Document:

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

41exv10w8

 

EXHIBIT
10.8

SOUTHWEST AIRLINES CO.

401(k) PLAN

 

 

SOUTHWEST AIRLINES CO.

401(k) PLAN

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I Purpose
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II Definitions and Construction
	 	 	2	 
	 
	 	 	 	 
	2.1 Definitions
	 	 	2	 
	2.2 Construction
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III Eligibility and Participation
	 	 	9	 
	 
	 	 	 	 
	3.1 Eligibility Requirements
	 	 	9	 
	3.2 Notification of Eligibility
	 	 	9	 
	3.3 Re-entry of Prior Members
	 	 	10	 
	 
	 	 	 	 
	ARTICLE IV Contributions
	 	 	10	 
	 
	 	 	 	 
	4.1 Salary Reduction Contributions
	 	 	10	 
	4.2 Catch-Up Contributions
	 	 	10	 
	4.3 Company Matching Contributions
	 	 	11	 
	4.3 Qualified Nonelective Contributions
	 	 	11	 
	4.4 Reduction of Excess Deferrals
	 	 	11	 
	4.5 Deferral Percentage Test
	 	 	12	 
	4.6 Contribution Percentage Test
	 	 	14	 
	4.7 Rollover Contributions
	 	 	16	 
	 
	 	 	 	 
	ARTICLE V Adjustment of Individual Accounts
	 	 	17	 
	 
	 	 	 	 
	5.1 Individual Accounts
	 	 	17	 
	5.2 Method of Adjustment
	 	 	18	 
	5.3 Salary Reduction Elections
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VI Allocations
	 	 	20	 
	 
	 	 	 	 
	6.1 Salary Reduction, Company Matching, and Rollover Contributions
	 	 	20	 
	6.2 Qualified Nonelective Contributions
	 	 	20	 
	6.3 Forfeitures
	 	 	20	 
	6.4 Notification to Members
	 	 	20	 
	6.5 Maximum Annual Addition to Account or Benefit
	 	 	20	 
	 
	 	 	 	 
	ARTICLE VII Retirement
	 	 	23	 
	 
	 	 	 	 
	7.1 Normal or Late Retirement
	 	 	23	 
	7.2 Benefit
	 	 	23	 
	 
	 	 	 	 
	ARTICLE VIII Death
	 	 	23	 
	 
	 	 	 	 
	8.1 Death of Member
	 	 	23	 
	8.2 Designation of Beneficiary
	 	 	23	 
	8.3 Benefit
	 	 	24	 
	8.4 No Beneficiary
	 	 	24	 

i

 

	 	 	 	 	 
	 	 	 	Page
	 
	ARTICLE IX Disability
	 	 	24	 
	 
	 	 	 	 
	9.1 Disability
	 	 	24	 
	9.2 Benefit
	 	 	24	 
	 
	 	 	 	 
	ARTICLE X Termination of Employment and Forfeitures
	 	 	24	 
	 
	 	 	 	 
	10.1 Eligibility and Benefits
	 	 	24	 
	10.2 Time of Payment
	 	 	25	 
	10.3 Forfeitures
	 	 	25	 
	10.4 Forfeitures for Cause
	 	 	26	 
	 
	 	 	 	 
	ARTICLE XI Withdrawals and Loans
	 	 	26	 
	 
	 	 	 	 
	11.1 Loans to Members
	 	 	26	 
	11.2 Withdrawals
	 	 	29	 
	 
	 	 	 	 
	ARTICLE XII Investment of the Trust Fund
	 	 	33	 
	 
	 	 	 	 
	12.1 Member Direction of Investment
	 	 	33	 
	12.2 Conversion of Investments
	 	 	35	 
	 
	 	 	 	 
	ARTICLE XIII Administration
	 	 	36	 
	 
	 	 	 	 
	13.1 Appointment of Committee
	 	 	36	 
	13.2 Committee Powers and Duties
	 	 	36	 
	13.3 Duties and Powers of the Plan Administrator
	 	 	37	 
	13.4 Rules and Decisions
	 	 	38	 
	13.5 Committee Procedures
	 	 	38	 
	13.6 Authorization of Benefit Payments
	 	 	38	 
	13.7 Payment of Expenses
	 	 	38	 
	13.8 Indemnification of Members of the Committee
	 	 	39	 
	 
	 	 	 	 
	ARTICLE XIV Notices
	 	 	39	 
	 
	 	 	 	 
	14.1 Notice to Trustee
	 	 	39	 
	14.2 Subsequent Notices
	 	 	39	 
	14.3 Reliance upon Notice
	 	 	39	 
	 
	 	 	 	 
	ARTICLE XV Benefit Payments
	 	 	39	 
	 
	 	 	 	 
	15.1 Method of Payment
	 	 	39	 
	15.2 Time of Payment
	 	 	40	 
	15.3 Cash Out Distribution
	 	 	42	 
	15.4 Minority or Disability Payments
	 	 	42	 
	15.5 Distributions Under Domestic Relations Orders
	 	 	42	 
	15.6 Direct Rollover of Eligible Rollover Distributions
	 	 	44	 
	 
	 	 	 	 
	ARTICLE XVI Trustee
	 	 	45	 
	 
	 	 	 	 
	16.1 Appointment of Trustee
	 	 	45	 
	16.2 Appointment of Investment Manager
	 	 	45	 
	16.3 Responsibility of Trustee and Investment Manager
	 	 	45	 
	16.4 Bonding of Trustee and Investment Manager
	 	 	46	 
	 
	 	 	 	 
	ARTICLE XVII Amendment and Termination of Plan
	 	 	46	 
	 
	 	 	 	 
	17.1 Amendment of Plan
	 	 	46	 
	17.2 Termination of Plan
	 	 	46	 
	17.3 Suspension and Discontinuance of Contributions
	 	 	46	 
	17.4 Liquidation of Trust Fund
	 	 	47	 
	17.5 Consolidation, Merger or Transfer of Plan Assets
	 	 	47	 
	 
	 	 	 	 
	ARTICLE XVIII General Provisions
	 	 	47	 
	 
	 	 	 	 
	18.1 No Employment Contract
	 	 	47	 

ii

 

	 	 	 	 	 
	 
	 	 	Page
	 
	18.2 Manner of Payment
	 	 	48	 
	18.3 Nonalienation of Benefits
	 	 	48	 
	18.4 Titles for Convenience Only
	 	 	48	 
	18.5 Validity of Plan
	 	 	48	 
	18.6 Plan Binding
	 	 	48	 
	18.7 Return of Contributions
	 	 	48	 
	18.8 Missing Members or Beneficiaries
	 	 	49	 
	18.9 Qualified Military Service
	 	 	49	 
	 
	 	 	 	 
	ARTICLE XIX Top-Heavy Rules
	 	 	49	 
	 
	 	 	 	 
	19.1 Definitions
	 	 	49	 
	19.2 Determination of Top-Heavy Status
	 	 	50	 
	19.3 Minimum Company Contribution
	 	 	51	 
	 
	 	 	 	 
	ARTICLE XX Fiduciary Provisions
	 	 	52	 
	 
	 	 	 	 
	20.1 General Allocation of Duties
	 	 	52	 
	20.2 Fiduciary Duty
	 	 	52	 
	20.3 Fiduciary Liability
	 	 	52	 
	20.4 Co-Fiduciary Liability
	 	 	52	 
	20.5 Delegation and Allocation
	 	 	53	 

iii

 

SOUTHWEST AIRLINES CO.

401(k) PLAN

PREAMBLE

     WHEREAS, SOUTHWEST AIRLINES CO., a corporation formed under the laws of the State of Texas
(the “Company”) has previously adopted a profit sharing plan and trust designated as the Southwest
Airlines Co. ProfitSharing Plan, effective as of January 1, 1973, which was subsequently amended
and restated in its entirety, effective as of January 1, 1986, and which was again amended and
restated in its entirety, effective as of January 1, 1991, to comply with the Tax Reform Act of
1986 and subsequent legislation and to continue the cash or deferred feature of the plan as a
separate Plan (the “Prior Plan”); and

     WHEREAS, the Company now desires to again amend and restate the Prior Plan in its entirety to
implement certain provisions of, and for compliance with, the Pension Protection Act of 2006, to
add an automatic enrollment feature, to incorporate amendments that have previously been made, 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, effective as of January 1, 2008, except as otherwise specifically provided herein,
the Prior Plan is hereby restated and amended in its entirety, superseded and replaced by this plan
(hereinafter referred to as the “Plan”), and the Company does hereby adopt this restated Plan for
the benefit of its eligible employees. There will be no gap or lapse in time or effect between
such plans, and the existence of a qualified plan 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 help the Employees accumulate funds for their later years, 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. With respect to Qualified Nonelective Contributions, if
any, the last day of the Plan Year and, with respect to Salary Reduction Contributions and
Company Matching Contributions, the Valuation Date coincident with or next following the
date on which such contributions are transmitted to the Trust.

