of the Code; and (10) severance payments. For
purposes of this Section 2.1(c), severance payments include severance pay, unfunded
nonqualified deferred compensation benefits and parachute payments made after an Employee’s
severance from employment, but shall not include amounts attributable to payments made
within 21/2 months following severance from employment that, absent a severance from
employment, would have been paid to the Employee for services rendered prior to the
severance from employment and for accrued bona fide sick, vacation, or other leave (to the
extent the Employee would have been able to use the leave if employment had continued).
Annual Compensation shall include amounts otherwise includible, as provided above, which are
paid by the Company or an Eligible Affiliate to the Employee through another person,
pursuant to the common paymaster provisions of Section 3121(s) and 3306(p) of the Code.



 2 









 






     The Annual Compensation of each Member or former Member taken into account under the
Plan for any Plan Year shall not exceed $230,000, as adjusted by the Secretary of the
Treasury for increases in the cost of living at the time and in the manner set forth in
Section 401(a)(17)(B) of the Code. If a Plan Year consists of fewer than twelve (12)
months, then the dollar limitation in the preceding sentence will be multiplied by a
fraction, the numerator of which is the number of months in the Plan Year, and the
denominator of which is twelve (12). Furthermore, for purposes of an allocation under the
Plan based on Annual Compensation, Annual Compensation shall only include amounts
attributable to the period an Employee is a Member of the Plan.




     (d) Beneficiary. A person designated by a Member or former Member to receive
benefits hereunder upon the death of such Member or former Member.




     (e) Break in Service. An Employee shall have a Break in Service for each Plan
Year in which he completes less than 501 Hours of Service with the Company or an Eligible
Affiliate unless he is on a leave of absence authorized by the Company or an Eligible
Affiliate in accordance with its leave policy.




     (f) Code. The Internal Revenue Code of 1986, as amended.




     (g) Committee. The persons who may be appointed to administer the Plan in
accordance with Article XIII.




     (h) Common Stock. The common stock of the Company.




     (i) Company. Southwest Airlines Co., or its successor or successors.




     (j) Company Contributions. Contributions that are made by the Company for each
Plan Year pursuant to the provisions of Section 4.1 hereof.




     (k) Deductible Contributions. A Member’s voluntary contributions, if any, to
the Plan, made prior to January 1, 1987 and deductible by such Member for federal income tax
purposes in accordance with Section 219 of the Internal Revenue Code, as then in effect.




     (l) Deductible Contribution Account. A separate subaccount to which is
credited a Member’s Deductible Contributions, if any, and any earnings attributable thereto,
adjusted to reflect any withdrawals, distributions or investment losses attributable
thereto.




     (m) Disability. A physical or mental condition that, in the judgment of the
Committee, totally and presumably permanently prevents the Employee from engaging in any
substantial gainful employment with the Company or an Eligible Affiliate. A determination
of Disability shall be based upon competent medical evidence satisfactory to the Committee.
The Committee shall apply the rules with respect to Disability uniformly and consistently to
all Employees in similar circumstances.



 3 









 






     (n) Effective Date. January 1, 2008, except as otherwise specifically provided
herein.




     (o) Employee. Any person who is receiving remuneration for personal services
rendered to the Company or any Eligible Affiliate, or who would be receiving such
remuneration except for an authorized leave of absence; provided, however, that any
individual whose conditions of employment are governed by a collective bargaining agreement
between the Company and a labor union shall not be considered an Employee unless the
collective bargaining agreement provides for coverage of such individual under the Plan. In
no event shall any individual employed by any Affiliate or subsidiary of the Company be
considered an Employee unless such Affiliate or subsidiary has specifically been designated
by the Company as an Eligible Affiliate. Notwithstanding the foregoing, individuals whose
conditions of employment are governed by a collective bargaining agreement that does not
provide for coverage of such individual under the Plan shall nonetheless be deemed to be an
Employee for purposes of crediting service pursuant to the provisions of subsections 2.1(t),
(gg) and (kk) hereunder.




     The term “Employee” shall also include any “leased employee,” as such term is defined
below, deemed to be an employee of an Employer or any Affiliate as provided in Sections
414(n) or (o) of the Code. The term “leased employee” means any person (other than an
employee of the recipient) who, pursuant to an agreement between the recipient and any other
person (“leasing organization”), has performed services for the recipient (or for the
recipient and related persons determined in accordance with Section 414(n)(6) of the Code)
on a substantially full-time basis for a period of at least one year, and such services are
performed under primary direction or control by the recipient. Contributions or benefits
provided by the leasing organization that are attributable to services performed for the
recipient shall be treated as provided by the recipient. Notwithstanding the foregoing, a
leased employee shall not be considered an employee of the recipient if: (i) such employee
is covered by a money purchase pension plan that provides: (1) a nonintegrated employer
contribution rate of at least ten percent (10%) of compensation, as defined in Section
415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction
agreement that are excludable from the employee’s gross income under Section 125, Section
402(e)(3), Section 402(h)(1)(B), or Section 403(b) of the Code, immediate vesting; and (ii)
leased employees do not constitute more than twenty percent (20%) of the recipient’s
nonhighly compensated work force.




     (p) Employer Savings Account. A separate subaccount to which is credited a
Member’s Company Contributions and forfeitures, if any, and any earnings attributable
thereto, adjusted to reflect any withdrawals, distributions or investment losses
attributable thereto.




     (q) Entry Date. January 1st of each year.




     (r) ERISA. The Employee Retirement Income Security Act of 1974, as amended.



 4 









 






     (s) Fund or Trust Fund. All assets of whatsoever kind or nature held from time
to time by the Trustee in the Trust forming a part of this Plan, without distinction as to
income and principal and without regard to source, e.g., allocations, Company contributions,
earnings, forfeitures or gifts.




     (t) Hour of Service. An Hour of Service shall include all hours for which pay
is received or for which an Employee is entitled to payment, whether worked or not, plus
service credit on the basis of the number of his regularly scheduled working hours for any
other period of absence for which the Employee is paid or entitled to payment and that is
authorized by the Company in accordance with its uniform leave policy for vacation, holiday,
sick leave, illness, Disability, layoff, military service or civic duty. In no event shall
credit for the number of Hours of Service attributable to a single continuous period for
which no duties are performed exceed 501. Service credit shall also be given for each other
leave of absence authorized by the Company for which the Employee is paid or entitled to
payment.




     Hours of Service shall be computed on an equivalency basis, whereby for each month
during which an Employee would be credited with at least one Hour of Service (or, in the
case of flight attendants or pilots, one trip), such Employee shall be credited with one
hundred ninety (190) Hours of Service.




     These hours must be credited to Employees in the computation period during which the
duties were performed, or, if no duties were performed, during which the applicable period
of absence occurred, and not when paid, if different. Credit must also be given, without
duplicating any hours described above, for each hour for which back pay, irrespective of
mitigation of damages, has been awarded or agreed to by the Company or any Eligible
Affiliate. These hours must be credited in the computation period or periods to which the
award or agreement pertains rather than that in which the payment, award or agreement was
made.




     In determining the number of Hours of Service to be credited to an Employee in the case
of a payment which is made or due to an Employee under the provisions of the paragraphs
above, the Committee shall apply the rules set forth in Department of Labor Regulations
2530.200b-2(b) and (c), which rules are incorporated into and made a part of this Plan by
reference.




     For purposes of determining whether an Employee has incurred a Break in Service as
defined in Section 2.1(e), the Committee shall credit an Employee with Hours of Service
during absence from work for maternity or paternity reasons which would otherwise have been
credited to such Employee but for such absence. For purposes of this Plan, an Employee
shall be deemed to be on maternity or paternity leave if the Employee’s absence from work is
(1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the
Employee, (3) by reason of the placement of a child with the Employee in connection with the
adoption of such child by the Employee, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be limited to the lesser of (1) the number necessary to
prevent the Employee from incurring a Break



 5 









 







in Service or (2) 501 Hours of Service. Hours of Service credited under this paragraph
shall be credited in the Plan Year in which the absence begins, but if the Employee does not
need those Hours of Service to prevent a Break in Service in the Plan Year in which the
absence began, then they shall be credited in the immediately following Plan Year.




     (u) Individual Account. The account or record maintained by the Committee
showing the monetary value of the individual interest in the Trust Fund of each Member,
former Member and Beneficiary.




     (v) Investment Managers. The qualified and acting Investment Managers, as
defined in ERISA, who under this Plan may be appointed by the Company to invest and manage
Plan assets as fiduciaries.




     (w) Member. An Employee who has met the eligibility requirements for
participation in this Plan, as set forth in Article III hereof.




     (x) Named Fiduciary. The Committee shall be the Named Fiduciary designated to
manage the operation and administration of the Plan.




     (y) Nondeductible Contributions. A Member’s voluntary contributions, if any,
to the Plan, made prior to January 1, 1987, which are not deductible by such Member for
federal income tax purposes.




     (z) Nondeductible Contribution Account. A separate subaccount to which is
credited a Member’s Nondeductible Contributions, if any, and any earnings attributable
thereto, adjusted to reflect any withdrawals, distributions or investment losses
attributable thereto.




     (aa) Normal Retirement Date. The date on which a Member attains the age of
fifty-nine and one-half (591/2) years.




     (bb) Plan. Southwest Airlines Co. ProfitSharing Plan, as amended from time to
time.




     (cc) Plan Administrator. Such person or persons as designated by the
Committee, which shall be the Committee unless and until it designates such other person or
persons.




     (dd) Plan Year. The annual period beginning January 1st and ending December
31st, both dates inclusive of each year.




     (ee) Prior Plan. The Southwest Airlines Co. ProfitSharing Plan, effective
January 1, 1973, as heretofore amended and restated from time to time.




     (ff) Retirement. Separation from service after a Member has reached his Normal
Retirement Date. Retirement shall be considered as commencing on the day immediately
following a Member’s last day of service.



 6 









 






     (gg) Service. A period or periods of employment by an Employee used in
determining eligibility for Plan participation or in determining the amount of benefits. If
the Company is a member of a controlled group of corporations (as defined in Section 414(b)
of the Code), is one of a group of trades or businesses (whether or not incorporated) which
are under common control (as defined in Section 414(c) of the Code), is a member of an
affiliated service group (as defined in Section 414(m) of the Code) or is otherwise required
to be aggregated with any entity pursuant to Section 414(o) of the Code and the regulations
issued thereunder, then Service shall include any employment with any such Affiliate from
and after the date such entity becomes an Affiliate, including Service prior to the
Effective Date.




     (hh) Trust. Southwest Airlines Co. ProfitSharing Trust, as amended from time
to time, the Trust established to hold and invest contributions made under the Plan and
Prior Plan for the exclusive benefit of the Members included in the Plan from which the
benefits will be distributed.




     (ii) Trustee. The qualified and acting Trustee under the Trust, who shall be
the fiduciary designated to invest and manage the Plan assets, other than those which may be
managed exclusively by an Investment Manager, and to operate and administer the Trust Fund.




     (jj) Valuation Date. Each business day on which the financial markets are
open for trading activity.




     (kk) Vesting Service. Vesting Service is the period of employment used in
determining eligibility for benefits. A year of Vesting Service shall be granted for each
Plan Year in which an Employee has completed 1,000 or more Hours of Service with the Company
or an Affiliate, subject to the following exceptions:




     (i) Vesting Service prior to January 1, 1973 shall be excluded.




     (ii) Vesting Service completed after December 31, 1972 and prior to January 1,
1976 shall be excluded if such service would have been disregarded under the break
in service rules of the Prior Plan, as then in effect. For this purpose, break in
service rules are those rules which result in the loss of prior vesting because of
service termination or failure to complete a required period of service within a
specified time.




