Document:

exv10w7

 

Exhibit 10.7

AMENDMENT NO. 8

TO SOUTHWEST AIRLINES CO. PROFIT SHARING PLAN

     Pursuant to the authority of the Board of Directors of Southwest Airlines Co., and the
provisions of Section 17.1 thereof, the Southwest Airlines Co. Profit Sharing Plan is hereby
amended in the following respects only, effective as of January 1, 2007, except as otherwise
specifically set forth herein:

     (1) Article II, Subsection 2.1(c), is hereby amended to read as follows:

     “(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) items of imputed income; (5) 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; (6) 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; (7) 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; (8) 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 (9) 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 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 $225,000, 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.”

     (2) Article III, Section 3.1, is hereby amended to read as follows:

     “3.1 Eligibility Requirements: Every Employee who was a Member in the
Plan on the day before the effective date of this amendment 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) Article III, Section 3.2, is hereby amended to read as follows:

     “3.2 Notification of Eligibility. The Committee shall promptly notify
each Employee of his qualification as a Member and shall furnish each new Member a
copy of such explanation of the Plan as the Committee shall provide for that
purpose.”

     (4) Article XII, Section 12.3, subsection (a) thereof, is hereby amended to add as the final
sentence the following:

     “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.”

- 2 -

 

     IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument
comprising Amendment No. 8 to the Southwest Airlines Co. Profit Sharing Plan, the Company has
caused these presents to be duly executed in its name and behalf by its proper officers thereunto
duly authorized this 12th day of December, 2006.

	 	 	 	 	 	 	 
	 	 	SOUTHWEST AIRLINES CO.  
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary C. Kelly	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Gary C. Kelly, Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	ATTEST:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Deborah Ackerman
	 	 	 	 	 	 
	 

Deborah Ackerman, Assistant Secretary

	 	 	 	 	 	 

- 3 -

 

	 	 	 	 	 
	STATE OF TEXAS

	 	§
	 	 
	 

	 	§
	 	 
	COUNTY OF DALLAS

	 	§
	 	 

     BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this
12th day of December, 2006, personally appeared GARY C. KELLY, to me known to be the
identical person who subscribed the name of SOUTHWEST AIRLINES CO., as its CHIEF EXECUTIVE OFFICER
to the foregoing instrument and acknowledged to me that he executed the same as his free and
voluntary act and deed and as the free and voluntary act and deed of such organization for the uses
and purposes therein set forth.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, the day and year last above written

	 	 	 	 	 
	 

	 	/s/ Teri Lee Lambert	 	 
	 

	 	 

Notary Public in and for the State of Texas
	 	 

My Commission Expires: June 4, 2010

- 4 -exv10w8

 

Exhibit 10.8

AMENDMENT NO. 7

TO SOUTHWEST AIRLINES CO. 401(k) PLAN

     Pursuant to the authority of the Board of Directors of Southwest Airlines Co., and the
provisions of Section 17.1 thereof, the Southwest Airlines Co. 401(k) Plan (the “Plan”) is hereby
amended in the following respects only, effective as of January 1, 2007, except as otherwise
specified herein:

     (1) Article II, Section 2.1(c), is hereby amended to read as follows:

     “(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) items of imputed income; (5) 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; (6) 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; (7) 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; (8) amounts, if any, paid to an
Employee in lieu of a Company Contribution to the Southwest Airlines Co. Profit
Sharing 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 (9) 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 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 $225,000, 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). 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.”

     (2) Article III, Section 3.1, is hereby amended to read as follows:

     “3.1 Eligibility Requirements: Every Employee who was a Member in the
Plan on the day before the effective date of this amendment 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) Article III, Section 3.2, is hereby amended to read as follows:

     “3.2 Notification of Eligibility: The Committee shall promptly notify
in writing each Employee of his qualification as a Member and shall furnish each new
Member a copy of such explanation of the Plan as the Committee shall provide for
that purpose.”

2

 

     (4) Article IV, Section 4.5, is hereby amended to read as follows:

     “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, 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.

     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.