     (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 the Southwest Airlines Co. ProfitSharing 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

2

 

through another person, pursuant to the common paymaster provisions of Sections 3121(s)
and 3306(p) of the Code.

     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
faction, the numerator of which is the number of months in the Plan Year, and the
denominator of which is twelve (12). Except as otherwise provided herein, for purposes of
an allocation under the Plan based on Annual Compensation, Annual Compensation shall only
include amounts actually paid to an Employee during the period he is a Member of the Plan.
Notwithstanding the limitation in the preceding sentence, for purposes of an allocation of a
Company Matching Contribution, Annual Compensation shall include amounts actually paid to an
Employee during the applicable Plan Year.

     (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 fewer than 501 Hours of Service with the Company unless he is on
a leave of absence authorized by the Company 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) Company. Southwest Airlines Co., or its successor or successors.

     (i) Company Matching Contributions. Contributions that may be made by the
Company for any Plan Year on behalf of a Member who has elected to receive Salary Reduction
Contributions for such Plan Year as provided in Section 4.2 hereof. Company Matching
Contributions shall be determined on behalf of Members whose conditions of employment are
governed by a collective bargaining agreement between the Company and a labor union in
accordance with the terms of such collective bargaining agreement, as then in effect, and
shall be determined on behalf of Members whose conditions of employment are not so governed
in the sole and absolute discretion of the board of directors of the Company.

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

     (k) Deemed Election Date. Except as otherwise provided herein, the Entry Date
on which an eligible Employee commences or recommences participation in the

3

 

Plan after January 1, 2008, in accordance with Section 3.1 hereof. Notwithstanding the
foregoing, in the event an eligible Employee’s employment with the Company and all
Affiliates terminates, any deemed election that would otherwise be in effect shall
automatically terminate and such Employee shall have a new Deemed Election Date, which shall
be the first day of the calendar month concurrent with or next following such Employee’s
completion of thirty (30) consecutive days of Service, beginning on the date on which such
Employee is reemployed. Furthermore, a deemed election in effect with respect to any Member
shall automatically terminate upon the date of a withdrawal from such Member’s Salary
Reduction Contribution Account in accordance with the provisions of Section 11.2(e) hereof.
An Employee hired prior to January 1, 2008 shall not have a Deemed Election Date unless such
Employee terminates employment and is subsequently rehired after January 1, 2008.

     (l) Disability. A physical or mental condition which, in the judgment of the
Committee, totally and presumably permanently prevents the Employee from engaging in any
substantial gainful employment with the Company. 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.

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

     (n) Employee. Any person who is receiving remuneration for personal services
rendered to the Company, 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.
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(s), (ii) and (mm) 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 the primary direction of 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

4

 

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, (2) immediate participation, and (3) full and immediate vesting; and (ii) leased
employees do not constitute more than twenty percent (20%) of the recipient’s nonhighly
compensated work force.

     (o) Entry Date. The first day of each calendar month.

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

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

     (r) Highly Compensated Employee. The term Highly Compensated Employee includes
highly compensated active employees and highly compensated former employees. A highly
compensated active employee includes any Employee who performs Service for the Company
during the determination year and who, during the look-back year received compensation from
the Company in excess of $105,000 (as adjusted pursuant to Section 415(d) of the Code). The
term Highly Compensated Employee also includes Employees who are Five Percent (5%) Owners
(as defined in Section 19.1(f) hereof) at any time during the look-back year or
determination year. For purposes of this Section 2.1(s), the determination year shall be
the Plan Year. The look-back year shall be the twelve-month period immediately preceding
the determination year. For purposes of this Section 2.1(r), the term “compensation” shall
have the same meaning as set forth in Section 415(c)(3) of the Code.

     A highly compensated former employee includes any Employee who separated from service
(or was deemed to have separated from service) prior to the determination year, performs no
Service for the Company during the determination year, and was a highly compensated active
employee for either the separation year or any determination year ending on or after the
Employee’s 55th birthday. The determination of the identity of Highly Compensated Employees
will be made in accordance with Section 414(q) of the Code and the regulations thereunder.

     (s) 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 which 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

5

 

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, 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. 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 that 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
2530.200 b-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 that 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 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.

     (t) 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.

     (u) 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.

6

 

     (v) Member. An Employee who has met the eligibility requirements for
participation in this Plan, as set forth in Article III hereof. A former Member is a Member
who has terminated employment with the Company but who has an Individual Account under the
Plan, and shall include those individuals who have an Individual Account under the Plan and
who were not employed by the Company, but who were formerly employed by Morris Air
Corporation.

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

     (x) Normal Retirement Date. The date on which a Member attains the age of sixty
(60) years.

     (y) Plan. Southwest Airlines Co. 401(k) Plan, as amended from time to time.

     (z) 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.

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

     (bb) Prior Plan. The Southwest Airlines Co. 401(k) Plan, effective January 1,
1991, as heretofore amended and restated from time to time.

     (cc) Qualified Nonelective Contributions. Contributions which may, at the
election of the Company, be made to the Plan by the Company in an amount necessary to assure
the Plan’s compliance with the deferral percentage test described in Section 4.5 hereof or
the contribution percentage test described in Section 4.6 hereof.

     (dd) 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.

     (ee) Rollover Contributions. Contributions that may be made to the Plan by a
Member or Employee, as provided in Section 4.7 hereof.

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

     (gg) Salary Reduction Contributions. Contributions made to the Plan by the
Company, at the election of a Member, in lieu of cash compensation, pursuant to a salary
reduction agreement, as provided in Sections 4.1 and 4.2 hereof.

     (hh) Salary Reduction Contribution Account. A separate subaccount to which is
credited a Member’s Salary Reduction Contributions, Qualified Nonelective

7

 

Contributions, if any, and any earnings attributable thereto, adjusted to reflect any
withdrawals, distributions, or investment losses attributable thereto.

     (ii) 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 member of
such controlled group of corporations, such group of trades or businesses under common
control, such affiliated service group, or such other entity required to be so aggregated,
including Service prior to the Effective Date.

     (jj) Trust. Southwest Airlines Co. 401(k) Trust, as amended from time to time,
which was established to hold and invest Salary Reduction Contributions, Company Matching
Contributions, and Qualified Nonelective Contributions, if any, 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.

     (kk) 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 that may be
managed exclusively by an Investment Manager, and to operate and administer the Trust Fund.

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

     (mm) 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, 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 that 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) 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 a Break
in Service, his years of Vesting Service before such

8

 

Break in Service shall not be taken into account until he has completed a year
of Vesting Service following his reemployment. In the case of an Employee who has
five (5) or more consecutive Breaks in Service, all years of Vesting Service
incurred after such Breaks in Service will be disregarded for purposes of measuring
years of Vesting Service before such Breaks in Service.

     (iv) Prior to January 1, 1985, if an Employee who does not have any
nonforfeitable right to his Company Matching Contribution Account incurs a period of
consecutive Breaks in Service that equals or exceeds the aggregate number of years
of Vesting Service incurred before such period, then all of his prior years of
Vesting Service before such period shall no longer be credited to him. However,
effective January 1, 1985, and thereafter, if an Employee who does not have any
nonforfeitable right to his Company Matching Contribution Account incurs a period of
five or more consecutive Breaks in Service, then all of his prior years of Vesting
Service before such period shall no longer be credited to him.

     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 such Employee’s completion of thirty (30) consecutive days of
Service, beginning on his employment commencement date. 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(n) 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. The Committee shall provide a notice
explaining the Employee’s rights and obligations under the automatic enrollment arrangement
provided under the Plan. The notice shall explain: (a) the Employee’s right to elect not to have

9

 

Salary Reduction Contributions, as described in Section 4.1 hereof, made on the Employee’s
behalf or to elect to have Salary Reduction Contributions made in a different percentage (including
an election of 0%) and (b) the manner in which Salary Reduction Contributions made under the
arrangement will be invested in the absence of any investment direction by the Employee in
accordance with Section 12.1 hereof. The notice shall also explain that the Employee shall be
given a reasonable period of time following the date of such notice to make an affirmative election
with respect to the percentage of Salary Reduction Contributions to be made (including an election
of 0%) and the manner and applicable percentages in which the Employee desires the Trustee to
invest such contributions.

     3.3 Re-entry 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. 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 if later, the first Entry Date
following the satisfaction of such requirements.