     (iii) In the case of an Employee who has a Break in Service, his years of
Vesting Service before such Break in Service shall not be taken into account until
he has completed a year of Vesting Service following his reemployment. Prior to
January 1, 1985, in the case of an Employee who has any Break in Service, all years
of Vesting Service incurred after such Break shall be disregarded for purposes of
measuring years of Vesting Service before such Break. However, effective January 1,
1985, and thereafter, in the case of an Employee who has five (5) or more
consecutive Breaks in Service, all years of



 7 









 







Vesting Service incurred after such Breaks in Service will be disregarded for
purposes of measuring years of Vesting Service before such Breaks in Service.




     (ll) Eligible Affiliate. An Affiliate, the employees of which the Company has
specifically designated as being eligible to participate in the Plan.



     2.2 Construction. The masculine gender, where appearing in the Plan, shall be deemed
to include the feminine gender, unless the context clearly indicates to the contrary. The words
“hereof,” “herein,” “hereunder,” and other similar compounds of the word “here” shall mean and
refer to the entire Plan, not to any particular provision or section. The Plan and Trust shall
each form a part of the other by reference and terms shall be used therein interchangeably.



ARTICLE III

ELIGIBILITY AND PARTICIPATION




     3.1 Eligibility Requirements. Every Employee who was a Member in the Prior Plan on
the day before the Effective Date shall continue to be a Member in the Plan. Except as otherwise
provided herein, every other Employee shall become a Member in the Plan as of the first Entry Date
concurrent with or next following his employment commencement date or the date on which his
employer became an Eligible Affiliate, whichever is later. The employment commencement date is the
first day for which an Employee is entitled to be credited hereunder with an Hour of Service.
Notwithstanding the foregoing, non-resident aliens who receive no earned income from the Company
that constitutes income from sources within the United States shall not be eligible to participate
in the Plan. Furthermore, “leased employees” (as such term is defined in Section 2.1(o) hereof)
and Employees classified by the Company as interns shall not be eligible to participate in the
Plan. A person who is not treated as an Employee on the Company’s books and records (such as a
person who as a matter of practice is treated by the Company as an independent contractor, but who
is later determined to be an Employee as a matter of fact) shall not be an eligible Employee during
any part of a Plan Year in which such person was not treated as an Employee, despite any
retroactive recharacterization.



     3.2 Notification of Eligibility. The Committee shall notify in writing each Employee
of the qualifications for eligibility and shall furnish each Employee a copy of such explanation of
the Plan as the Committee shall provide for that purpose.



     3.3 Reentry of Prior Members. An Employee who terminates employment after becoming a
Member hereunder shall be eligible to participate immediately upon his completion of one Hour of
Service following his reemployment by the Company or an Eligible Affiliate. An Employee who
terminates employment after satisfying the requirements of Section 3.1 hereof, but prior to the
first Entry Date following the satisfaction of such requirements, shall be eligible to participate
immediately upon his completion of one Hour of Service following his reemployment by the Company or
an Eligible Affiliate, or, if later, the first Entry Date following the satisfaction of such
requirements.



 8 









 





ARTICLE IV

CONTRIBUTIONS




     4.1 Company Contributions. The Company may, for each of its taxable years, contribute
to the Trust Fund such profit sharing contribution, if any, as the Company shall determine by
resolution of its board of directors. The amount of the profit sharing contribution, if any, shall
be determined in the sole and absolute discretion of the board of directors of the Company;
provided, however, that in the absence of any action of the board of directors to the contrary, the
amount of the profit sharing contribution shall be an amount equal to 15% of ANP, reduced by the
contribution made to the Southwest Airlines Co. 2005 Deferred Compensation Plan for Pilots for such
Plan Year pursuant to section 3.2 of such plan.



     For purposes of the foregoing, “ANP” is the operating profit of the Company for such Plan
Year. As used herein, the term “operating profit” of the Company for any Plan Year shall mean its
income for such Plan Year before income taxes, derived in accordance with generally accepted
accounting principles, and as set forth in the Company’s audited statement of income included in
the annual report to shareholders, before provision for any contribution to this Plan, excluding
(1) nonoperating or non-recurring gains or losses not arising from the Company’s usual business
operations, including those gains or losses recognized under Statement of Financial Accounting
Standards No. 133 that are factored into the Company’s presentation of “economic” results and gains
or losses from the sale or exchange of capital assets, as set forth in the Company’s audited
statement of income or disclosed in the notes thereto, and (2) profits or losses incurred by
TranStar or any separately definable division of the Company; provided, however, that
notwithstanding the foregoing, profits and losses incurred by Morris Air Corporation shall be taken
into account for Plan Years beginning after December 31, 1993.



     The contribution shall be made either (1) in cash, (2) in Common Stock having a fair market
value equal to the amount of the contribution, or (3) in cash and Common Stock having an aggregate
fair market value equal to the amount of the contribution. The fair market value of any Common
Stock contributed shall be based on the mean of the reported high and low sales prices of Common
Stock on the New York Stock Exchange-Composite Tape on the day of the contribution to the Plan;
except however, if the Company acquires Common Stock on the open market and contributes it to the
Plan immediately following the settlement date, then the fair market value of the contribution
shall be equal to the cost paid by the Company for the Common Stock, including commissions and
other expenses which the Trustee would incur in the acquisition of Common Stock if the Trustee
acquired the Common Stock directly. Any portion of the contribution made in Common Stock may be
made in the form of authorized but unissued shares or shares previously issued and reacquired by
the Company.



     Company Contributions shall be added to and become a part of the Trust Fund, and, as of each
Allocation Date, shall be credited to the Individual Accounts of the Members, as provided in
Section 6.1 hereof.



 9 









 





ARTICLE V

ADJUSTMENT OF INDIVIDUAL ACCOUNTS




     5.1 Individual Accounts. The Committee shall establish an Individual Account for each
Member showing the monetary value of the individual interest in the Trust Fund of each Employee,
former Employee and Beneficiary. The Individual Account of each Member shall be composed of an
Employer Savings Account, to which Company Contributions and forfeitures, if any, shall be
credited. In addition, if a Member was at any time prior to the Effective Date a member of the
Prior Plan who, prior to January 1, 1987, made voluntary Deductible Contributions or Nondeductible
Contributions, his Individual Account shall include a Deductible Contribution Account and/or
Nondeductible Contribution Account, as applicable. Such accounts are primarily for accounting
purposes and do not require a segregation of the Trust Fund, except as otherwise provided herein.



     5.2 Method of Adjustment. As of each Valuation Date, before any restoration of
accounts as required pursuant to Section 15.3 hereof and before taking into account the
contributions of the Company and forfeitures for the period since the last preceding Valuation
Date, the Committee or the Trustee, as directed by the Committee, shall value the assets of each
investment fund and adjust the Individual Accounts of all Members who have elected to participate
in such investment fund as follows.




     (a) The Committee shall determine the market value of the investment fund, including
the effect of expenses of administration and other charges against such investment fund
since the last Valuation Date.




     (b) The Committee shall determine the total aggregate value of all Individual Accounts
participating in the investment fund as shown in its records as of the prior Valuation Date.
The Individual Account balances of Employees, former Employees and Beneficiaries shall be
reduced by any amounts paid to them from the investment fund since the last Valuation Date.




     (c) The Committee shall then adjust the value of each Individual Account participating
in the investment fund by crediting each Individual Account with its proportion of the
difference between (a) and (b) if (a) is the larger or charging it with its proportion of
the difference between (a) and (b) if (b) is larger; the proportion to be so credited or
charged to each Individual Account shall be calculated by multiplying the difference between
(a) and (b) by a fraction, the numerator of which is the then value of said Individual
Account and the denominator of which is the then aggregate value of all Individual Accounts
participating in such investment fund.



ARTICLE VI

ALLOCATIONS




     6.1 Company Contribution. As of each Allocation Date, but after any adjustment of
Individual Accounts, as provided in Section 5.2, and other applicable provisions herein, the
Committee shall credit the Company Contribution, as described in Section 4.1 hereof, for the Plan
Year ending with said Allocation Date to the Individual Accounts of all Members and



 10 









 







former Members, except those Members and former Members who failed to complete at least 1,000
Hours of Service during such Plan Year. The amount of the annual Company Contribution allocated to
the Individual Account of each eligible Member or former Member shall be in the proportion that his
Annual Compensation during the applicable Plan Year bears to the total Annual Compensation of all
eligible Members and former Members during the applicable Plan Year.



     6.2 Allocation of Forfeitures. If a Member or former Member forfeits a portion of his
Individual Account as provided in Section 10.3 hereof, then said forfeited amount shall be used
first to restore the Individual Accounts of rehired Members, as required under Section 15.3 hereof,
and next to reduce Company Contributions made in accordance with Section 18.11 hereof for Plan
Years prior to the Plan Year in which a Member returns from qualified military service, as well as
any such Company Contributions outstanding as of the effective date hereof. Any remaining
forfeitures shall be allocated as soon as practicable following the Plan Year in which said
forfeiture occurs among the Individual Accounts of the Members and former Members who are eligible
to have a Company contribution credited on their behalf for such Plan Year, as set forth in Section
6.1 hereof. The amount of the forfeiture allocated under this Section 6.2 to the Individual
Account of such Member or former Member shall be in the proportion that his Annual Compensation for
such Plan Year bears to the total Annual Compensation for such Plan Year of all such Members and
former Members.



     If a Member or former Member who does not have any nonforfeitable right to his Individual
Account terminates his employment and thereby forfeits his Individual Account, then in the event
such Member or former Member is reemployed before he has incurred five (5) or more consecutive
Breaks in Service, his Individual Account that was forfeited shall be restored by the Company at
the time of his reemployment.



     6.3 Notification to Members. At least annually, the Committee shall advise each
Member, former Member and Beneficiary for whom an Individual Account is held hereunder of the then
balance in such account.



     6.4 Maximum Annual Addition to Account or Benefit.




     (a) Limitations. If the Employer maintains this Plan and one or more other
qualified defined contribution plans, the Annual Additions (as defined in subsection (b)
below) allocated under this Plan to any Member’s Individual Account shall be limited in
accordance with the allocation provisions of this subsection 6.4(a).




     The amount of the Annual Additions that may be allocated under this Plan to the
Individual Account of any Member as of any Allocation Date, together with Annual Additions
allocated on behalf of any such Member under any other defined contribution plan of the
Employer for the Limitation Year (as defined in subsection (b) below) in which such
Allocation Date occurs, shall not exceed the Maximum Permissible DC Amount (as defined in
subsection (b) below), based upon Annual Compensation up to such Allocation Date for such
Limitation Year.



 11 









 






     If the Annual Additions allocated on behalf of a Member or former Member under this
Plan and any other defined contribution plan of the Employer are to be reduced as of any
Allocation Date as a result of exceeding the limitations described in the next preceding two
paragraphs, such reduction shall be, to the extent required, effected by first reducing the
Annual Additions to be allocated on behalf of such Member or former Member under this Plan
as of such Allocation Date.




     If as a result of the first three paragraphs of this subsection 6.4(a) the allocation
of Annual Additions under this Plan is to be reduced, such reduction shall be allocated to a
suspense account as of such Allocation Date and held therein until the next succeeding
Allocation Date on which Company Contributions and forfeitures could be allocated under the
provisions of the Plan, at which time such reduction shall be allocated and reallocated to
the Individual Accounts of Members hereunder (in accordance with the provisions of Section
6.1 hereof and subject to the limitations of this Section 6.4) before any Company
Contributions may be made to the Plan for the limitation year ending on such Allocation
Date. In the event of termination of the Plan, the suspense account shall revert to the
Company to the extent it may not be allocated to any Individual Account. If a suspense
account is in existence at any time during a Limitation Year pursuant to this Section, it
will not participate in the allocation of the Trust Fund’s investment gains and losses.




     (b) Definitions Applicable to Section 6.4. For purposes of Section 6.4, the
following definitions shall apply:




     (i) Annual Additions. Annual Additions are the sum of the following
amounts allocated on behalf of a Member or former Member for a Limitation Year:




     (1) all Employer contributions;




     (2) forfeitures, if any;




     (3) all Employee contributions; and




     (4) amounts allocated after March 31, 1984, to an individual medical
benefit account, as defined in Code Section 415(1)(2) that is part of a
pension or annuity plan maintained by the Employer, and amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years
ending after such date, that are attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code Section 419(d)(3)) under a welfare benefit plan (as defined in Code
Section 419(e) maintained by the Employer.