3

 

     (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 21.3 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) 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

4

 

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. For Plan Years commencing on
and after January 1, 2006, but prior to January 1, 2008, a distribution of an excess
contribution shall include the sum of the allocable gain or loss for the Plan Year
in which the excess contribution arose and the allocable gain or loss for the period
following the Plan Year in which the excess contribution arose and ending on the
date of distribution (or a date that is no more than seven (7) days prior to the
date of distribution). 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.”

     (5) Article IV, Section 4.6, is hereby amended to read as follows:

     “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 the Employee’s
compensation (as defined in Section 2.1(r) hereof) for such Plan Year;

     (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

5

 

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.

     (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

6

 

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. For Plan Years commencing on and after
January 1, 2006, but prior to January 1, 2008, a distribution of an excess
contribution shall include the sum of the allocable gain or loss for the Plan Year
in which the excess contribution arose and the allocable gain or loss for the period
following the Plan Year in which the excess contribution arose and ending on the
date of distribution (or a date that is no more than seven (7) days prior to the
date of distribution). 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.”

     (6) Article V, Section 5.3, is hereby amended in its entirety, to read as follows:

     “5.3 Salary Reduction Elections: Each Member who desires to make
Salary Reduction Contributions 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
and shall be effective for each payroll period thereafter until modified or amended,
as provided below. Each Member who is eligible to make Catch-Up Contributions under
Section 21.3 hereof and who desires to make such contributions for the Plan Year
shall indicate such intent and shall consent to the corresponding reduction in
Annual Compensation in the manner and within the time period prescribed by the
Committee.

     Salary reduction 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

7

 

Compensation, subject to the applicable limitations of Article IV. The Company
will make a contribution to the Trust Fund on behalf of the Participant for each
payroll period in an amount equal to the total amount by which the Member’s 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 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 at any time upon advance
notice to the Committee, within the time period established by the Committee, and
thus discontinue all future withholding thereafter. Following such a revocation, 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 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.”

8

 

     (7) Article XI, Section 11.1, is hereby amended, effective August 25, 2005, to designate the
current provisions as subsection (a) and to add subsections (b), (c), and (d), to read as follows:

     “(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

     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:

     (A) 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

     (B) 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:

9

 

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

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

     (3) 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.

     (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.”

     (8) Article XI, Section 11.2, is hereby amended to add subsection (c), effective August 25,
2005, to read as follows:

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

     (1) 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.

     (2) 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

10

 

through one or more 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 Participant’s Rollover Contribution Account.

     (3) Definitions.

     (i) 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.

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

11

 

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

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

     (9) Article XII, Subsection 12.1(c), is hereby amended to read as follows:

     “(a) 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 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 the event the nature of any fund shall, in the opinion of the Committee,
change, then the Committee shall notify those Members who the Committee, in its sole
and absolute discretion, determines are affected by the change, who shall have a
reasonable period of time, as determined by the Committee, to designate the manner
and the percentages in which amounts invested in those funds affected by the change
shall be invested.”

     IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument
comprising Amendment No. 7 to the Southwest Airlines Co. 401(k) Plan, the Company has caused these
presents to be duly executed in its name and behalf by its proper officers thereunto duly
authorized this 12th day of December, 2006.

	 	 	 	 	 	 	 
	 	 	SOUTHWEST AIRLINES CO.  
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary C. Kelly	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Gary C. Kelly, Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	ATTEST:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Deborah Ackerman
 

Deborah Ackerman, Assistant Secretary

	 	 	 	 	 	 

12

 

	 	 	 	 	 
	STATE OF TEXAS

	 	§
	 	 
	 

	 	§
	 	 
	COUNTY OF DALLAS

	 	§
	 	 

     BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this
12th day of December, 2006, personally appeared GARY C. KELLY, to me known to be the
identical person who subscribed the name of SOUTHWEST AIRLINES CO., as its CHIEF EXECUTIVE OFFICER
to the foregoing instrument and acknowledged to me that he executed the same as his free and
voluntary act and deed and as the free and voluntary act and deed of such organization for the uses
and purposes therein set forth.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE, the day and year last above written

	 	 	 	 	 
	 

	 	/s/ Teri Lee Lambert
 

Notary Public in and for the State of Texas
	 	 

My Commission Expires: June 4, 2010

13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]