ARTICLE IV

CONTRIBUTIONS

     4.1 Salary Reduction Contributions. Each Member may elect to have contributed on his
behalf to the Trust Fund, on a pre-tax basis, any whole percentage of his Annual Compensation that
is not less than one percent (1%) and that does not exceed fifty percent (50%). Salary Reduction
Contributions shall be elected pursuant to a salary reduction election, in accordance with Section
5.3 hereof. If, following notice to the Member, in accordance with Section 3.2 above, the
Committee fails to receive a proper election for a Member prior to the Member’s Deemed Election
Date, the Member shall, on his Deemed Election Date, be deemed to have made an election under this
Section 4.1 to have contributed on his behalf a percentage of his Annual Compensation equal to
three percent (3%). Notwithstanding any provision herein to the contrary, any percentage of Annual
Compensation elected (or deemed elected) to be contributed to the Trust Fund on the Member’s behalf
may not exceed the applicable dollar amount for such Plan Year, as provided in Section 402(g) of
the Code, adjusted for increases in the cost of living as provided in Section 402(g)(4) of the
Code. Salary Reduction Contributions are at all times one hundred percent (100%) vested and
nonforfeitable. Salary Reduction Contributions made on behalf of a Member shall be added to the
Trust Fund as soon as practicable after deduction from a Member’s paycheck and shall be credited to
the Salary Reduction Contribution Account of the Member as of each Allocation Date, as provided in
Section 6.1.

     4.2 Catch-Up Contributions. Each Member who has attained or would have attained age
fifty (50) prior to the close of the Member’s taxable year, and who has affirmatively elected, in
accordance with the provisions of Section 4.1, to have Salary Reduction Contributions made to the
Plan on his behalf, shall be deemed to have elected to have Catch-Up Contributions contributed on
his behalf to the Trust Fund on a pre-tax basis, in accordance with, and subject to the limitations
of, Section 414(v) of the Code. Except as otherwise provided under Sections 4.5, 4.6, 4.7 and 6.5
hereof, Catch-Up Contributions shall be made pursuant to a salary reduction election, in accordance
with Section 5.3 hereof. Catch-Up Contributions are at all times one

10

 

hundred percent (100%) vested and nonforfeitable. Catch-Up Contributions made on behalf of a
Member shall be added to the Trust Fund as soon as practicable after deduction from a Member’s
paycheck, and shall be credited to the Salary Reduction Contribution Account of the Member as of
each Allocation Date, as provided in Section 6.1. The Plan shall not be treated as failing to
satisfy any provision implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12),
410(b), or 416 of the Code, as applicable, by reason of the making of such Catch-Up Contributions.

     4.3 Company Matching Contributions. The Company may, as provided below, contribute to
the Trust Fund a Company Matching Contribution. Company Matching Contributions shall be determined
on behalf of Members whose conditions of employment are governed by a collective bargaining
agreement between the Company and a labor union in accordance with the terms of such collective
bargaining agreement, as then in effect, and shall be determined on behalf of Members whose
conditions of employment are not so governed, in the sole and absolute discretion of the board of
directors of the Company. If a Company Matching Contribution is made, such Contribution will equal
a specified percentage of the Member’s Salary Reduction Contributions, including, if applicable,
Catch-Up Contributions, not to exceed the specific amount set forth in the collective bargaining
agreement, if applicable, or otherwise established by the board of directors of the Company.
Company Matching Contributions shall be added to the Trust Fund as soon as practicable after
deduction of the applicable Salary Reduction Contributions, including, if applicable, Catch-Up
Contributions from a Member’s paycheck and credited, as of each Allocation Date, to the Company
Matching Contribution Account of each eligible Member who has elected to have Salary Reduction
Contributions, including, if applicable, Catch-Up Contributions made to the Trust Fund on his
behalf during the applicable period.

     4.3 Qualified Nonelective Contributions. The Company may, for each Plan Year,
contribute to the Trust Fund Qualified Nonelective Contributions. Qualified Nonelective
Contributions are at all times one hundred percent (100%) vested and nonforfeitable. Qualified
Nonelective 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 6.2.

     4.4 Reduction of Excess Deferrals. If a Member’s Salary Reduction Contributions
hereunder should exceed the applicable dollar amount set forth in Section 402(g) of the Code,
adjusted for increases in the cost of living, as set forth in Section 402(g)(4) of the Code, the
excess (with earnings thereon) shall be reduced as follows:

     (a) To the extent that such excess Salary Reduction Contributions do not exceed the
applicable dollar limitation under Section 414(v), reduced by Catch-Up Contributions
previously made and Salary Reduction Contributions previously treated as Catch-Up
Contributions, whether under this Plan or another applicable employer plan (as defined in
Section 414(v)(6)(A) of the Code), the amount of such excess Salary Reduction Contributions
shall be recharacterized as Catch-Up Contributions, if such Member is otherwise eligible to
make Catch-Up Contributions in accordance with Section 4.2 hereof during the Plan Year in
which such excess deferrals were made.

11

 

     (b) If the Member is not eligible to make Catch-Up Contributions, as provided in
Section 4.2 hereof, or to the extent that recharacterization of such excess Salary Reduction
Contributions, together with Catch-Up Contributions previously made and Salary Reduction
Contributions previously treated as Catch-Up Contributions, whether under this Plan or
another applicable employer plan (as defined in Section 414(v)(6)(A) of the Code), exceeds
the applicable dollar limitation under Section 414(v), the amount of such excess Salary
Reduction Contributions shall be distributed to the Member. Any distribution under this
paragraph (b) shall be made to the Member no later than the April 15th immediately following
the close of the Member’s taxable year with respect to which such excess deferrals were
made.

     If the Member also participates in another elective deferral program (within the meaning of
Section 402(g)(3) of the Code) and if, when aggregating his elective deferrals under all such
programs, an excess of deferral contributions arises under the dollar limitation in Code Section
402(g) with respect to such Member, the Member shall, no later than March 1st following the close
of the Member’s taxable year, notify the Committee as to the portion of such excess deferrals to be
allocated to this Plan and such excess so allocated to this Plan (with earnings thereon) shall be
deemed a Catch-Up Contribution in accordance with subparagraph (a) herein, as the case may be, or
distributed to the Member in accordance with subparagraph (b) herein. In the event there is a loss
allocable to an excess deferral, any distribution to a Member as required by this Section shall be
no greater than the lesser of: (i) the value of the Member’s Salary Reduction Contribution Account
or (ii) the Member’s excess deferrals for the Plan Year.

     4.5 Deferral Percentage Test.

     (a) Determination of Deferral Percentages. As soon as administratively
feasible after the end of each Plan Year (or other applicable period) the Committee shall
determine:

     (i) Deferral Percentage. The “deferral percentage” for each Employee
who is then eligible for Salary Reduction Contributions (not including Catch-Up
Contributions, if applicable), which shall be the ratio of the amount of such
Employee’s Salary Reduction Contributions for such Plan Year (less excess Salary
Reduction Contributions treated as Catch-Up Contributions for the Plan Year in
accordance with Section 4.4 above) to the Employee’s compensation (as defined in
Section 2.1(r) hereof) for such Plan Year;

     (ii) Highly Compensated Deferral Percentage. The “highly compensated
deferral percentage,” which shall be the average of the “deferral percentages” for
all Highly Compensated Employees then eligible for Salary Reduction Contributions;
and

     (iii) Nonhighly Compensated Deferral Percentage. The “nonhighly
compensated deferral percentage,” which shall be the average of the “deferral
percentages” for all Employees then eligible for Salary Reduction Contributions who
were not included in the “highly compensated deferral percentage,” in (ii) above.

12

 

     If a Highly Compensated Employee participates in two (2) or more plans maintained by an
Employer or any Affiliate that are subject to the deferral percentage test, then such
Employee’s deferral percentage shall be determined by aggregating his participation in all
such plans. In addition, if the Company maintains two (2) or more plans subject to the
deferral percentage test and such plans are treated as a single plan for purposes of the
requirements for qualified plans under either Code Section 410(b) or 401(a)(4), then such
plans are treated as a single plan for purposes of the deferral percentage test. For
purposes of implementing the deferral percentage test, elective deferrals treated as
Catch-Up Contributions shall be disregarded. If, however, the Company elects to apply
Section 410(b)(4)(B) in determining whether the Plan meets the requirements of Section
410(b)(1) of the Code, the Company may, in determining whether the Plan meets the
requirements of this Section 4.5, either elect to (A) exclude from consideration all
eligible Employees (other than Highly Compensated Employees) who have not met the minimum
age and service requirements of Section 410(a)(1)(A) of the Code or (B) perform the deferral
percentage test separately for the group of Employees who have met the minimum age and
service requirements of Section 410(a)(1)(A) of the Code and the group of Employees who have
not met the minimum age and service requirements of Section 410(a)(1)(A) of the Code.