     The Annual Additions for any Limitation Year beginning before January 1, 1987,
shall not be recomputed to treat all Employee Contributions as Annual Additions.



 12 









 






     (ii) Employer. Employer shall mean, in addition to the Company (as
defined in Section 2.1(i) hereof, all members of a controlled group of corporations
(as defined in Section 414(b) of the Code as modified by Section 415(h)), all
commonly controlled trades or businesses (as defined in Section 414(c) as modified
by Section 415(h)) or affiliated service groups (as defined in Section 414(m)) of
which the Company is a part, and any other entity required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the Code.




     (iii) Limitation Year. The Limitation Year shall be the twelve (12)
consecutive month period ending on the last day of December or any other twelve (12)
consecutive month period for all qualified plans of the Company pursuant to a
written resolution the Company adopts.




     (iv) Maximum Permissible DC Amount. The Maximum Permissible DC Amount
for a given Limitation Year is equal to the lesser of (i) 100% of compensation or
(ii) $46,000, as adjusted for increases in the cost-of-living under Section 415(d)
of the Code. For purposes of this subparagraph (iv), compensation shall mean
compensation as defined in Section 3401(a) of the Code and all other payments of
compensation to an Employee by the Company (in the course of the Company’s trade or
business) for which the Company is required to furnish the Employee a written
statement under Sections 6041(d), 6051(a)(3), and 6052 of the Code without regard to
any rules under Section 3401(a) that limit the remuneration included in wages based
on the nature or location of the employment or the services performed, together with
any amounts not includable in the gross income of an Employee pursuant to Sections
125, 132(f)(4), 402(e)(3), 403(b), 457, or 402(h)(1)(B) of the Code applicable to
such Limitation Year. If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month period,
the dollar limitation referred to above is multiplied by a fraction, the numerator
of which is equal to the number of months in the short Limitation Year and the
denominator of which is twelve. The compensation limit referred to in this
subparagraph (iv) shall not apply to any contribution for medical benefits after
separation from service (within the meaning of section 401(h) or section 419A(f)(2)
of the Code) that is otherwise treated as an Annual Addition hereunder.



ARTICLE VII

RETIREMENT




     7.1 Normal or Late Retirement. A Member, upon reaching his Normal Retirement Date for
the purposes of this Plan, shall be one hundred percent (100%) vested in his Individual Account,
and such amount contained therein shall be nonforfeitable. If a Member continues in the service of
the Company beyond his Normal Retirement Date, he shall continue to participate in the Plan.



 13 









 





     7.2 Benefit. Upon Retirement (whether normal or late Retirement in accordance with
Section 7.1), a Member shall be entitled to the entire amount to the credit of his Individual
Account as of the Valuation Date concurrent with or next following his date of Retirement,
including his portion, if any, of Company Contributions and forfeitures allocated after his date of
Retirement, adjusted for earnings and losses, if any, that accrue to the Valuation Date immediately
preceding the date of distribution, if later. Upon his Retirement under this Article VII, a Member
shall receive the benefits to which he is entitled at the time and in the manner provided in
Article XV hereof.



ARTICLE VIII

DEATH




     8.1 Death of Member. Upon the death of a Member while employed by the Company, such
Member’s Individual Account shall thereupon become one hundred percent (100%) vested, and the
amount contained therein shall be nonforfeitable.



     8.2 Designation of Beneficiary. Each Member and former Member may, from time to time,
designate one or more Beneficiaries and alternate Beneficiaries to receive benefits pursuant to
this Article in the event of the death of such Member or former Member. Such designation shall be
made in writing upon a form provided by the Committee and shall only be effective when filed with
the Committee. The last such designation filed with the Committee shall control.



     If a Member is married, his spouse shall automatically be designated his Beneficiary;
provided, however, a Beneficiary other than his spouse may be designated if (1) his spouse consents
in writing to such designation, the consent acknowledges the effect of such designation and the
designation is witnessed by a member of the Committee or a notary public, or (2) it is established
to the satisfaction of the Committee that there is sufficient reason why the consent may not be
obtained. Notwithstanding the foregoing, divorce after the filing of a designation or designations
that name the spouse as beneficiary shall be deemed to revoke such designation or designations if
written notice of such divorce is received by the Committee before payment has been made in
accordance with the existing designation or designations on file with the Committee.



     8.3 Benefit. Subject to the requirements of Section 18.10 hereof, upon the death of a
Member or former Member, his designated Beneficiary shall be entitled to the entire amount to the
credit of his Individual Account as of the Valuation Date concurrent with or next following his
date of death, including his portion, if any, of Company Contributions and forfeitures allocated
after the date of his death, adjusted for earnings and losses, if any, that accrue to the Valuation
Date immediately preceding the date of distribution, if later. Payment shall be made at the time
and in the manner provided in Article XV hereof.



     8.4 No Beneficiary. If a Member or former Member dies without a designated Beneficiary
surviving him, or if all his Beneficiaries die before receiving the payment to which they are
entitled, then any amounts to which such Member, former Member or Beneficiary is entitled hereunder
shall be paid to his estate.



 14 









 





     For the purpose of this Plan, the production of a certified copy of the death certificate of
any Employee or other person shall be sufficient evidence of death, and the Committee shall be
fully protected in relying thereon. In the absence of such proof, the Committee may rely upon such
other evidence of death as it deems necessary or advisable.



ARTICLE IX

DISABILITY




     9.1 Disability. If a Member’s employment with the Company terminates as a result of
his Disability, such Participant’s Individual Account shall thereupon become one hundred percent
(100%) vested, and the amount contained therein shall be nonforfeitable.



     9.2 Benefit. In the event of the Disability of a Member or former Member, he shall be
entitled to the entire amount to the credit of his Individual Account as of the Valuation Date
concurrent with or next following the date on which his termination of employment occurs as a
result of his Disability, including his portion, if any, of Company Contributions and forfeitures
allocated after the date of his termination of employment, adjusted for earnings and losses, if
any, that accrue to the Valuation Date immediately preceding the date of distribution, if later.
Payments shall be made at the time and in the manner provided in Article XV hereof.



ARTICLE X

TERMINATION OF EMPLOYMENT AND FORFEITURES




     10.1 Eligibility and Benefits. If a Member’s employment with the Company and all
Eligible Affiliates shall terminate for any reason other than his Retirement Under Article VII,
death under Article VIII, or Disability under Article IX, such Member shall be entitled to all of
his Nondeductible Contribution Account and Deductible Contribution Account and to a percentage of
the amount in his Employer Savings Account as of the Valuation Date concurrent with or next
following the date on which his termination of employment occurs, including his portion, if any, of
Company Contributions and forfeitures allocated after the date of his termination of employment,
adjusted for earnings and losses, if any, that accrue to the Valuation Date immediately preceding
the date of distribution, if later. The percentage of a Member’s Employer Savings Account to which
he is entitled shall be determined in accordance with the following schedule:





	 	 	 	 	 
	 	 	Percentage
	Completed Years of Vesting Service	 	Payable
	Less than 5 years
	 	 	0	%
	5 years or more
	 	 	100	%





 15 









 






     Notwithstanding the foregoing, effective with respect to contributions allocated for Plan
Years beginning on and after January 1, 2007, the percentage of a Member’s Employer Savings Account
to which he is entitled shall be determined in accordance with the following schedule:



	 	 	 	 	 
	 	 	Percentage
	Completed Years of Vesting Service	 	Payable
	Less than 1 year
	 	 	0	%
	1 year but less than 2 years
	 	 	20	%
	2 years but less than 3 years
	 	 	40	%
	3 years but less than 4 years
	 	 	60	%
	4 years but less than 5 years
	 	 	80	%
	5 years or more
	 	 	100	%






     The provisions of this Section shall be subject to the provisions of Section 17.3 hereof,
which shall be given full effect.



     10.2 Time of Payment. The amount to which a Member shall be entitled under Section
10.1 shall be paid to him at the time and in the manner provided in Article XV hereof.



     10.3 Forfeitures. A Member to whom Section 10.1 is applicable shall forfeit that
portion of the amount in his Individual Account to which he is not entitled under Section 10.1 and
the amount thus forfeited shall remain in the Trust Fund and shall be allocated pursuant to the
provisions of Section 6.2. A Member who does not have any nonforfeitable right to his Individual
Account shall be deemed to have received a cashout distribution pursuant to Section 15.3 hereof,
and shall forfeit the amount in such Individual Account in the Plan Year in which his termination
of employment occurs.



     10.4 Forfeiture for Cause. In the event a Member who has not completed at least three
(3) years of Vesting Service is discharged due to his dishonest or criminal act (proven by
conclusive evidence to the unanimous satisfaction of the Committee) or due to embezzlement, fraud,
or dishonesty against and damaging to the Company whereby the reasons for such discharge are
confirmed by resolution of the board of directors or other governing authority of the Company, the
entire amount credited to the benefit of such Member in his Employer Savings Account shall be
forfeited and neither he nor his Beneficiary shall be entitled to any benefit hereunder with
respect to such amounts. Likewise, any amounts credited to, but not distributed from, the Employer
Savings Account of a former Member who has not completed at least three (3) years of Vesting
Service shall be forfeited upon the discovery of any embezzlement, fraud or dishonesty of such
former Member against and damaging to the Company. Notwithstanding the foregoing, in the event the
Plan is top heavy for any Plan Year pursuant to Section 19.2 hereof, the provisions of Section 10.1
shall supersede this Section 10.4 and shall be controlling for all purposes hereunder.



ARTICLE XI

WITHDRAWALS




     11.1 Withdrawals.




 16 












 






     (a) Nondeductible and Deductible Contribution Accounts. Effective as of any
Valuation Date, a Member may, upon prior written notice to the Committee within the time
period established by the Committee for such elections, elect to withdraw from his
Nondeductible and Deductible Contribution Accounts any or all of the balance thereof, as of
such Valuation Date. If a Member timely elects such a withdrawal, distribution shall be
made as soon as practicable following such Valuation Date.




     (b) Employer Savings Account. Subject to the requirements of Section 18.10
hereof, a Member who has reached his Normal Retirement Date may elect in writing, within the
time period established by the Committee for such elections, to withdraw all or any portion
of his vested interest in his Employer Savings Account. No more than one such withdrawal
may be made by the Member during any Plan Year. The amount available for withdrawal shall
be determined as of the Valuation Date next following the date on which the Committee
receives the Member’s withdrawal election, and the withdrawal amount shall be distributed to
the Member as soon as practicable thereafter.



ARTICLE XII

INVESTMENT OF THE TRUST FUND





12.1 Member Direction of Investment.




     (a) Investment of Contributions. Each Member shall have the right, within the
guidelines established by the Committee, to direct the Committee to instruct the Trustee to
invest any whole percentage, up to one hundred percent (100%), of such Member’s current
Company Contributions and forfeitures in one or more of such investment media as the
Committee may designate from time to time. The Committee shall direct the Trustee or, if
applicable, an Investment Manager as to the investments in which Members may invest. The
Committee may determine to offer as investment media any investment fund, program or other
vehicle that is suitable as a proper and permissible investment of contributions made to a
retirement plan qualified pursuant to Section 401(a) of the Code. The investment directions
of the Members shall be implemented by the Trustee or, if applicable, an Investment Manager
provided, however, that the Trustee or, if applicable, an Investment Manager shall not be
obligated to follow the investment direction of a Member if such direction would result in a
prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code, would
generate income that would be taxable to the Plan, or:




     (i) would not be in accordance with the documents and instruments governing the
Plan insofar as such documents and instruments are consistent with the provisions of
Title I of ERISA;




     (ii) would cause a fiduciary to maintain the indicia of ownership of any assets
of the Plan outside the jurisdiction of the district courts of the United States
other than as permitted by Section 404(b) of ERISA and Department of Labor
Regulations §2550.404b-1;




     (iii) would jeopardize the Plan’s tax qualified status under the Code;



17









 






     (iv) could result in a loss in excess of a Member’s or Beneficiary’s account
balance; or




     (v) would result in a direct or indirect:




     (1) sale, exchange, or lease of property between the Company (or any
affiliate of the Company) and the Plan except for the acquisition or
disposition of any interest in a fund, subfund or portfolio managed by the
Company (or an affiliate of the Company), or the purchase or sale of any
qualifying employer security (as defined in Section 407(d)(5) of ERISA) which
meets the conditions of Section 408(e) of ERISA and subparagraph (4) below;




     (2) loan to the Company or any affiliate of the Company;




     (3) acquisition or sale of any employer real property (as defined in
Section 407(d)(2) of ERISA); or




     (4) acquisition or sale of any employer security except to the extent
that any such employer security and any such acquisition or sale complies
with the requirements of Department of Labor Regulations
§2550.404c-1(d)(2)(4).