     (b) Limitation on Highly Compensated Deferral Percentage. In no event shall
the “highly compensated deferral percentage” exceed the greater of: (1) a deferral
percentage equal to one and one–fourth (11/4) times the “nonhighly compensated deferral
percentage” or (2) a deferral percentage equal to two (2) times the “nonhighly compensated
deferral percentage,” but not more than two (2) percentage points greater than the
“nonhighly compensated deferral percentage.”

     (c) Recharacterization of Excess Salary Reduction Contributions. If the above
deferral percentage test would otherwise be violated as of the end of the Plan Year, then,
to the extent that the excess Salary Reduction Contributions of such Highly Compensated
Employees do not exceed the applicable dollar limitation under Section 414(v), reduced by
elective deferrals previously treated as Catch-Up Contributions, whether under this Plan or
another elective deferral program (as defined under Section 402(g)(3)), the amount of the
excess Salary Reduction Contributions of such Highly Compensated Employees shall be
recharacterized as Catch-Up Contributions, if such Member is otherwise eligible to make
Catch-Up Contributions in accordance with Section 4.2 hereof during the Plan Year in which
the excess deferral arises.

     (d) Application of Qualified Nonelective Contributions. If, after
recharacterization of the excess Salary Reduction Contributions of such Highly Compensated
Employees, the deferral percentage test would still be violated as of the end of the Plan
Year, then, subject to satisfaction of the conditions described in Section 1.401(k)–1(b)(5)
of the Treasury Regulations, the “deferral percentage,” as defined in (a)(i) above, shall
instead be the ratio of the sum of the Employee’s Salary Reduction Contributions (less
excess Salary Reduction Contributions treated as Catch-Up Contributions for the Plan Year),
Qualified Nonelective Contributions, if any, and, to the extent necessary to satisfy the
deferral percentage test, Company Matching Contributions for such Plan Year to the
Employee’s compensation (as defined in Section 2.1(r) hereof)

13

 

for such Plan Year. Any Company Matching Contributions so utilized to satisfy the
deferral percentage test shall at all times be one hundred percent (100%) vested and
nonforfeitable and shall be excluded from consideration for purposes of the contribution
percentage test described in Section 4.6.

     (e) Distribution of Excess Contributions. If, after consideration of Qualified
Nonelective Contributions, if any, and applicable Company Matching Contributions, as
described above, the deferral percentage test would still be violated as of the end of the
Plan Year, then notwithstanding any other provision hereof, every Salary Reduction
Contribution (other than excess Salary Reduction Contributions treated as Catch-Up
Contributions for the Plan Year) included in the “highly compensated deferral percentage”
for a Member whose deferral percentage is greater than the permitted maximum shall be
revoked to the extent necessary to comply with such deferral percentage test and the amount
of such Salary Reduction Contribution (other than excess Salary Reduction Contributions
treated as Catch-Up Contributions for the Plan Year), to the extent revoked, shall
constitute an “excess contribution” to be distributed (with earnings thereon) no later than
the last day of the Plan Year following the Plan Year with respect to which such
contribution was made. Excess contributions are allocated to the Highly Compensated
Employees with the largest amounts of Employer contributions taken into account in
calculating the deferral percentage test for the Plan Year in which the excess arose,
beginning with the Highly Compensated Employee with the largest amount of such Employer
contributions and continuing in descending order until all excess contributions have been
allocated. For purposes of the preceding sentence, the “largest” amount is determined after
distribution of any amounts distributed hereunder pursuant to Section 4.4 hereof. In the
event there is a loss allocable to an excess contribution, any distribution to a Member as
required by this Section shall be no greater than the lesser of: (a) the value of the
Member’s Salary Reduction Contribution Account (without regard to Catch-Up Contributions) or
(b) the Member’s excess contribution for the Plan Year. If an excess contribution is
distributed to a Member in accordance with the foregoing, any Company Matching Contribution
relating to such excess contribution shall be forfeited and then utilized as described in
Section 6.3 hereof, and shall not be taken into account in determining the Member’s
contribution percentage under Section 4.6.

     4.6 Contribution Percentage Test.

     (a) Determination of Contribution Percentages. As soon as administratively
feasible after the end of each Plan Year (or other applicable period) the Committee shall
determine:

     (i) Contribution Percentage. The “contribution percentage” for each
Employee who is then eligible to receive Company Matching Contributions, which shall
be the ratio of the amount of such Employee’s Company Matching Contributions for
such Plan Year to such Employee’s compensation (as defined in Section 2.1(r) hereof)
for such Plan Year;

14

 

     (ii) Highly Compensated Contribution Percentage. The “highly
compensated contribution percentage,” which shall be the average of the
“contribution percentages” for all Highly Compensated Employees then eligible for
Company Matching Contributions; and

     (iii) Nonhighly Compensated Contribution Percentage. The “nonhighly
compensated contribution percentage,” which shall be the average of the
“contribution percentages” for all Employees then eligible for Company Matching
Contributions who were not included in the “highly compensated contribution
percentage,” in (ii) above.

     If a Highly Compensated Employee participates in two (2) or more plans maintained by an
Employer or any Affiliate that are subject to the contribution percentage test, then such
Employee’s contribution percentage shall be determined by aggregating his participation in
all such plans. In addition, if the Company maintains two (2) or more plans subject to the
contribution percentage test and such plans are treated as a single plan for purposes of the
requirements for qualified plans under either Code Section 410(b) or 401(a)(4), then such
plans are treated as a single plan for purposes of the contribution percentage test. If,
however, the Company elects to apply Section 410(b)(4)(B) in determining whether the Plan
meets the requirements of Section 410(b)(1) of the Code, the Company may, in determining
whether the Plan meets the requirements of this Section 4.6, either elect to (A) exclude
from consideration all eligible Employees (other than Highly Compensated Employees) who have
not met the minimum age and service requirements of Section 410(a)(1)(A) of the Code or (B)
perform the contribution percentage test separately for the group of Employees who have met
the minimum age and service requirements of Section 410(a)(1)(A) of the Code and the group
of Employees who have not met the minimum age and service requirements of Section
410(a)(1)(A) of the Code.

     (b) Limitation on Highly Compensated Contribution Percentage. In no event
shall the “highly compensated contribution percentage” exceed the greater of: (1) a
contribution percentage equal to one and one–fourth (11/4) times the “nonhighly compensated
contribution percentage” or (2) a contribution percentage equal to two (2) times the
“nonhighly compensated contribution percentage” but not more than two (2) percentage points
greater than the “nonhighly compensated contribution percentage.”

     (c) Application of Qualified Nonelective Contributions. If the above
contribution percentage test would otherwise be violated as of the end of the Plan Year,
then subject to satisfaction of the conditions described in Section 1.401(m)-1(b)(5) of the
Treasury Regulations, the “contribution percentage,” as defined in (a) above, shall instead
be the ratio of the sum of the Employee’s Company Matching Contributions, Qualified
Nonelective Contributions, if any, and to the extent necessary to satisfy the contribution
percentage test, Salary Reduction Contributions for the applicable Plan Year to the
Employee’s compensation (as defined in Section 2.1(r) hereof) for the applicable Plan Year.
Any Salary Reduction Contributions or Qualified Nonelective Contributions so utilized to
satisfy the contribution percentage test shall be excluded from consideration for purposes
of the deferral percentage test described in Section 4.5.

15

 

     (d) Distribution of Excess Aggregate Contributions. If after consideration of
applicable Salary Reduction Contributions and Qualified Nonelective Contributions, if any,
as described above, the contribution percentage test would still be violated as of the end
of the Plan Year, then notwithstanding any other provision hereof, every Company Matching
Contribution included in the “highly compensated contribution percentage” for a Member whose
contribution percentage is greater than the permitted maximum shall automatically be revoked
to the extent necessary to comply with such contribution percentage test and the amount of
such contribution, to the extent revoked, shall constitute an “excess aggregate
contribution” to be distributed to such Member (with earnings thereon) or forfeited, if
applicable, no later than the last day of the Plan Year following the Plan Year for which
such contribution was made. Excess aggregate contributions are allocated to the Highly
Compensated Employees with the largest amounts of Employer contributions taken into account
in calculating the contribution percentage test for the Plan Year in which the excess arose,
beginning with the Highly Compensated Employee with the largest amount of such Employer
contributions and continuing in descending order until all excess aggregate contributions
have been allocated. For purposes of the preceding sentence, the “largest amount” is
determined after first determining required distributions under Section 4.4 hereof, and then
determining excess contributions under Section 4.5. In the event there is a loss allocable
to an excess aggregate contribution, any distribution to a Member as required by this
Section shall be no greater than the lesser of: (a) the value of the Member’s Company
Matching Contribution Account or (b) the Member’s excess aggregate contribution for the Plan
Year.

     4.7 Rollover Contributions.

     (a) Direct Rollovers. A Member who is entitled to receive an “eligible
rollover distribution”, as such term is defined in Section 15.6 hereof, from (i) a qualified
plan described in section 401(a) or 403(a) of the Code, (ii) an annuity contract described
in section 403(b) of the Code, or (iii) 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, may, in accordance with
procedures approved by the Committee, elect to transfer directly to the Trustee, as a
trustee-to-trustee transfer, in cash only, an amount equal to all or a portion of such
distribution; provided, however, that the maximum amount of such transfer shall be the fair
market value of that portion of the distribution that would be includable in gross income if
not so transferred (determined without regard to Section 402(c) of the Code).

     (b) Member Rollover Contributions from Other Plans. Any Member who has
distributed to him an amount that qualifies as an “eligible rollover distribution”, as such
term is defined in Section 15.6 hereof, from (i) a qualified plan described in section
401(a) or 403(a) of the Code, (ii) an annuity contract described in section 403(b) of the
Code, (iii) 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, or (iv) any portion of a distribution from an individual retirement
account annuity described in section 408(a) or 408(b) of the Code, may, in accordance with
procedures approved by the Committee, contribute, in cash only, an amount equal to

16

 

all or any portion of such distribution that is eligible to be rolled over and that
would otherwise be includible in gross income if not so transferred (determined without
regard to Section 402(c) of the Code). Such transfer must occur on or before the
60th day following the Member’s receipt of such distribution, or such later date
as permitted by the Internal Revenue Service for distributions on and after January 1, 2002.

     (c) Method of Transfer. The Committee shall develop such procedures, and may
require such information from a Member desiring to make such a transfer, as it deems
necessary or desirable to determine that the proposed transfer will meet the requirements of
this Section. Upon approval by the Committee, the amount transferred shall be deposited in
the Trust and shall be credited, as of the Valuation Date next following such transfer, to a
Rollover Contribution Account for the Member.

     (d) Rollover Contributions Prior to Eligibility as a Member. An Employee,
prior to satisfying the eligibility conditions of the Plan, as set forth in Section 3.1
hereof, may make a Rollover Contribution to the Trust Fund to the same extent and in the
same manner as a Member. If an Employee makes a Rollover Contribution to the Trust Fund
prior to satisfying the Plan’s eligibility conditions, the Committee and Trustee shall treat
the Employee as a Member for all purposes of the Plan except for purposes of sharing in
Company Matching Contributions, Salary Reduction Contributions, or Qualified Nonelective
Contributions under the Plan until he actually becomes a Member. If the Employee terminates
employment prior to becoming a Member, the Trustee will distribute his Rollover Contribution
Account to him in accordance with the provisions of Article XV hereof as if such Employee
were a Member of the Plan.

     (e) Vesting and Distribution of Rollover Contribution Account. Each Member’s
Rollover Contribution Account shall be 100% vested and nonforfeitable at all times and shall
share in asset adjustments pursuant to Section 5.2 herein, but shall not share in Company
contributions. Upon termination of employment, the total amount of a Member’s Rollover
Contribution Account shall be distributed in accordance with Article XV hereof.

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 a
Company Matching Contribution Account, to which Company Matching Contributions, if any, shall be
credited; a Salary Reduction Contribution Account, to which Salary Reduction Contributions, if any,
including Catch-Up Contributions, if any, together with Qualified Nonelective Contributions and
Company Matching Contributions, if any, utilized to satisfy the deferral percentage test or the
contribution percentage test, as set forth in Sections 4.5 and 4.6 hereof, if any, shall be
credited; and, if applicable, a Rollover Contribution Account. Such accounts are primarily for
accounting purposes and do not require a segregation of the Trust Fund, except as otherwise
provided herein.

17

 

     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 contributions
of the Company 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.

     5.3 Salary Reduction Elections. Each Member who desires to make Salary Reduction
Contributions (including an election to contribute 0% of his Annual Compensation) shall indicate
such intent by making a salary reduction election to be effective as of the Entry Date on which
such Member first satisfies the eligibility requirements of Article III hereof or as of any
subsequent payroll period. Such election must be made in the manner and within the time period
prior to such Entry Date (or subsequent payroll period) prescribed by the Committee. Each Member
with respect to whom a deemed election has been made pursuant to Section 4.1 hereof shall be deemed
to have filed a salary reduction election to be effective as of the Deemed Election Date. Each
Member with respect to whom a deemed election has been made pursuant to Section 4.2 hereof shall be
deemed to have filed a salary reduction election to be effective with respect to Catch-Up
Contributions made on his behalf. Salary reduction elections (including deemed elections) shall be
effective for each payroll period thereafter until modified or amended, as provided below.

     Salary reduction elections (including deemed elections) shall constitute a payroll withholding
agreement between the Member and the Company, and shall constitute authorization for the reduction
in Annual Compensation described above. The terms of such election shall evidence the Member’s
intent to have the Company withhold from his compensation each payroll period any whole percentage
of his Annual Compensation, subject to the applicable limitations of Article IV. The Company will
make a contribution to the Trust Fund on behalf of the Member for each payroll period in an amount
equal to the total amount by which the Member’s

18

 

Annual Compensation from the Company was reduced during such payroll period pursuant to a
salary reduction election.

     Notwithstanding any provision of this Section 5.3 to the contrary, salary reduction elections
shall be governed by the following general guidelines:

     (a) A salary reduction election shall be made in the manner determined by the
Committee. All salary reduction elections (including deemed elections) shall apply to each
payroll period during which such election is in effect. Upon termination of employment,
such election will become void.

     (b) A Member may revoke a salary reduction election (including a deemed election under
Section 4.1) at any time upon advance notice to the Committee, within the time period
established by the Committee, and thus discontinue all future withholding thereafter. A
revocation of a salary reduction election under Section 4.1 shall automatically revoke any
deemed election under Section 4.2. Following the revocation of a salary reduction
election, a Member may elect to resume withholding effective as of the first day of the
first full payroll period next following the payroll period in which the revocation occurs,
or as of the first day of any payroll period thereafter next following timely receipt by the
Committee of such notice. A resumption of withholding following the revocation of a salary
reduction election may be made only upon advance notice to the Committee, within the time
period established by the Committee. A Member may increase the percentage to be withheld
from his Annual Compensation or decrease the percentage to be withheld from his Annual
Compensation upon advance notice to the Committee, within the time period established by the
Committee, and in the manner prescribed by the Committee, such increase or decrease to be
effective as of the first day of the first full payroll period next following timely receipt
by the Committee of such notice. Any revocation of or change in the terms of a salary
reduction election shall be made in the manner prescribed by the Committee.

     (c) The Company may unilaterally amend or revoke a salary reduction election (including
a deemed election) at any time, including an amendment to recharacterize an election of
Salary Reduction Contributions as an election of Catch-Up Contributions, if the Company
determines that such revocation or amendment is necessary to insure that a Member’s Annual
Additions, as defined in subsection 6.5(b) hereof, for any Plan Year will not exceed the
limitations of Article VI or to ensure that the requirements of Section 401(k) of the Code
and Sections 4.1 and 4.2 hereof have been satisfied with respect to the amount that may be
withheld and contributed on behalf of a Member. Furthermore, a deemed election in effect
with respect to any Member shall automatically terminate upon the date of a withdrawal from
such Member’s Salary Reduction Contribution Account in accordance with the provisions of
Section 11.2(e) hereof.

19

 

ARTICLE VI

ALLOCATIONS

     6.1 Salary Reduction, Company Matching, and Rollover Contributions. Salary Reduction
Contributions and Company Matching Contributions shall be credited to the Individual Accounts of
the Members and former Members, as of each Allocation Date, in accordance with each Member’s or
former Member’s salary reduction election and the Company Matching Contribution, if any, made with
respect to such Salary Reduction Contributions. Rollover Contributions shall be credited to the
Individual Accounts of Members as provided in Section 4.7 hereof.

     6.2 Qualified Nonelective Contributions. 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 allocate Qualified Nonelective Contributions, if any, for the Plan Year
ending with said Allocation Date to the Individual Accounts of all Members and former Members who
are not Highly Compensated Employees for the Plan Year. The amount of the contribution allocated
under this Section 6.2 to the Individual Account of each such Member or former Member shall be in
the proportion that his Annual Compensation bears to the total Annual Compensation of all such
Members and former Members.