     (b) Modification of Investment Media. The Committee shall be authorized at any
time and from time to time to modify, alter, delete or add to the funds available for
investment at the direction of a Member. In the event a modification occurs, the Committee
shall notify those Members whom the Committee, in its sole and absolute discretion,
determines are affected by the change, and shall give such persons such additional time as
is determined by the Committee to designate the manner and percentage in which amounts
invested in those funds thereby affected shall be invested.




     The Committee shall not be obligated to substitute funds of similar investment criteria
for existing funds, nor shall it be obligated to continue the types of investments presently
available to the Members. Nothing contained herein shall constitute any action by the
Committee as a direction of investment of the assets or an attempt to control such
direction.




     (c) Investment Direction. Any Member, on or before his entry into the Plan,
within the time period established by the Committee, may designate the manner and the
percentage in which the Member desires the Trustee or, if applicable, an Investment Manager
to invest his current Company Contributions and forfeitures, pursuant to the provisions set
forth above, which designation shall continue in effect until revoked or modified by the
Member. If a Member fails to designate the investment of his current Company Contributions
and forfeitures on or before his entry into the Plan, or if a Member wishes to change such
designation, the Member may make such designation or change, within the time period
established by the Committee, to become effective for all such future contributions and
forfeitures as soon as practicable following the date of



18









 






receipt by the Committee of such designation or change, and such designation or change
shall continue in effect until revoked by the Member in accordance with this Plan.




     Any amounts with respect to which the Trustee or, if applicable, an Investment Manager
fails to receive a proper investment direction from any Member shall be invested, as
directed by the Committee, in a qualified default investment alternative, as defined in
Department of Labor Regulations §2550.404c-5 and such other subsequent guidance as may be
promulgated by the Department of Labor, and with respect to which the other conditions set
forth in Department of Labor Regulations §2550.404c-5 are met, including, but not limited
to, the delivery to the Member of any material provided to the Plan that relates to the
Member’s investment therein. All investment designations shall be made in the manner
prescribed by the Committee.




     The Committee shall maintain separate subaccounts in the name of each Member within his
Individual Account to reflect such Member’s accrued benefit attributable to his directed
investment in the above investment media.




12.2 Conversion of Investments.




     (a) Member’s Individual Account. Effective as of any Valuation Date, within
the time period prior thereto established by the Committee, and subject to any restrictions
on transfer imposed under particular investment funds, a Member may, pursuant to guidelines
established by the Committee, direct the Committee to instruct the Trustee to convert any
whole percentage, up to one hundred percent (100%), of the amount in such Member’s
Individual Account that is invested in any of the investment media offered for investment
under the Plan into one or more other of such investment media. Such direction shall be
effective as soon as practicable following the date of receipt by the Committee of such
direction to convert. Notwithstanding any provision herein to the contrary, applicable fund
redemption and short-term trading fees may be imposed upon the Member’s Individual Account
in connection with any direction by such Member to convert investments hereunder.




     (b) Conversion Directions. A direction to convert by any eligible Member shall
be irrevocable and shall be made in the manner prescribed by the Committee within the time
period established by the Committee. Any conversion of investments pursuant to this Section
12.2 shall not affect a Member’s direction of investments with respect to his future
contributions and forfeitures pursuant to Section 12.1.




     (c) Direction of Spouse. If a Member’s spouse who is not a Member in this Plan
acquires an interest in a Member’s Individual Account pursuant to a qualified domestic
relations order, then the Member’s spouse may direct the Committee to convert the investment
of the interest to which such spouse is thus entitled in the same manner and at the same
time as the Member may direct a conversion of investments, as provided above. If such
spouse becomes a Member of the Plan, the spouse shall be entitled to convert such
investments in accordance with the rights of Members in the Plan.



19









 






     (d) Miscellaneous. The Committee is authorized to establish such other rules
and regulations, including adding additional times to convert investments, as it determines
are necessary to carry out the provisions of Section 12.1 and this Section 12.2, the
specific dates of conversion to be determined by the Committee, and all earnings on the
Member’s investments after such dates shall be allocated in accordance with the Member’s
Employer Savings Account, as adjusted on such dates. The Committee shall be authorized to
modify the allocations of earnings, provided such change is made on a reasonable and
nondiscriminatory basis.



ARTICLE XIII

ADMINISTRATION




     13.1 Appointment of Committee. The Plan shall be administered by a Committee
consisting of at least three or more persons who shall be appointed by and serve at the pleasure of
the board of directors of the Company. All usual and reasonable expenses of the Committee shall
be paid by the Trustee out of the principal or income of the Trust and, to the extent not so paid,
shall be paid by the Company. The members of the Committee shall not receive compensation with
respect to their services for the Committee. The members of the Committee may serve without bond
or security for the performance of their duties hereunder unless applicable law makes the
furnishing of such bond or security mandatory or unless required by the Company. Any member of the
Committee may resign by delivering his written resignation to the Company and to the other members
of the Committee.



     13.2 Committee Powers and Duties. The Committee shall have such powers as may be
necessary to discharge its duties hereunder, including, but not by way of limitation, the following
powers and duties:




     (a) to construe and interpret the Plan, decide all questions of eligibility and
determine the amount, manner and time of payment of any benefits hereunder;




     (b) to prescribe procedures to be followed by distributees in obtaining benefits;




     (c) to make a determination as to the right of any person to a benefit and to afford
any person dissatisfied with such determination the right to a hearing thereon;




     (d) to receive from the Company, Eligible Affiliates, and from Members such information
as shall be necessary for the proper administration of the Plan;




     (e) to delegate to one or more of the members of the Committee the right to act in its
behalf in all matters connected with the administration of the Plan and Trust;




     (f) to receive and review reports of the financial condition and of the receipts and
disbursements of the Trust Fund from the Trustee;




     (g) to appoint or employ for the Plan any agents it deems advisable, including, but not
limited to, legal counsel; and



20









 






     (h) to take any and all further actions from time to time as the Committee, in its sole
and absolute discretion, shall deem necessary for the proper administration of the Plan.



     The Committee shall have no power to add to, subtract from or modify any of the terms of the
Plan, nor to change or add to any benefits provided by the Plan, nor to waive or fail to apply any
requirements of eligibility for benefits under the Plan. The Committee shall have full and
absolute discretion in the exercise of each and every aspect of its authority under this Plan,
including without limitation, all of the rights, powers and authorities specified in this Section
13.2 and, if applicable, in Section 13.3 hereof.



     A majority of the members of the Committee shall constitute a quorum for the transaction of
business. No action of the Committee shall be taken except upon a majority vote of the Committee
members, other than as described in subparagraph (e) above. An individual shall not vote or decide
upon any matter relating solely to himself or vote in any case in which his individual right or
claim to any benefit under the Plan is particularly involved. If, in any case in which a Committee
member is so disqualified to act, and the remaining members cannot agree, the board of directors of
the Company will appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he is disqualified.



     13.3 Duties and Powers of the Plan Administrator. The Plan Administrator shall have
such powers as may be necessary to discharge its duties hereunder, including, but not by way of
limitation, the following powers and duties:




     (a) to file with the Secretary of Labor the annual report and other pertinent documents
that may be requested by the Secretary;




     (b) to file with the Secretary of Labor such terminal and supplementary reports as may
be necessary in the event of the termination of the Plan;




     (c) to furnish each Member, former Member and each Beneficiary receiving benefits
hereunder a summary plan description explaining the Plan;




     (d) to furnish any Member, former Member or Beneficiary, who requests in writing,
statements indicating such Member’s, former Member’s or Beneficiary’s total accrued benefits
and nonforfeitable benefits, if any;




     (e) to furnish to a Member a statement containing information contained in a
registration statement required by Section 6057(a)(2) of the Code;




     (f) to maintain all records necessary for verification of information required to be
filed with the Secretary of Labor;




     (g) to allocate the assets of the Plan available to provide benefits to Members in the
event the Plan should terminate; and




     (h) to report to the Trustee all available information regarding the amount of benefits
payable to each Member, the computations with respect to the allocation of



21









 






assets, and any other information that the Trustee may require in order to terminate
the Plan.



     13.4 Rules and Decisions. The Committee may adopt such rules as it deems necessary or
desirable. All rules and decisions of the Committee shall be uniformly and consistently applied to
all Employees in similar circumstances. The Committee is required to provide a notice in writing
to any person whose claim for benefits under the Plan has been denied, setting forth the specific
reasons for such denial. The Committee shall adopt rules or procedures to carry out the intent of
this Section and to provide a basis for a full and fair review by the Committee of the decision
denying the claim and provide such person with an opportunity to supply any evidence he has to
sustain the claim.



     13.5 Committee Procedures. The Committee may adopt such bylaws as it deems desirable.
The Committee shall elect one of its members as chairman. The Committee shall advise the Trustee
of such election in writing. The Committee shall keep a record of all meetings and forward all
necessary communications to the Trustee.



     13.6 Authorization of Benefit Payments. The Committee shall issue directions to the
Trustee concerning all benefits that are to be paid from the Trust Fund pursuant to the provisions
of the Plan. The Committee shall keep on file, in such manner as it may deem convenient or proper,
all reports from the Trustee.



     13.7 Payment of Expenses. All expenses incident to the administration of the Plan and
Trust, including but not limited to, actuarial, legal, accounting, investment advisory, investment
education, recordkeeping, Trustee’s fees, and any other plan administrative expenses, shall be paid
by the Trustee from the Trust Fund and, until paid, shall constitute a first and prior claim and
lien against the Trust Fund. To the extent such expenses are not paid by the Trustee from the
Trust Fund, they shall be paid by the Company.



     13.8 Indemnification of Members of the Committee. The Company shall, to the maximum
extent permitted under the Company’s bylaws, indemnify the members of the Committee against
liability or loss sustained by them by an act or failure to act in their capacity as members of the
Committee.



ARTICLE XIV

NOTICES




     14.1 Notice to Trustee. As soon as practicable after a Member ceases to be in the
employ of the Company for any of the reasons set forth in Articles VII through X, inclusive, the
Committee shall give notice to the Trustee, which notice shall include such of the following
information and directions as are necessary or advisable under the circumstances:




     (a) name and address of the Member;




     (b) name and address of the Beneficiary or Beneficiaries in case of a Member’s death;



22









 






     (c) amount to which the Member is entitled in case of termination of employment
pursuant to Article X; and




     (d) manner and amount of payments to be made pursuant to Article XV.



     If a former Member dies, the Committee shall give a like notice to the Trustee, but only if
the Committee learns of his death.



     14.2 Subsequent Notices. At any time and from time to time after giving the notice as
provided for in Section 14.1, the Committee may modify such original notice or any subsequent
notice by means of a further notice or notices to the Trustee; but, any action theretofore taken or
payments theretofore made by the Trustee pursuant to a prior notice shall not be affected by a
subsequent notice.



     14.3 Reliance upon Notice. Upon receipt of any notice as provided in this Article,
the Trustee shall promptly take whatever action and make whatever payments are called for therein,
it being intended that the Trustee may rely upon the information and directions in such notice
absolutely and without question. However, the Trustee may call to the attention of the Committee
any error or oversight that the Trustee believes to exist in any notice.



ARTICLE XV

BENEFIT PAYMENTS




     15.1 Method of Payment. As soon as practicable after a Member, former Member, or
Beneficiary becomes entitled to receive benefits hereunder, as provided in Articles VII, VIII, IX
or X and this Article XV, the Committee shall give written notice to the Trustee. Such benefits
shall be paid to the Member, former Member, or his Beneficiary in a lump sum. Any benefit payable
hereunder will be paid in cash or in whole shares of Common Stock, as elected by the Member, former
Member or Beneficiary; provided, however, that such benefit shall in any event be paid in whole
shares of Common Stock to the extent that such Member’s, former Member’s or Beneficiary’s
Individual Account is invested in Common Stock, pursuant to Article XII hereof. Any fractional
shares of Common Stock shall be converted to, and paid, in cash.



     15.2 Time of Payment. Distribution shall be made as soon as administratively
practicable, but in no event later than one (1) year after the Valuation Date coincident with or
immediately following the separation from service of a Member, former Member, or Beneficiary who is
entitled to receive a benefit hereunder. Notwithstanding the foregoing, if the nonforfeitable
portion of a Member’s or former Member’s Individual Account exceeds One Thousand and No/100 Dollars
($1,000.00), no distributions, other than distributions upon the death of such Member or former
Member, may commence without the consent of the Member or former Member until he attains age
sixty-two (62), at which time distribution shall be made. Such consent must be obtained within
the one hundred eighty (180) day period ending on the date of distribution. The Committee shall
notify the Member or former Member of the right to defer any distribution until the date on which
he attains age sixty-two (62). Such notification shall include a general description of the
material features, and an explanation of the relative values of, the optional forms of benefit
available under the Plan in a manner that would satisfy the notice requirements of Section
417(a)(3) of the Code, and shall be provided no less than thirty



23









 




(30) days and no more than one hundred eighty (180) days prior to the annuity starting date.
The annuity starting date is the first day of the first period for which a benefit is paid
hereunder. Notwithstanding the foregoing, the consent of the Member or former Member shall not be
required to the extent that a distribution is required to satisfy Section 415 of the Code. In
addition, upon termination of this Plan, if the Plan does not then offer an annuity option, the
Member’s or former Member’s Individual Account may, without his consent, be distributed to the
Member or former Member or transferred to another defined contribution plan maintained by an
Affiliate.




     Distribution shall be made no later than the required beginning date, which is April 1st of
the calendar year following the later of: (a) the calendar year in which a Member attains age 701/2
or (b) the calendar year in which the Member retires; provided that if a Member is a Five Percent
(5%) Owner (as defined in Section 19.1(f) hereof), then the required beginning date is April 1st of
the calendar year following the calendar year in which such Member attains age 701/2. Subject to the
provisions of Section 18.10 hereof, distribution of the entire Individual Account of a Member shall
be made in a single lump sum on or before such Member’s required beginning date; provided, however,
that in the case of a Member who attained age 701/2 prior to September 15, 2000, or in the case of a
Member who is a Five Percent Owner, only the minimum distribution required for the calendar year
immediately preceding the Member’s required beginning date must be made on or before his required
beginning date. Furthermore, a minimum distribution for other calendar years, including the
minimum distribution for the calendar year in which such Member’s required beginning date occurs,
must be made on or before December 31 of such calendar year. All minimum distributions required
under this Article XV shall be determined and made in accordance with the applicable Treasury
Regulations under Section 401(a)(9) of the Code, and the requirements of this Article will take
precedence over any inconsistent provisions of the Plan. Required minimum distributions will be
determined beginning with the first distribution calendar year and up to and including the
distribution calendar year that includes the Member’s date of death. During such Member’s
lifetime, the minimum amount that will be distributed for each distribution calendar year is the
lesser of:




     (a) the quotient obtained by dividing the Member’s Individual Account balance by the
distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the
Treasury Regulations, using the Member’s age as of the Member’s birthday in the distribution
calendar year; or




     (b) if the Member’s sole designated beneficiary for the distribution calendar year is
the Member’s spouse, the quotient obtained by dividing the Member’s Individual Account
balance by the number in the Joint and Last Survivor Table set forth in section
1.401(a)(9)-9 of the Treasury Regulations, using the Member’s and spouse’s attained ages as
of the Member’s and spouse’s birthdays in the distribution calendar year.



     Notwithstanding any provision herein to the contrary, any Member who attains age 701/2 in a
calendar year after 1995 and prior to September 15, 2000, may irrevocably elect, in the manner
established by the Committee, by April 1 of the calendar year following the year in which the
Member attains age 701/2 (or by December 31, 1997 in the case of a Member who attains age 701/2 in
1996) to defer distributions until April 1 of the calendar year following the calendar year in
which the Member retires. If no such election is made, the Member will begin



24









 




receiving distributions by the April 1 of the calendar year following the year in which the
Member attains age 701/2 (or by December 31, 1997 in the case of a Member who attains age 701/2 in
1996), and any such distributions shall comply with the provisions of the preceding paragraph.
Furthermore, any Member who attains age 701/2 in a calendar year prior to 1996, may irrevocably
elect, in the manner established by the Committee, to stop distributions and recommence
distributions as of the April 1 of the calendar year following the calendar year in which such
Member retires.




     If distributions have commenced so that payments are being made over the life of the Member,
and he dies before his entire interest has been distributed, then the remaining portion of such
interest shall be distributed at least as rapidly as under the method of distribution being used as
of the date of his death, but in no event later than one year after the Valuation Date coincident
with or immediately following his death. On the other hand, if a Member dies before the
distribution of any of his benefits has begun, then his entire interest will be distributed no
later than one year after the Valuation Date coincident with or immediately following his death.
If the designated Beneficiary is the Member’s surviving spouse and such surviving spouse dies
after the Member, but before payment to such surviving spouse is made, then the provisions of the
preceding sentence shall be applied as if the surviving spouse were the Member. Furthermore, if
the designated Beneficiary is the surviving spouse of the Member, then distribution to such
surviving spouse will not be required earlier than the later of: (a) December 31 of the calendar
year immediately following the calendar year of the Member’s death and (b) December 31 of the
calendar year in which the Member would have attained age 701/2. Distribution of benefits is
considered to have begun, for purposes of this paragraph, on the required beginning date; provided
that if a Member’s designated Beneficiary is his surviving spouse, and such surviving spouse dies
after the Member but before payments to such surviving spouse have begun, then distribution of
benefits is considered to have begun on the date distribution to the surviving spouse is required
to begin pursuant to the provisions of this paragraph.



     Notwithstanding any provision herein to the contrary, unless a Member or former Member elects
otherwise, in writing, no distribution hereunder shall start later than 60 days after the close of
the Plan Year in which the last to occur of the following occurs:




     (a) the Member or former Member attains Normal Retirement Age,




     (b) the 10th anniversary of the year in which the Member or former Member commenced
participation in the Plan, or




     (c) the Member or former Member terminates service with the Company.



     15.3 Cash Out Distribution. If a Member or former Member who has received a
distribution of his benefits hereunder on or before the last day of the second Plan Year following
the year in which his separation from service occurs, has forfeited a portion of his Individual
Account, then in the event such Member or former Member is subsequently rehired by the Company or
an Eligible Affiliate prior to the date on which he incurs five (5) consecutive Breaks in Service,
he shall be entitled to repay, at any time prior to the earlier of: (i) the date which is five (5)
years after the first date on which he is subsequently reemployed by the Company or an



25









 




Eligible Affiliate and (ii) the date on which he incurs five (5) consecutive Breaks in
Service, the amount of the distribution to him from his Individual Account. Upon such repayment,
the rehired Member’s or former Member’s Individual Account shall be credited with the exact amount
that was nonvested at the time of termination. In the event a rehired Member or former Member who
has received a distribution hereunder does not timely repay such distribution from his Individual
Account, as provided above, then the amount he forfeited at the time of his distribution pursuant
to the terms of Section 10.3 hereof shall remain forfeited. His prior years of Vesting Service
shall be taken into account, however, for purposes of determining his vested interest in
contributions following reemployment. If a Member or former Member who does not have any
nonforfeitable right to his Individual Account and thus is deemed to have received a cashout
distribution, pursuant to the provisions of Section 10.3 hereof, is subsequently reemployed by the
Company or an Eligible Affiliate prior to incurring five (5) consecutive Breaks in Service, then
upon such reemployment, the rehired Member’s or former Member’s Individual Account shall be
credited with the exact amount that was nonvested at the time of termination.




     15.4 Minority or Disability Payments. During the minority or Disability of any person
entitled to receive benefits hereunder, the Committee may direct the Trustee to make payments due
such person directly to him or to his spouse or a relative or to any individual or institution
having custody of such person. Neither the Committee nor the Trustee shall be required to see to
the application of payments so made, and the receipt of the payee (including the endorsement of a
check or checks) shall be conclusive as to all interested parties.



     15.5 Distributions Under Domestic Relations Orders. Nothing contained in this Plan
shall prevent the Trustee, in accordance with the direction of the Committee, from complying with
the provisions of a qualified domestic relations order (as defined in Section 414(p) of the Code).
The Plan specifically permits distribution to an alternate payee under a qualified domestic
relations order at any time, irrespective of whether the Member or former Member has attained his
earliest retirement age under the Plan, as defined in Section 414(p) of the Code; provided,
however, that a distribution to an alternate payee prior to the Member or former Member’s
attainment of earliest retirement age is available only if: (1) the order specifies distribution
at that time or permits an agreement between the Plan and the alternate payee to authorize an
earlier distribution; (2) the order specifies that such distribution will be in the form of a
single, lump-sum payment; and (3) if the amount to which the alternate payee is entitled under the
Plan exceeds $1,000, and the order so requires, the alternate payee consents to any distribution
occurring prior to the alternate payee’s attainment of age sixty-two (62). If an alternate payee
has not previously received a distribution of the entire interest to which such alternate payee is
entitled hereunder, distribution shall be made to such alternate payee as soon as practicable
following the alternate payee’s attainment of age sixty-two (62). Nothing in this Section 15.5
gives a Member or former Member a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of payment not otherwise
permitted under the Plan.



     The Plan Administrator shall establish reasonable procedures to determine the qualified status
of a domestic relations order. Upon receiving a domestic relations order, the Plan Administrator
shall promptly notify the Member or former Member and any alternate payee named in the order, in
writing, of the receipt of the order and the Plan’s procedures for



26









 




determining the qualified status of the order. Within a reasonable period of time after
receiving the domestic relations order, the Plan Administrator shall determine the qualified status
of the order and shall notify the Member or former Member and each alternate payee, in writing, of
its determination. The Plan Administrator shall provide notice under this paragraph by mailing to
the individual’s address specified in the domestic relations order, or in a manner consistent with
Department of Labor regulations. The Plan Administrator may treat as qualified any domestic
relations order entered prior to January 1, 1985, irrespective of whether it satisfies all the
requirements described in Section 414(p) of the Code.




     If any portion of an Individual Account is payable during the period the Plan Administrator is
making its determination of the qualified status of the domestic relations order, the Committee
shall direct the Trustee to segregate the amounts that are payable into a separate account and to
invest the segregated account solely in fixed income investments. If the Plan Administrator
determines the order is a qualified domestic relations order within eighteen (18) months of
receiving the order, the Committee shall direct the Trustee to distribute the segregated account in
accordance with the order. If the Plan Administrator does not make its determination of the
qualified status of the order within eighteen (18) months after receiving the order, the Committee
shall direct the Trustee to distribute the segregated account in the manner in which the Plan would
otherwise distribute if the order did not exist and shall apply the order prospectively if the Plan
Administrator later determines the order is a qualified domestic relations order.