     6.3 Forfeitures. If a Member or former Member forfeits a portion of his Individual
Account as provided in Section 10.3 or Section 11.2(e) hereof, such forfeited amount shall be used
first to restore the Individual Accounts of rehired Members as required under Section 15.3 hereof.
Any remaining forfeitures shall be used to reduce the Company Matching Contribution. 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.

     6.4 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.

     6.5 Maximum Annual Addition to Account or Benefit.

     (a) Limitations. If the Employer maintains, or has ever maintained, 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 6.5(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

20

 

Amount (as defined in subsection (b) below), based upon Annual Compensation up to such
Allocation Date for such Limitation Year.

     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 such other
defined contribution plan of the Employer as of such Allocation Date.

     If as a result of the first three paragraphs of this subsection 6.5(a) the allocation
of Annual Additions under this Plan is to be reduced, such reduction shall be made as
follows:

     (i) To the extent that the excess Annual Additions of such Member do not exceed
the applicable dollar amount under Section 414(v) of the Code, reduced by Catch-Up
Contributions previously made and Salary Reduction Contributions previously treated
as Catch-Up Contributions for the taxable year in which the Plan Year ends, whether
under this Plan or another elective deferral program (as defined under Section
402(g)(3) of the Code), the amount of the excess Annual Additions of such Member
shall be recharacterized as Catch-Up Contributions, if such Member is otherwise
eligible to make Catch-Up Contributions under Section 4.2 during the taxable year in
which the excess Annual Addition arises.

     (ii) To the extent permitted under applicable Treasury Regulations, the amount
of such reduction consisting of Salary Reduction Contributions, and earnings
attributable thereto, shall be paid to the Member or former Member as soon as
administratively feasible.

     (iii) If an excess amount still exists after applying subparagraph (1), the
excess amount shall be allocated to a suspense account as of such Allocation Date
and held therein until the next succeeding Valuation Date or Dates on which Company
Matching Contributions or Qualified Nonelective Contributions, if any, may be
allocated under the provisions of the Plan, at which time such excess amount shall
be used to reduce such Company Matching Contributions and Qualified Nonelective
Contributions, if any. In the event of termination of the Plan, the suspense
account shall revert to the Company.

     (iv) 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 6.5. For purposes of Section 6.5, the
following definitions shall apply:

21

 

     (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, other than Catch-Up Contributions; and

     (4) amounts allocated after March 31, 1984, to an individual medical
benefit account, as defined in Code Section 415(l)(2), which 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, which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code Section 419A(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.
Nothing in this definition of Annual Additions shall be construed as requiring the
allocation of forfeitures to the Individual Accounts of Members, former Members, or
Beneficiaries rather than to reduce Company Matching Contributions, as provided in
Section 6.3 hereof.

     (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. 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. For

22

 

purposes of this subparagraph (b)(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. For Limitation Years
beginning after December 31, 1997, compensation shall include 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)(l)(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.

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.

     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 Qualified Nonelective Contributions 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 be effective only when filed with
the Committee. The last such designation filed with the Committee shall control.

23

 

     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 existing designation or designations on file with the Committee.

     8.3 Benefit. 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
Qualified Nonelective Contributions 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.

     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 Member’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 Qualified Nonelective Contributions
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.

24

 

     (a) Salary Reduction, Rollover and Qualified Nonelective Contributions. If a
Member’s employment with the Company 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 Salary Reduction Contribution Account and all of his
Rollover Contribution 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 Salary
Reduction Contributions and Qualified Nonelective Contributions 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.

     (b) Company Matching Contributions. In addition, such Member shall be entitled
to a percentage of the amount in his Company Matching Contribution 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 Matching Contributions
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 Company Matching Contribution Account to which he is
entitled shall be determined in accordance with the following schedule:

	 	 	 	 	 
	 	 	Percentage
	Completed Years of 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 paragraph (b) 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 be used to reduce Company Matching Contributions pursuant to the
provisions of Section 6.3. 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 separation
from service occurs. A Member who receives a cashout distribution in accordance with the
provisions of Section 15.3 hereunder shall forfeit that portion of his Individual Account to which
he is not entitled under Section 10.1 in the Plan Year in which the cashout distribution occurs. A
Member who is entitled to a portion of his Individual Account but who is not one

25

 

hundred percent (100%) vested in such Individual Account and who does not receive a cashout
distribution under Section 15.3, shall forfeit that portion of his Individual Account to which he
is not entitled under Section 10.1 in the Plan Year in which he incurs five (5) consecutive Breaks
in Service.

     10.4 Forfeitures 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 Company Matching Contribution 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
Company Matching Contribution 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 AND LOANS

     11.1 Loans to Members.

     (a) General. Subject to such rules and regulations as may from time to time be
promulgated by the Committee, the Committee upon application of a Member may, in its sole
and absolute discretion, direct the Trustee to make a loan or loans to such Member from his
Rollover Contribution Account, and upon depletion of the funds in his Rollover Contribution
Account, from his Salary Reduction Contribution Account upon such terms as the Committee
deems appropriate, subject to the following requirements.

     The maximum amount that may be loaned is the lesser of (i) $50,000.00, reduced as
provided below, or (ii) one-half of the sum of the value of the Member’s Rollover
Contribution Account and the value of the Member’s Salary Reduction Contribution Account as
of the Valuation Date next preceding the date on which the Committee receives the Member’s
loan application. The $50,000.00 limitation shall be reduced by the excess (if any) of:

     (i) the highest outstanding balance of loans from the Plan to the Member during
the one-year period ending on the day before the date on which such loan was made,
over

     (ii) the outstanding balance of loans from the Plan to the Member on the date
on which such loan was made.

     The minimum amount that may be loaned is the sum of: (i) One Thousand and No/100
Dollars ($1,000.00) and (ii) an amount equal to the Plan’s loan administration fee

26

 

in effect on the date on which the loan is made. Only one loan from the Plan per
calendar year may be approved for any Member, and no more than one such loan may be
outstanding at any time. Notwithstanding the foregoing, if, immediately prior to the merger
of the Morris Air Corporation Employee Retirement Plan (the “Morris Air Plan”) into this
Plan, a Member had an outstanding loan under this Plan and an outstanding loan under the
Morris Air Plan, then both such loans may remain outstanding. Loans shall be granted by the
Committee in a uniform and nondiscriminatory manner. Each loan shall bear a reasonable rate
of interest and be adequately secured and shall by its terms require repayment in no later
than five years, unless such loan is used to acquire any dwelling unit that within a
reasonable time is to be used (determined at the time the loan is made) as a principal
residence of the Member. All loans shall be repaid pro rata to the applicable account from
which the loan proceeds were paid pursuant to a salary deduction procedure established by
the Company unless the Member is on an authorized leave of absence or transfers to a
location that does not participate in a salary deduction procedure, in which case payment
shall be made to the principal office of the Company by check.

     All loans to Members granted under this provision are to be considered a directed
investment of such Member. The loan shall remain an asset of the Trust, but to the extent
of the outstanding balance of any such loan at any time, the Rollover Contribution Account
and, if applicable, Salary Reduction Contribution Account of the Member to whom such loan is
made alone shall share in any interest paid on such loan and alone shall bear any expense or
loss incurred in connection with such loan. The Trustee may retain any principal or
interest paid on any such loan in an interest-bearing segregated account held on behalf of
the Member to whom such loan is made until the Trustee deems it appropriate to add such
amounts to a Member’s Rollover Contribution Account, and if applicable, Salary Reduction
Contribution Account. Each loan applicant shall receive a clear statement of the charges
involved in each loan transaction. This statement shall include the dollar amount and
annual interest rate of the finance charge. Any outstanding loan or loans to a Member
shall, if not paid when due, be liquidated out of the interest of such Member; provided,
however, that no such liquidation shall occur prior to the time a Member is entitled to
receive a distribution under Article VII, VIII, IX or X hereof or a withdrawal under Section
11.2(b) hereof. No distribution shall be made to any Member or former Member, or to a
Beneficiary or Beneficiaries, or the estate of a Member unless and until all unpaid loans to
such Member, together with interest, have been liquidated, as described above, or paid in
full.

     (b) Qualified Hurricane Loans. Notwithstanding any provision of this Plan to
the contrary, any Member whose principal place of abode was located in a Hurricane Disaster
Area on the date applicable to such hurricane, as indicated below, and who sustained an
economic loss by reason of such hurricane, shall be eligible to request a Qualified
Hurricane Loan, regardless of any other outstanding loans from this Plan.