     To the extent it is not inconsistent with the provisions of the qualified domestic relations
order, the Committee may direct the Trustee to invest any amount that is subject to being paid to
an alternate payee pursuant to said order into a segregated subaccount or separate account and to
invest the account in federally insured, interest-bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated subaccount shall remain
a part of the Trust, but it alone shall share in any income it earns, and it alone shall bear any
expense or loss it incurs.



     The Trustee shall make any payments or distributions required under this Section 15.5 by
separate benefit checks or other separate distribution to the alternate payee(s).



     15.6 Direct Rollover of Eligible Rollover Distributions. An individual who is
entitled to a benefit hereunder (including a Participant’s surviving spouse, a Participant’s spouse
or former spouse who is the alternate payee under a qualified domestic relation order, as defined
in Section 414(p) of the Code, and a non-spouse Beneficiary designated in accordance with Section
8.2 hereof), the distribution of which would qualify as an “eligible rollover distribution”, as
such term is hereinafter defined, may, in lieu of receiving any payment or payments from the Plan,
direct the Trustee to transfer all or any portion of such payment or payments directly to the
trustee of one or more “eligible retirement plans”, as such term is hereinafter defined. For
purposes of this Section 15.6, the term “eligible rollover distribution” is defined as any
distribution of all or any portion of the balance to the credit of the distributee, including any
portion of such balance that consists of amounts that are not includible in gross income, except
that an eligible rollover distribution does not include: any distribution that is one of a series
of substantially equal periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life expectancies) of the
distributee and



27









 




the distributee’s designated beneficiary, or for a specified period of ten years or more and
any distribution to the extent such distribution is required under Code Section 401(a)(9). For
purposes of this Section 15.6, the term “eligible retirement plan” shall mean (i) an individual
retirement account described in Section 408(a) of the Code; (ii) an individual retirement annuity
described in Section 408(b) of the Code (other than an endowment contract); (iii) a qualified trust
described under Section 401(a) of the Code; (iv) an annuity plan described in Section 403(a) of the
Code; (v) an annuity contract described in Section 403(b) of the Code; and (vi) an eligible plan
under Section 457(b) of the Code that is maintained by a state, political subdivision of a state,
or any agency or instrumentality of a state or political subdivision of a state and that agrees to
separately account for amounts transferred into such plan from this Plan. Notwithstanding the
foregoing, in the case of a non-spouse Beneficiary, the term “eligible retirement plan” shall refer
only to a plan described in clauses (i) and (ii) above that is established on behalf of the
designated Beneficiary and that is required to be treated as an inherited IRA pursuant to the
provisions of Section 402(c)(11) of the Code. Also, in this case, the determination of any
required minimum distribution under Section 401(a)(9) of the Code that is ineligible for rollover
shall be made in accordance with IRS Notice 2007-7, Q&A 17 and 18, 2007-5 I.R.B. 395.




     A portion of a distribution that consists of after-tax employee contributions may be
transferred only to an individual retirement account or annuity described in Section 408(a) or (b)
of the Code, or to a qualified defined contribution or defined benefit plan described in Section
401(a) or an annuity contract described in Section 403(b) of the Code that agrees to separately
account for amounts so transferred, including separately accounting for the portion of such
distribution that is includible in gross income and the portion of such distribution that is not so
includible (as defined in Section 401(a)(31)(D) of the Code).



     Any such election of a direct rollover must be made on a form provided by the Committee for
that purpose and received by the Committee no later than the date established by the Committee
preceding the date on which the distribution is to occur. Any election made pursuant to this
Section 15.6 may be revoked at any time prior to the date established by the Committee preceding
the date on which the distribution is to occur. If an individual who is so entitled has not
elected a direct rollover within the time and in the manner set forth above, such distributee shall
be deemed to have affirmatively waived a direct rollover. A distributee who wishes to elect a
direct rollover shall provide to the Committee, within the time and in the manner prescribed by the
Committee, such information as the Committee shall reasonably request regarding the eligible
retirement plan or plans to which the payment or payments are to be transferred. The Committee
shall be entitled to rely on the information so provided, and shall not be required to
independently verify such information. The Committee shall be entitled to delay the transfer of
any payment or payments pursuant to this Section 15.6 until it has received all of the information
which it has requested in accordance with this Section 15.6.



ARTICLE XVI

TRUSTEE




     16.1 Appointment of Trustee. A Trustee (or Trustees) shall be appointed by the
Committee to administer the Trust Fund. The Trustee shall serve at the pleasure of the Committee
and shall have such rights, powers and duties as are provided to a Trustee under ERISA for the
investment of assets and for the administration of the Trust Fund.



28









 





     16.2 Appointment of Investment Manager. An Investment Manager (or Investment
Managers) may be appointed by the Committee to manage (including the power to acquire and dispose
of) any part or all of the assets of the Trust Fund. The Investment Manager shall serve at the
pleasure of the Committee, and shall have the rights, powers and duties provided to a named
fiduciary under ERISA for the investment of the assets assigned to it. (The Investment Manager may
be referred to from time to time hereafter as “he,” “they,” or “it,” or may be referred to in the
singular or plural, but all such references shall be to the then acting Investment Manager or
Investment Managers serving hereunder.)



     16.3 Responsibility of Trustee and Investment Manager. All contributions under this
Plan shall be paid to and held by the Trustee. The Trustee shall have responsibility for the
investment and reinvestment of the Trust Fund except with respect to the management of those assets
specifically delegated to the Investment Manager and those funds invested pursuant to the
provisions of Section 15.5. The Investment Manager shall have exclusive management and control of
the investment and/or reinvestment of the assets of the Trust Fund assigned to it in writing by the
Trustee. All property and funds of the Trust Fund, including income from investments and from all
other sources, shall be retained for the exclusive benefit of Members or former Members, as
provided herein, and shall be used to pay benefits to Members or former Members or their
Beneficiaries, or to pay expenses of administration of the Plan and Trust Fund.



     This Plan and the related Trust are intended to allocate to each fiduciary the individual
responsibilities of the prudent execution of the functions assigned to each. None of the allocated
responsibilities or any other responsibility shall be shared by the fiduciaries or the Trustee
unless such sharing shall be provided for by a specific provision in this Plan or related Trust.



     16.4 Bonding of Trustee and Investment Manager. Neither the Trustee nor the
Investment Manager shall be required to furnish any bond or security for the performance of their
powers and duties hereunder unless the applicable law makes the furnishing of such bond or security
mandatory.



ARTICLE XVII

AMENDMENT AND TERMINATION OF PLAN




     17.1 Amendment of Plan. The Company may, without the assent of any other party, make
from time to time any amendment or amendments to this Plan which do not cause any part of the Trust
Fund to be used for, or diverted to, any purpose other than the exclusive benefit of Members or
former Members of the Plan. Any such amendment shall be by a written instrument executed by the
Company, and shall become effective as of the date specified in such instrument. Notwithstanding
the foregoing, no amendment to the Plan shall be effective to the extent that it has the effect of
decreasing a Member’s or former Member’s accrued benefit, except as provided in Section 412(c)(8)
of the Code. For purposes of the preceding sentence, an amendment which has the effect of
decreasing a Member’s or former Member’s Individual Account or eliminating an optional form of
benefit, with respect to benefits attributable to service prior to such amendment shall be treated
as reducing an accrued benefit. If any amendment changes the vesting schedule set forth in Section
10.1, then a Member’s or former Member’s nonforfeitable percentage in his Individual Account
because of a change to the vesting schedule shall not be less than his nonforfeitable percentage
computed under the vesting schedule in effect prior to the



29









 




amendment. Furthermore, if any amendment changes the vesting schedule set forth in Section
10.1, then each Member or former Member having at least three (3) Years of Vesting Service may
elect to be governed under the vesting schedule set forth in the Plan without regard to the
amendment. The Member or former Member must file his written election with the Committee within
sixty (60) days after receipt of a copy of the amendment. The Committee shall furnish the Member
or former Member with a copy of the amendment and with notice of the time within which his election
must be returned to the Committee.




     17.2 Termination of Plan. The Company may at any time, effective as specified,
terminate the Plan by resolution of its board of directors. A certified copy of such resolution
shall be delivered to the Trustee.



     17.3 Complete Discontinuance of Contributions. In the event the Company decides it is
impossible or inadvisable for it to continue to make its contributions as provided in Article IV,
it shall have the power by appropriate resolution to either:




     (a) discontinue its contributions to the Plan; or




     (b) terminate the Plan.



     A complete discontinuance of contributions by the Company shall not constitute a formal
termination of the Plan and shall not preclude later contributions, but all Individual Accounts of
Members or former Members not theretofore fully vested shall be and become 100% vested and
nonforfeitable in the respective Members or former Members, irrespective of the provisions of
Section 10.1. In such event, Employees who become eligible to enter the Plan subsequent to the
discontinuance shall receive no benefit, and no additional benefits shall accrue to any of such
Employees unless such contributions are resumed. After the date of a complete discontinuance of
contributions, the Trust shall remain in existence as provided in this Section 17.3, and the
provisions of the Plan and Trust shall remain in force as may be necessary in the sole and absolute
discretion of the Committee.



     17.4 Liquidation of Trust Fund. Upon termination or partial termination of the Plan,
the Individual Accounts of all Members, former Members and Beneficiaries shall thereupon be and
become fully vested and nonforfeitable. Thereupon, the Trustee shall convert the Trust Fund to cash
after deducting all charges and expenses. The Committee shall then adjust the balances of all
Individual Accounts, as provided in Section 5.2. Thereafter, the Trustee shall distribute the
amount to the credit of each affected Member, former Member and Beneficiary, in accordance with the
provisions of Article XV hereof.



     17.5 Consolidation or Merger. This Plan shall not be merged or consolidated with, nor
shall any assets or liabilities be transferred to, any other plan, unless the benefits payable on
behalf of each Member or former Member if the Plan were terminated immediately after such action
would be equal to or greater than the benefits to which such Member or former Member would have
been entitled if this Plan had been terminated immediately before such action. The Trustee shall
not accept a direct transfer of assets from a plan subject to the requirements of Section 417 of
the Code.



30









 





ARTICLE XVIII

GENERAL PROVISIONS




     18.1 No Employment Contract. Nothing contained in this Plan shall be construed as
giving any person whomsoever any legal or equitable right against the Committee, the Company, its
stockholders, officers or directors or against the Trustee, except as the same shall be
specifically provided for in this Plan. Nor shall anything in this Plan give any Member, former
Member or other Employee the right to be retained in the service of the Company or an Eligible
Affiliate and the employment of all persons by the Company or an Eligible Affiliate shall remain
subject to termination by the Company or such Eligible Affiliate to the same extent as if this Plan
had never been executed.



     18.2 Manner of Payment. Wherever and whenever it is herein provided for payments or
distributions to be made, whether in money or otherwise, said payments or distributions shall be
made directly into the hands of the Member or former Member, his Beneficiary, his administrator,
executor or guardian, or an alternate payee pursuant to Section 15.5 herein, as the case may be. A
deposit to the credit of a person entitled to payment in any bank or trust company selected by such
person shall be deemed payment into his hands, and provided further that in the event any person
otherwise entitled to receive any payment or distribution shall be a minor or an incompetent, such
payment or distribution may be made to his guardian or other person as may be determined by the
Committee.



     18.3 Nonalienation of Benefits. Subject to Code Section 414(p) and Section 15.5
herein relating to qualified domestic relations orders, the interest of any Member, former Member
or Beneficiary hereunder shall not be subject in any manner to any indebtedness, judgment, process,
creditors’ bills, attachments, garnishment, levy, execution, seizure or receivership, nor shall
such interest be in any manner reduced or affected by any transfer, assignment, conveyance, sale,
encumbrance, act, omission, or mishap, voluntary or incidental, anticipatory or otherwise, of or to
said Member, former Member or Beneficiary, and they and any of them shall have no right or power to
transfer, convey, assign, sell or encumber said benefits and their interest therein, legal or
equitable, during the existence of this Plan. Notwithstanding the foregoing, no provision of this
Plan shall preclude the enforcement of a Federal tax levy made pursuant to Section 6331 of the Code
or collection by the United States on a judgment resulting from an unpaid tax assessment.