Applicable Date for Location of Principal Place of Abode

	 	 	 	 	 
	Hurricane Katrina
	 	August 28, 2005
	Hurricane Rita
	 	September 23, 2005
	Hurricane Wilma
	 	October 23, 2005

27

 

     For purposes of this subsection (b), a Member shall be deemed to have sustained an
economic loss on account of loss, damage to, or destruction of real or personal property
from fire, flooding, looting, vandalism, theft, wind, or other cause; loss related to
displacement from such Member’s home; loss of livelihood due to temporary or permanent
layoff, and such other economic loss as the Committee, in its sole discretion, shall
determine. A Qualified Hurricane Loan is a loan from the Plan that is made to a Member on
or before December 31, 2006, in an amount that does not exceed the lesser of: (1) one
hundred percent (100%) of such Member’s vested Individual Account balance or (2) $100,000,
reduced by the excess of:

     (i) the highest outstanding balance on loans from the Plan to the Member during
the one-year period ending on the day before the date on which such loan was made,
over

     (ii) the outstanding balance of loans from the Plan to the Member on the date
on which such loan was made.

     A Qualified Hurricane Loan made with respect to Hurricane Katrina must be made on or
after September 24, 2005, and a Qualified Hurricane Loan made with respect to Hurricanes
Rita or Wilma must be made on or after December 21, 2005.

     (c) Suspension of Plan Loans. Any Member who is eligible to receive a
Qualified Hurricane Loan, as set forth in subsection (b) above, may suspend for one year any
loan payments under an outstanding loan from the Plan to such Member originally due during
the following periods:

     (i) August 25, 2005 through December 31, 2006 for Members whose principal place
of abode was located in the Hurricane Katrina Disaster Area;

     (ii) September 23, 2005 through December 31, 2006 for Members whose principal
place of abode was located in the Hurricane Rita Disaster Area; and

     (iii) October 23, 2005 through December 31, 2006 for Members whose principal
place of abode was located in the Hurricane Wilma Disaster Area.

     After any period during which a Member elects to suspend the payment(s) on an
outstanding loan, the outstanding balance of the loan(s) shall be reamortized to include the
interest accruing during such delay. Any delay elected by a Member shall increase the
repayment period for such loan, and the maximum repayment period determined under subsection
(a) above for such loan shall be increased by the period of up to one year when no payments
were made. Notwithstanding subsection (a) above, a Member may pledge up to 100% of his
Individual Account as collateral for a Qualified Hurricane Loan.

28

 

     (d) Hurricane Disaster Areas. For purposes of subsections (b) and (c) above,
the following Hurricane Disaster Areas shall apply:

 Hurricane Katrina Disaster Area: The States of Alabama, Florida,
Louisiana and Mississippi.

 Hurricane Rita Disaster Area: The States of Louisiana and Texas.

 Hurricane Wilma Disaster Area: The State of Florida.

11.2 Withdrawals.

(a) Financial Hardship. A Member may, upon the approval of the Committee,
withdraw on account of financial hardship any portion of his Rollover Contribution Account
and upon depletion of the funds in his Rollover Contribution Account, any portion of his
Salary Reduction Contribution Account other than amounts attributable to Qualified
Nonelective Contributions, if any, and income on such Member’s Salary Reduction
Contributions and Qualified Nonelective Contributions, if any. A Member may not withdraw,
on account of hardship, amounts in his Company Matching Contribution Account. A Member who
wishes to request a hardship withdrawal shall file with the Committee a written request for
withdrawal on a form provided by the Committee. The Committee shall adopt uniform and
nondiscriminatory rules regarding the granting of such requests and shall evaluate hardship
requests made under this Section. For purposes of this Plan, a financial hardship means an
immediate and heavy financial need of the Member for which funds are not reasonably
available from other resources of the Member. The determination of whether a Member suffers
sufficient hardship to justify the granting of his written request and of the amount
permitted to be withdrawn under this Section shall be made in the sole and absolute
discretion of the Committee after a full review of the Member’s written request and evidence
presented by the Member showing financial hardship. Upon a Member’s receipt of a withdrawal
for financial hardship, such Member shall be prohibited from making Salary Reduction
Contributions, including Catch-Up Contributions, if applicable, for a period of at least six
(6) months, beginning on the date on which the hardship withdrawal is made. A Member may
elect to resume Salary Reduction Contributions, including Catch-Up Contributions, if
applicable, under this Plan as of the first day of any new payroll period following the last
day of such six (6) month period by filing a new salary reduction election within the time
period prior to the first day of such payroll period established by the Committee.

        If approved by the Committee, any withdrawal for financial hardship may not exceed the
amount deemed necessary to meet the immediate financial need created by the hardship,
including any amounts necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the withdrawal. The request of any Member
for a hardship withdrawal shall be deemed necessary to meet the immediate financial need of
the Member if the Member has theretofore (i) obtained all currently available distributions,
other than hardship distributions, (ii) obtained all nontaxable loans permitted under all
plans maintained by the Company; and (iii) agreed to suspend his or her Salary Reduction
Contributions, including Catch-Up Contributions, if applicable,

29

 

under this Plan and elective contributions and employee contributions under all other
plans (other than a health or welfare benefit plan) maintained by the Company for a period
of at least six (6) months following receipt of the hardship distribution. A Member may
elect to resume Salary Reduction Contributions, including Catch-Up Contributions, if
applicable, under this Plan in the manner described hereinabove and may elect to resume
elective contributions and employee contributions under all other plans in accordance with
their respective terms.

     Notwithstanding the foregoing, a request for a hardship withdrawal will generally be
treated as necessary to satisfy a financial hardship if the Committee relies upon the
Member’s representation (made in writing or such other form as may be prescribed by the
Commissioner), unless the Committee has actual knowledge to the contrary, that the hardship
cannot reasonably be relieved:

     (i) through reimbursement or compensation by insurance or otherwise;

     (ii) by liquidation of the Member’s assets;

     (iii) by cessation of Salary Reduction Contributions, including Catch-Up
Contributions, if applicable, under the Plan;

     (iv) by other distributions or nontaxable (determined at the time of the loan)
loans from plans maintained by the Company, or any other employer of such Member, or

     (v) by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the financial hardship.

     Expenses that may warrant approval of a Member’s request for a hardship withdrawal
include:

     (vi) Expenses for (or necessary to obtain) medical care that would be
deductible under Section 213 of the Code (determined without regard to whether the
expenses exceed 7.5% of adjusted gross income);

     (vii) Expenses (excluding mortgage payments) incurred to purchase a principal
residence of the Member;

     (viii) Payment of tuition, related educational fees, and room and board
expenses for the next twelve (2) months of post-secondary education for the Member,
his or her spouse, or children or dependents (as defined in Section 152 of the Code,
without regard to Section 152(b)(1), (b)(2) and (d)(1)(B) of the Code);

     (ix) Payments necessary to prevent the eviction of the Member from his
principal residence or foreclosure on the mortgage of the Member’s principal
residence;

30

 

     (x) Payments incurred for burial or funeral expenses for the Member’s deceased
parent, spouse, children or dependents (as defined in Section 152 of the Code,
without regard to Section 152(b)(1), (b)(2) and (d)(1)(B) of the Code);

     (xi) Expenses for the repair of damage to the Member’s principal residence that
would qualify for the casualty deduction under Section 165 of the Code (determined
without regard to whether the loss exceeds 10% of adjusted gross income); and

     (xii) Such other expenses as the Committee may determine to be within the
intent of this Section.

     (b) Attainment of Age 59-1/2. A Member who has attained the age of fifty-nine
and one-half (591/2) 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
(determined pursuant to Section 10.1 hereof) in his Individual Account. Any partial
withdrawal shall be taken from such Member’s Individual Account as follows: first, from the
after-tax amounts, if any, in the Member’s Individual Account until such amounts are fully
depleted; second, from the Member’s Rollover Contribution Account until such account is
fully depleted; third, from the Member’s Salary Reduction Contribution Account until such
account is fully depleted; and fourth, from the Member’s Company Matching Contribution
Account until such account is fully depleted. 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.

     (c) Withdrawals from Rollover Contribution Account. A Member may elect, in
writing, within the time period established by the Committee for such elections, to withdraw
all or any portion of his Rollover Contribution 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.

     (d) Qualified Hurricane Distributions. A Member may, upon the approval of the
Committee, take a Qualified Hurricane Distribution from his Individual Account.

     (i) Amount. The Qualified Hurricane Distribution shall not exceed the
lesser of: (i) 100% of the Member’s vested Individual Account balance or (ii) the
excess of (A) $100,000 over (B) the aggregate amounts treated as Qualified Hurricane
Distributions in all prior taxable years.