     18.4 Titles for Convenience Only. Titles of the Articles and Sections hereof are for
convenience only and shall not be considered in construing this Plan. Also words used in the
singular or the plural may be construed as though in the plural or singular where they would so
apply.



     18.5 Validity of Plan. This Plan and each of its provisions shall be construed and
their validity determined by the laws of the State of Texas, and all provisions hereof shall be
administered in accordance with the laws of said State, provided that in case of conflict, the
provisions of ERISA shall control.




31












 





     18.6 Plan Binding. This Plan shall be binding upon the successors and assigns of the
Company and the Trustee and upon the heirs and personal representatives of those individuals who
become Members hereunder.



     18.7 Return of Contributions. This Plan and the related Trust are designed to qualify
under Sections 401(a) and 501(a) of the Code. Anything contained herein to the contrary
notwithstanding, if the initial determination letter is issued by the District Director of Internal
Revenue to the effect that this Plan and related Trust hereby created, or as amended prior to the
receipt of such letter, do not meet the requirements of Section 401(a) and 501(a) of the Code, the
Company shall be entitled at its option to withdraw all contributions theretofore made, in which
event the Plan and Trust shall then terminate.



     Each contribution to the Plan is specifically conditioned on the deductibility of such
contribution under the Code. The Trustee, upon written request from the Company, shall return to
the Company the amount of the Company’s contribution made as a result of a mistake of fact or the
amount of the Company’s contribution disallowed as a deduction under Section 404 of the Code. Such
return of contribution must be made within one (1) year after (a) the Company made the contribution
by mistake of fact or (b) the disallowance of the contribution as a deduction. The amount of
contribution subject to being returned hereunder shall not be increased by any earnings
attributable to the contribution, but such amount subject to being returned shall be decreased by
any losses attributable to it.



     18.8 Missing Members or Beneficiaries. Each Member shall file with the Committee from
time to time in writing a mailing address and any change of mailing address for himself and his
designated Beneficiary. Any communication, statement or notice addressed to a Member or
Beneficiary at the last mailing address filed with the Committee, or if no such address is filed
with the Committee, then at his last mailing address as shown on the Company’s records, shall be
binding on the Member or his Beneficiary for all purposes of the Plan. The Committee shall not be
required to search for or locate a Member or Beneficiary. If the Committee notifies any Member or
Beneficiary that he is entitled to a distribution and also notifies him of the provisions of this
Section 18.8 (or makes reasonable effort to so notify such Member or Beneficiary by certified
letter, return receipt requested, to the last known address, or such other further diligent effort,
including consultation with the Internal Revenue Service or the Social Security Administration, to
ascertain the whereabouts of such Member or Beneficiary as the Committee deems appropriate) and the
Member or Beneficiary fails to claim his distributive share or make his whereabouts known to the
Committee within three years thereafter, the distributive share of such Member or Beneficiary will
be forfeited and reallocated according to Section 6.2. However, if the Member or his Beneficiary
should, thereafter, make a proper claim for such share, it shall be distributed to him.



     18.9 Voting Rights.




     (a) Each Member shall be entitled to direct the Trustee as to the manner in which any
Common Stock allocated to said Member’s Accounts shall be voted. The Committee shall
furnish to each Member a proxy adequate for such purpose. The Trustee shall vote
specifically in accordance with each Member’s instructions to the extent of such Member’s
whole shares and shall, to the extent possible, vote the combined



32









 








fractional shares of such Members in such manner as to reflect the Members’ expressed
desires. To the extent permitted under ERISA, the Trustee shall vote shares of Common Stock
with respect to which it does not receive instructions and shares of Common Stock which have
not been allocated to Members’ Accounts under the Plan in the same proportion as are voted
the shares of Common Stock held under the Plan with respect to which instructions were
received by the Trustee from Members.




     (b) Notwithstanding anything to the contrary contained in the Plan, if a cash tender
offer or exchange offer for shares of Common Stock is made, Common Stock allocated to each
Member’s accounts under the Plan shall be tendered or exchanged by the Trustee pursuant to
such cash tender offer or exchange offer only in accordance with the written instructions
and directions of such Member to the Trustee to so tender or exchange. If a cash tender
offer or exchange offer for shares of Common Stock is made, the Trustee shall use its best
efforts to take those steps reasonably necessary to furnish information to, and allow
decision by, each Member with respect to such cash tender offer or
exchange offer and the shares of Common Stock allocated to such Member’s accounts under the Plan in substantially
the same manner as would be available to holders of Common Stock generally, and, in that
connection, the Trustee shall:




     (i) Inform each Member as to the existence of such cash tender offer or
exchange offer;




     (ii) Transmit to each Member as soon as practicable such written information,
explanation and other materials relative to such cash tender offer or exchange offer
as are made available by the Company or by the persons or entities making such cash
tender offer or exchange offer to the holders of shares of Common Stock generally;




     (iii) Request detailed written instructions and directions from each Member as
to whether to tender or exchange the shares of Common Stock allocated to such
Member’s accounts under the Plan and as to the time and manner of such tender or
exchange, if so instructed and directed; and




     (iv) Use its best efforts to effect on a nondiscriminatory basis the tender or
exchange of Common Stock held under the Plan with respect to such cash tender offer
or exchange offer solely in accordance with written instructions and directions
received from Members. If written instructions or directions are not timely
received from a Member, the shares of Common Stock allocated to his accounts under
the Plan shall not be tendered or exchanged pursuant to such cash tender offer or
exchange offer.




     For purposes of this subparagraph (b), the term cash tender offer shall include a
tender offer for, or request or invitation for tenders of, shares of Common Stock in
exchange for cash, as made to the Plan or to holders of shares of Common Stock generally;
the term exchange offer shall include a tender offer for, or request or invitation for
tenders of, any shares of Common Stock in exchange for any consideration other than for all
cash, as made to the Plan or to holders of shares of Common Stock generally.



33









 






     (c) If any shares of Common Stock held under the Plan are tendered or exchanged
pursuant to a cash tender offer or exchange offer in accordance with subparagraph (b) above,
any cash proceeds obtained by the Trustee in connection therewith shall be temporarily
invested in such short term investments as the Trustee may determine, until such time as
such temporarily invested cash proceeds are reinvested in Common Stock. Any other property
obtained by the Trustee pursuant to an exchange offer shall be temporarily held in kind by
the Trustee, until such time as such temporarily held property is sold and the proceeds
therefrom are reinvested in Common Stock.



     18.10 Preretirement Diversification Rights. If, as of December 31, 2007, a Member has
attained age fifty-five (55) and has been credited with ten (10) years of participation in the Plan
(hereinafter referred to as a “Qualified Member”), notwithstanding the provisions of Section 15.1
hereof, the following rules shall apply to any distribution made under the Plan to or on behalf of
such Qualified Member.




     (a) Annuity Distributions to Qualified Members. The Committee shall direct the
Trustee to distribute such Member’s benefits held in a Qualified Member’s Individual Account
in the form of a qualified joint and survivor annuity, unless the Qualified Member has a
valid waiver election (described in Section 18.10(b) hereof) in effect. A qualified joint
and survivor annuity is an immediate annuity (a) that is payable for the life of the
Qualified Member, with, if the Qualified Member is married on the annuity starting date, as
defined below, a survivor annuity for the life of the Qualified Member’s surviving spouse
that is equal to fifty percent (50%) of the amount of the annuity payable during the joint
lives of the Qualified Member and his spouse, and (b) that is the actuarial equivalent of a
single annuity for the life of the Qualified Member. On or before the annuity starting date
(the first day of the first period for which the Qualified Member would receive an amount as
an annuity or in any other form), the Committee shall direct the Trustee to pay the
Qualified Member’s benefits in a lump sum, in lieu of a qualified joint and survivor
annuity, if the nonforfeitable portion of a Qualified Member’s Individual Account is not
greater than One Thousand and No/100 Dollars ($1,000.00).




     If a Qualified Member who is married dies prior to commencement of payment of his
benefits, the Committee shall direct the Trustee to distribute the Qualified Member’s
Individual Account, as calculated under Article VIII, to the Qualified Member’s surviving
spouse in the form of a preretirement survivor annuity, unless the Qualified Member has a
valid waiver election (as described in Section 18.10(c) hereof) in effect. A preretirement
survivor annuity is an annuity that is payable for the life of the Qualified Member’s
surviving spouse. The surviving spouse may elect to have the preretirement survivor annuity
distributed within a reasonable period after the Qualified Member’s death. The Committee
shall direct the Trustee to pay the Qualified Member’s Individual Account in a lump sum, in
lieu of a preretirement survivor annuity, if the nonforfeitable portion of a Qualified
Member’s Individual Account is not greater than One Thousand and No/100 Dollars ($1,000.00).




     The Committee is not required to distribute any survivor annuity described herein to
the spouse of a Qualified Member unless the Qualified Member and his spouse were married
throughout the one-year period ending on the earlier of the Qualified Member’s



34









 







annuity starting date or the Qualified Member’s death; provided, however, this
exception shall not apply if the Qualified Member marries within one year before the annuity
starting date and has been married for at least a one-year period ending on or before the
date of the Qualified Member’s death.




     If the Qualified Member has in effect a valid waiver election regarding the qualified
joint and survivor annuity or the preretirement survivor annuity, and has not elected to
receive a qualified optional survivor annuity, as provided in paragraph (b) below, the
Committee shall direct the Trustee to distribute the Participant’s Individual Account in
accordance with Section 15.1. Furthermore, the Qualified Member’s surviving spouse may
elect a qualified optional survivor annuity or the form of payment described in Section 15.1
in lieu of the preretirement survivor annuity. For purposes of applying this Section 18.10,
the Committee shall treat a former spouse as the Qualified Member’s spouse or surviving
spouse to the extent required under a qualified domestic relations order.




     (b) Waiver Election – Qualified Joint and Survivor Annuity. Within a
reasonable period of time (no less than thirty (30) days and no more than one hundred eighty
(180) days) before the Qualified Member’s annuity starting date, the Committee shall provide
the Qualified Member a written explanation of the terms and conditions of the qualified
joint and survivor annuity and the qualified optional survivor annuity, the Qualified
Member’s right to make, and the effect of, an election to waive the qualified joint and
survivor form of benefit, the rights of a married Qualified Member’s spouse regarding the
waiver election and the Qualified Member’s right to make, and the effect of, a revocation of
a waiver election.




     A Qualified Member’s waiver election is not valid unless:




     (i) the Qualified Member makes the waiver election within the one hundred
eighty (180) day period ending on his annuity starting date;




     (ii) in the event the nonforfeitable portion of the Qualified Member’s
Individual Account exceeds Five Thousand and No/100 Dollars ($5,000.00), the
Qualified Member’s spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity) consents in writing to the waiver election,
the spouse’s consent acknowledges the effect of the election, and a notary public or
a Committee member (or its representative) witnesses the spouse’s consent; and




     (iii) in the event the nonforfeitable portion of a Qualified Member’s
Individual Account exceeds Five Thousand and No/100 Dollars ($5,000.00), either the
spouse is the Qualified Member’s sole primary Beneficiary or the spouse consents to
the Qualified Member’s Beneficiary designation or to any change in the Qualified
Member’s Beneficiary Designation.




     Additionally, a Qualified Member’s waiver of the qualified joint and survivor annuity
shall not be effective unless the election designates a form of benefit payment, which may
include a qualified optional survivor annuity, which may not be changed



35









 







without spousal consent (or the spouse expressly permits designations by the Qualified
Member without any further spousal consent).




     The Committee may accept as valid a waiver election that does not satisfy the spousal
consent requirements described in paragraphs (ii) and (iii) above if the Committee
establishes that the Qualified Member does not have a spouse, the Committee is not able to
locate the Qualified Member’s spouse, or other circumstances prescribed by Treasury
Department regulations.




     Any consent by a spouse obtained under this Section (or the establishment that the
consent of a spouse may not be obtained) shall be effective only with respect to such
spouse. A consent that permits designations by the Qualified Member without any requirement
of further consent by such spouse must acknowledge that the spouse has the right to limit
consent to a specific Beneficiary, and a specific form of benefit where applicable, and that
the spouse voluntarily elects to relinquish either or both of such rights. A revocation of
a prior waiver may be made by a Qualified Member without the consent of the spouse at any
time before the commencement of benefits. The number of revocations shall not be limited.
No consent obtained under this Section shall be valid unless the Qualified Member has
received an explanation of the terms and conditions of the qualified joint and survivor
annuity and the qualified optional survivor annuity, as provided herein. For purposes of
this Section 18.10, a qualified optional survivor annuity is an immediate annuity (a) that
is payable for the life of the Qualified Member, with, if the Qualified Member is married on
the annuity starting date, a survivor annuity for the life of the Qualified Member’s
surviving spouse that is equal to seventy-five percent (75%) of the amount of the annuity
payable during the joint lives of the Qualified Member and his spouse, and (b) that is the
actuarial equivalent of a single annuity for the life of the Qualified Member.




     (c) Waiver Election — Preretirement Survivor Annuity. The Committee shall
provide each Qualified Member, within a reasonable period after the Member becomes a
Qualified Member, a written explanation of the terms and conditions of the preretirement
survivor annuity, the Qualified Member’s right to make, and the effect of, an election to
waive the preretirement survivor annuity, the rights of the Qualified Member’s spouse
regarding the waiver election and the Qualified Member’s right to make, and the effect of, a
revocation of a waiver election.




     For purposes of applying this subsection, a reasonable period is the end of the
two-year period beginning one year prior to the date on which the Member becomes a Qualified
Member, and ending one year after that date.




     A Qualified Member’s waiver election of the preretirement survivor annuity is not valid
unless the election satisfies the spousal consent requirements described in Section
18.10(b).



     18.11 Qualified Military Service. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits and service credit with respect to qualified military service
will be provided in accordance with Section 414 (u) of the Code.



36









 





ARTICLE XIX

TOP-HEAVY RULES




19.1 Definitions. For purposes of applying the provisions of this Article XIX:




     (a) “Key Employee” shall mean, as of any Determination Date (as defined below), any
Employee or former Employee (including any deceased Employee) who, at any time during the
Plan Year that includes the Determination Date, was an officer of the Company having Annual
Compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for Plan
Years beginning on or after January 1, 2003), a 5-percent owner of the Company, or a
1-percent owner of the Company having Annual Compensation of more than $150,000. For this
purpose, Annual Compensation means compensation within the meaning of Section 6.5(b)(iv) of
the Plan. The determination of who is a Key Employee will be made in accordance with
section 416(i)(1) of the Code and the applicable regulations and other guidance of general
applicability issued thereunder. The constructive ownership rules of Section 318 of the Code
will apply to determine ownership in the Company.



     (b) “Non-Key Employee” is an Employee who does not meet the definition of Key Employee.



     (c) “Required Aggregation Group” means:




     (i) Each qualified plan of the Company or an Affiliated Entity (as defined
below) in which at least one (1) Key Employee participates or participated at any
time during the Plan Year that includes the Determination Date, or during the
preceding four Plan Years (regardless of whether the plan has terminated); and




     (ii) Any other qualified plan of the Company that enables a plan described in
(1) to meet the requirements of Section 401(a)(4) or Section 410 of the Code.




     (d) “Permissive Aggregation Group” is the Required Aggregation Group plus any other
qualified plans maintained by the Company, but only if such group would satisfy in the
aggregate the requirements of Section 401(a)(4) and Section 410 of the Code. The Committee
shall determine which plans to take into account in determining the Permissive Aggregation
Group.




     (e) “Determination Date” for any Plan Year is the Allocation Date of the preceding Plan
Year or, in the case of the first Plan Year of the Plan, the Allocation Date of that Plan
Year.




     (f) “Five Percent (5%) Owner” is any person who owns more than five percent (5%) of the
outstanding stock of the Company or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Company.



37









 






     (g) “One Percent (1%) Owner” is any person who owns more than one percent (1%) of the
outstanding stock of the Company or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Company.




     (h) “Affiliated Entity” shall mean all the members of (i) a controlled group of
corporations as defined in Section 414(b) of the Code; (ii) a commonly controlled group of
trades or businesses (whether or not incorporated) as defined in Section 414(c) of the Code;
(iii) an affiliated service group as defined in Section 414(m) of the Code of which the
Company is a part; or (iv) a group of entities required to be aggregated pursuant to Section
414(o) of the Code and the regulations issued thereunder.



     19.2 Determination of Top-Heavy Status. The Plan is top heavy for a Plan Year if the
top heavy ratio as of the Determination Date (as defined in Section 19.1 above) exceeds sixty
percent (60%). The top heavy ratio is a fraction, the numerator of which is the sum of the present
value of the Individual Accounts of all Key Employees (as defined in Section 19.1 above) as of the
Determination Date and the denominator of which is a similar sum determined for all Employees in
the Plan. The present value of the Individual Account balance of an Employee as of the
Determination Date shall be increased by the distributions made with respect to the Employee under
the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the
1-year period ending on the Determination Date. The preceding sentence shall also apply to
distributions under a terminated plan which, had it not been terminated, would have been aggregated
with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a
reason other than separation from service, death, or disability, this provision shall be applied by
substituting “5-year period” for “1-year period.” The Individual Account of any individual who has
not performed services for the Employer during the 1-year period ending on the Determination Date
shall not be taken into account. The Committee shall calculate the top heavy ratio without regard
to any Non Key Employee (as defined in Section 19.1 above) who was formerly a Key Employee. The
Committee shall calculate the top heavy ratio, including the extent to which it must take into
account distributions, rollovers and transfers, in accordance with Section 416 of the Code and the
regulations under that Code Section.



     If the Company maintains other qualified plans (including a simplified employee pension plan)
this Plan is top-heavy only if it is part of the Required Aggregation Group (as defined in Section
19.1 above), and the top-heavy ratio for both the Required Aggregation Group and the Permissive
Aggregation Group (as defined in Section 19.1 above) exceeds sixty percent (60%). The Committee
will calculate the top-heavy ratio in the same manner as required by the first paragraph of this
Section 19.2, taking into account all plans within the aggregation group. The Committee shall
calculate the present value of accrued benefits and the other amounts the Committee must take into
account, under defined benefit plans or simplified employee pension plans included within the group
in accordance with the terms of those plans, Section 416 of the Code and the regulations under that
Code Section. The Committee shall calculate the top-heavy ratio with reference to the
Determination Dates that fall within the same calendar year.



     19.3 Minimum Company Contribution. Notwithstanding anything contained herein to the
contrary, for any Plan Year in which this Plan is determined to be top-heavy pursuant to Section
19.2 hereof, each Non-Key Employee who is an eligible Member shall be entitled to a supplemental
contribution equal to three percent (3%) of such Non-Key Employee’s Annual



38









 







Compensation, reduced by (i) the amount of “Qualified Nonelective Contributions”, if any,
allocated to a Member’s “Salary Reduction Contribution Account” under the Southwest Airlines Co.
401(k) Plan for the applicable Plan Year and (ii) the amount of “Non-Elective Contributions”, if
any, allocated to a Member’s “Participant’s Elective Account” under the Southwest Airlines Pilots
Retirement Savings Plan for the applicable Plan Year. For purposes of this Section 19.3, an
eligible Member is a Non-Key Employee who is employed by the Company on the last day of the
applicable Plan Year.



     The percentage referred to in the preceding paragraph shall not exceed the percentage of
Annual Compensation at which Company contributions are made or allocated under this Plan and all
other qualified defined contribution plans maintained by the Company, including “Salary Reduction
Contributions” under the Southwest Airlines Co. 401(k) Plan and “Elective Contributions” under the
Southwest Airlines Pilots Retirement Savings Plan , to the Key Employee for whom such percentage is
the largest; provided, however, this sentence shall not apply if the Plan is required to be
included in an Aggregation Group and enables a defined benefit plan required to be included in such
group to meet the requirements of Code Sections 401(a)(4) or 410. If the minimum allocation is
made for a Non-Key Employee pursuant to another qualified plan maintained by the Company, then the
minimum allocation requirement will be considered satisfied for purposes of this Plan. “Company
Matching Contributions” under the Southwest Airlines Co. 401(k) Plan and “matching contributions”
under the Southwest Airlines Pilots Retirement Savings Plan shall be taken into account for
purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and
the Plan and shall be treated as matching contributions for purposes of the actual contribution
percentage test and other requirements of section 401(m) of the Code.



ARTICLE XX

FIDUCIARY PROVISIONS




     20.1 General Allocation of Duties. Each fiduciary with respect to the Plan shall have
only those specific powers, duties, responsibilities and obligations as are specifically given him
under the Plan. The board of directors of the Company shall have the sole responsibility for
authorizing its contributions under the Plan. The Company shall have the sole authority to appoint
and remove the members of the Committee and to amend or terminate this Plan, in whole or in part.
The Committee shall have the sole authority to appoint and remove the Trustee and Investment
Managers. However, neither the board nor the Committee shall be liable for any acts or omissions
of the Trustee or Investment Manager or be under any obligation to invest or otherwise manage any
assets of the Trust Fund which are subject to the management of the Trustee or Investment Manager.
Except as otherwise specifically provided, the Committee shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described herein. Except as
otherwise specifically provided, the Trustee shall have the sole responsibility for the
administration, investment and management of the assets held under the Plan. It is intended under
the Plan that each fiduciary shall be responsible for the proper exercise of its own powers,
duties, responsibilities and obligations hereunder and shall not be responsible for any act or
failure to act of another fiduciary, except to the extent provided by law or as specifically
provided herein.



39









 





     20.2 Fiduciary Duty. Each fiduciary under the Plan shall discharge its duties and
responsibilities with respect to the Plan:




     (a) solely in the interest of the Members of the Plan, for the exclusive purpose of
providing benefits to such Members and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;




     (b) with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims;




     (c) by diversifying the investments of the Plan so as to minimize the risk of large
losses, unless under the circumstances it is prudent not to do so; and




     (d) in accordance with the documents and instruments governing the Plan insofar as such
documents and instruments are consistent with applicable law.



     20.3 Fiduciary Liability. A fiduciary shall not be liable in any way for any acts or
omissions constituting a breach of fiduciary responsibility occurring prior to the date it becomes
a fiduciary or after the date it ceases to be a fiduciary.



     20.4 Co-Fiduciary Liability. A fiduciary shall not be liable for any breach of
fiduciary responsibility by another fiduciary unless:




     (a) it participates knowingly in, or knowingly undertakes to conceal, an act or
omission of such other fiduciary, knowing such act or omission is a breach;




     (b) by its failure to comply with Section 404(a)(1) of ERISA in the administration of
its specific responsibilities which give rise to its status as a fiduciary, it has enabled
such other fiduciary to commit a breach; or




     (c) having knowledge of a breach by such other fiduciary, it fails to make reasonable
efforts under the circumstances to remedy the breach.



40









 






     20.5 Delegation and Allocation. The Committee may appoint subcommittees, individuals
or any other agents as it deems advisable and may delegate to any of such appointees any or all of
the powers and duties of the Committee. Such appointment and delegations must clearly specify the
powers and duties delegated. Upon such appointment and delegation, the delegating Committee
members shall have no liability for the acts or omissions of any such delegate, as long as the
delegating Committee members do not violate their fiduciary responsibility in making or continuing
such delegation.



     IN WITNESS WHEREOF, Southwest Airlines Co. has caused its corporate seal to be affixed hereto
and these presents to be duly executed in its name and behalf by its proper officers thereunto duly
authorized this 14th day of December, 2007.



	 	 	 	 	 
	 	 	SOUTHWEST AIRLINES CO.
	 
	 	 	 	 
	 

	 	By:	 	/s/ Gary C. Kelly
	 

	 	 	 	 
	 	 	 	 	Gary C. Kelly, Chief Executive Officer







41