     (ii) Recontributions. At any time during the three-year period
beginning on the day after the date on which a Member receives a Qualified Hurricane
Distribution from the Plan, such Member may recontribute the amount of the Qualified
Hurricane Distribution to the Plan through one or more

31

 

contributions. Such contributions will be treated in the same manner as
Rollover Contributions, as provided in Section 4.7, and shall be credited to the
Member’s Rollover Contribution Account.

(iii) Definitions.

(1) Qualified Hurricane Distribution means:

     (A) Any distribution from the Plan made on or after August 25,
2005, and before January 1, 2007, to a Member whose principal place
of abode on August 28, 2005, was located in the Hurricane Katrina
Disaster Area and who has sustained an economic loss by reason of
Hurricane Katrina;

     (B) Any distribution from the Plan made on or after September
23, 2005, and before January 1, 2007, to a Member whose principal
place of abode on September 23, 2005, was located in the Hurricane
Rita Disaster Area and who has sustained an economic loss by reason
of Hurricane Rita; and

     (C) Any distribution from the Plan made on or after October 23,
2005, and before January 1, 2007, to a Member whose principal place
of abode on October 23, 2005, was located in the Hurricane Wilma
Disaster Area and who has sustained an economic loss by reason of
Hurricane Wilma.

     For purposes of this subparagraph (i), a Member shall be deemed to have
sustained an economic loss on account of loss, damage to, or destruction of
real or personal property from fire, flooding, looting, vandalism, theft,
wind, or other cause; loss related to displacement from such Member’s home;
loss of livelihood due to temporary or permanent layoff; and such other
economic loss as the Committee, in its sole discretion, shall determine. As
long as a Member has sustained an economic loss by reason of Hurricane
Katrina, Hurricane Rita or Hurricane Wilma, Qualified Hurricane
Distributions are permitted without regard to the Member’s need, and the
amounts of such distributions are not required to correspond to the amount
of economic loss suffered by the Member.

     (2) The Hurricane Katrina Disaster Area consists of the States
of Alabama, Florida, Louisiana and Mississippi.

     (3) The Hurricane Rita Disaster Area consists of the States of
Louisiana and Texas.

     (4) The Hurricane Wilma Disaster Area consists of the State of
Florida.

32

 

     (e) Automatic Enrollment Contributions: Any Member may elect, within the
ninety (90) day period following the first date on which amounts are contributed on his
behalf pursuant to a deemed election under Section 4.1 hereof, and in the manner prescribed
by the Committee, to withdraw the entire amount of such Salary Reduction Contributions made
prior to the date of such withdrawal election (adjusted for earnings and/or losses
attributable thereto). 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. In the event a Member elects to withdraw the Salary Reduction
Contributions made on his behalf pursuant to a deemed election, as provided above, all
Company Matching Contributions (adjusted for earnings and/or losses attributable thereto)
made on behalf of such Member and attributable to the Salary Reduction Contributions
withdrawn under this subparagraph (e) shall be forfeited and the amount thus forfeited shall
be used to reduce Company Matching Contributions pursuant to the provisions of Section 6.3.
Furthermore, the deemed election of such Member under Section 4.1 shall automatically
terminate on the date of an election to withdraw under this subparagraph (e) and no further
Salary Reduction Contributions shall be made on behalf of such Member until the later of:
(i) the date on which the Member makes an affirmative election under Section 4.1 hereof to
have Salary Reduction Contributions made on his behalf or (ii) a subsequent Deemed Election
Date of such Member.

     (f) Qualified Reservist Withdrawal. Effective November 15, 2007, a Member who
(by reason of being a member of a reserve component, as such term is defined in Section 101
of Title 37, United States Code), is ordered or called to active duty after September 11,
2001 and prior to December 31, 2007 (or such later date as may be set forth in Section
72(t)(2)(G)(iv) of the Code) for a period in excess of one hundred seventy-nine (179) days,
or for an indefinite period, may, upon the approval of the Committee, take a “Qualified
Reservist Withdrawal”, as such term is defined below, from his Salary Reduction Contribution
Account. A Qualified Reservist Withdrawal is a withdrawal of all or any portion of a
Member’s Salary Reduction Contribution Account that is made during the period beginning on
the date of a Member’s order or call to active duty, as set forth above, and ending on the
last day of the active duty period. 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 the contributions made by
or on behalf of such Member in one or more of such investment media as the Committee may
designate from time to time. The Committee shall direct

33

 

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;

     (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.

     (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

34

 

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 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 contributions, 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 contributions 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 future
contributions as soon as practicable following the date of 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 who has an account balance
in his Individual Account in excess of any loan receivables from such 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 such amount in his
Individual Account (in excess of the loan receivables) 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.

35

 

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 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.

     (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
Individual Accounts, 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;

36

 

     (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 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

     (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;

37

 

     (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 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.

38

 

     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;

     (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

     5.1 Method of Payment. As soon as practicable after the separation from service of a
Member, former Member, or Beneficiary who is 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.

39

 

     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 (30) days and no more than one
hundred eighty (180) days prior to the date of distribution. 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 or Sections 401(k)(8) or 401(m)(6) 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. Furthermore, if a
distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such
distribution may commence less than thirty (30) days after the notice required under Section
1.411(a)-11(c) of the Treasury Regulations is given, provided that: (i) the Committee clearly
informs the Member or former Member that he has a right to a period of at least thirty (30) days
after receiving the notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and (ii) the Member or former Member, after
receiving the notice, affirmatively elects a distribution.

     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. Effective as
of November 16, 2001, distribution of a Member’s entire Individual Account shall be made in a
single lump sum on or before such Member’s required beginning date. In the case of a Member who
attained age 701/2 prior to November 16, 2001, or in the case of a Member who is a five percent (5%)
owner, 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. The minimum
distribution for other calendar years, including the minimum distribution for the calendar year in
which the 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.

40

 

Effective January 1, 2003, 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 November 16, 2001, 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 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

41

 

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
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 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 and five (5) consecutive Breaks in Service have not
occurred, 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 separation from service.

     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

42

 

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 such distribution to 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 Member or former Member’s attainment of earliest retirement age. 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 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 a 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

43

 

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. Effective November 15,
2007, 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 the distributee’s designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such distribution is required
under Code Section 401(a)(9); and any hardship distribution described in Code Section
401(k)(B)(i)(IV). 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 plan 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).

44

 

     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.

     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.

45

 

     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 that 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 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 Suspension and 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) suspend its contributions to the Plan;

     (b) discontinue its contributions to the Plan; or

     (c) terminate the Plan.

     Suspension shall be a temporary cessation of contributions and shall not constitute or require
a termination of the Plan. Such a suspension which has not ripened into a complete discontinuance
shall not constitute or require a termination of the Plan or Trust or any vesting of Individual
Accounts, other than as prescribed by the provisions of Section 10.1. A complete

46

 

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, Merger or Transfer of Plan Assets. 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. Further, except to the extent such transfer constitutes a direct rollover of an “eligible
rollover distribution” pursuant to Section 15.6 hereof or constitutes an elective transfer, as
described in Treasury Regulations Section 1.411(d)-4, Q&A-3(b)(1), to another qualified cash or
deferred arrangement under Code Section 401(k), no assets of this Plan shall be transferred to
another plan unless the Committee demonstrates to the Trustee’s reasonable satisfaction that any
portion of the transfer attributable to Salary Reduction Contributions, including Catch-Up
Contributions, if applicable, Qualified Nonelective Contributions and Qualified Matching
Contributions shall remain subject to the limitations on distributions prescribed under Treasury
Regulations Section 1.401(k)-1(d). The Trustee shall not accept a direct transfer of assets from a
plan subject to the requirements of Section 417 of the Code.

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, and the
employment of all persons by the Company shall remain subject to termination by the Company to the
same extent as if this Plan had never been executed.

47

 

     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; provided, however, that a Member may assign or pledge
his vested interest in the Fund as security for a loan made pursuant to the provisions of Section
11.1 hereof. 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.

     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.

48

 

     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 applied to reduce the Company Matching Contribution. However, if the Member or
his Beneficiary should, thereafter, make a proper claim for such share, it shall be distributed to
him.

     18.9 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.

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

49

 

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 last day of the preceding Plan Year
or, in the case of the first Plan Year of the Plan, the last day 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.

     (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

50

 

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 (as determined under
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
Compensation, reduced by the amount of Qualified Nonelective Contributions, if any, allocated to
his Salary Reduction Contribution Account 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, including Salary Reduction Contributions, are
made or allocated under this Plan, and all other qualified defined contribution plans maintained by
the Company, 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 shall be taken into
account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of
the Code and the Plan shall be

51

 

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.

     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:

52

 

     (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.

     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 	 
	 	 	 	 
	 

53

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00135-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00135-of-00352.parquet"}]]