Exhibit 4.1
SOUTHWEST AIRLINES CO.
2000 STOCK CLERKS NON-QUALIFIED
STOCK OPTION PLAN
SOUTHWEST AIRLINES CO., a Texas corporation (the "Company"), hereby
formulates and adopts the following 2000 Stock Clerks Non-Qualified Stock
Option Plan (the "Plan).
1. Purpose. This Plan is adopted pursuant to the Collective Bargaining
Agreement (the "Agreement") between the Company and the International
Brotherhood of Teamsters - Airline Division for Stock Clerks of Southwest
Airlines Co. (the "IBT") ratified on November 17, 2000.
2. Administration. This Plan shall be administered by an Administrative
Committee (the "Committee") consisting of not more than five (5) persons
designated from time to time by the Chief Executive Officer of the Company,
including as one of its members a representative of the IBT. Members of
the Committee may be removed or replaced at any time by the Chief
Executive Officer of the Company. The Administrative Committee shall select
one of its members as Chairman and shall adopt such rules and regulations as
it shall deem appropriate concerning the holding of its meetings, the
transaction of its business and the administration of this Plan. A
majority of the whole Committee shall constitute a quorum, and the act of a
majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee; any decision or
determination reduced to writing and signed by a majority of the members of
the Administrative Committee shall be fully as effective as if made by a
majority vote at a meeting duly called and held.
3. Grant of Options; Persons Eligible.
(a) Persons Eligible. The Stock Option Committee of the Board of
Directors of the Company, or such other committee as may be appointed by
the Board, shall have the authority and responsibility, within the
limitations of this Plan, to grant options from time to time to persons
employed as Stock Clerks by the Company pursuant to the Agreement and as
set forth in the schedule attached as Exhibit A and made a part hereof.
Only persons who are employed as fulltime Stock Clerks of SWA on the date
of the grant may be granted options under this Plan; under no
circumstances shall executive officers of the Company be eligible to
receive options hereunder.
(b) Grant Price. Initial Grants (as defined in Exhibit A) shall be
granted at an exercise price of $29.72 per share; thereafter, Options shall
be granted at an exercise price equal to the fair market value of the
Common Stock of the Company on the date of the grant of the option plus
five percent (5%).
(c) Southwest Airlines Employees Becoming Stock Clerks. Except as
provided in subparagraph (e) below, Southwest Airlines Employees who enter
the Stock Clerks work force without a break in company service and who are
participants in another stock option plan (an "existing plan") will either
retain stock option grants established in accordance with such existing
plan (if permitted by such other plan), or will receive grants in accordance
with this Plan, whichever is chosen by the Employee involved, but the
Employee shall not hold grants under both plans simultaneously. The
Employee must make the election prior to the scheduled grant date for
options under this Plan. If the Employee does not make a timely election,
options previously granted will remain in effect, and no grant will be made
under this Plan. Exercise of options will be done in accordance with the
Plan under which they were awarded. At such time as the Employee no longer
holds any vested or unvested options under the other existing plan, the
Employee will receive an initial grant under this Plan on the next scheduled
grant date. The total grant shall be based on the Employee's years of
service as of the grant date, and shall be equal to the number of shares
which have not vested prior to the grant date for that step level, according
to Exhibit A.
(d) Stock Clerks Transferring to Another Work Group. Except as
Provided in subparagraph (e) below, if a Southwest Airlines Stock Clerk
transfers to another work group, any unvested portion of any option granted
in accordance with this Plan, shall automatically and without notice
terminate and become null and void as of the first day such Optionee is on
the payroll for such position. Any vested and unexercised portion of any
such option shall remain exercisable under this Plan.
(e) Employees Transferring between Groups Represented by the
International Brotherhood of Teamsters. Southwest Airlines Stock Clerks
who transfer between work groups represented by the International Brotherhood
of Teamsters and which are each covered by an existing stock option plan will
either retain stock option grants established in accordance with their
original plan or will receive grants in accordance with the plan for their
new group, whichever is chosen by the Employee involved, but the Employee
shall not hold grants under both plans simultaneously; provided however, that
if the Employee chooses to retain his grants under his original plan, and the
stock option plan for the group into which he is moving would provide
additional options (in the Total Grant) at his entry, he may choose to retain
his grants under his original plan, and, in addition, receive a supplemental
grant under the other plan in an amount equal to the difference between those
available under the other plan, and the amount he has already received under
his original plan.
The Employee must make the election under this paragraph prior to the
next scheduled grant date for options under the stock option plan for the
group into which the Employee is moving. If the Employee does not make a
timely election, options previously granted under the Employee's original
plan will remain in effect and, if appropriate, an incremental grant will
be made under the other stock option plan.
4. Definitions. An Employee receiving any option under this Plan is
hereinafter referred to as an "Optionee." Any reference herein to the
employment of an Optionee with the Company shall include only employment
with the Company. The fair market value of the Common Stock on any day shall
be the mean between the highest and lowest quoted selling prices of the
Common Stock on such day as reported by the primary national stock exchange
on which such stock is listed. If no sale shall have been made on that day,
or if the Common Stock is not listed on a national exchange at that time,
fair market value will be determined on the most recent business day on
which the stock was traded, unless otherwise determined by the Committee.
5. Stock Subject to Options. Subject to the provisions of paragraph 12,
the number of shares of the Company's Common Stock subject at any one time
to options, plus the number of such shares then outstanding pursuant to
exercises of options, granted under this Plan, shall not exceed 1,250,000
shares. If, and to the extent the options granted under this Plan terminate
or expire without having been exercised, new options may be granted with
respect to the shares covered by such terminated or expired options;
provided that the granting and terms of such new options shall in all
respects comply with the provisions of this Plan.
Shares sold or distributed upon the exercise of any option granted
Under this Plan may be shares of the Company's authorized and unissued
Common Stock, shares of the Company's issued Common Stock held in the
Company's treasury, or both.
There shall be reserved at all times for sale or distribution under
This Plan a number of shares of Common Stock (either authorized and unissued
Shares or shares held in the Company's treasury, or both) equal to the
maximum number of shares which may be purchased or distributed upon the
exercise of options granted under this Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of shares of Common Stock which may thereafter be available, both for
purposes of this Plan and for sale to any one individual, by the number of
shares as to which the Option is exercised.
6. Expiration and Termination of the Plan. This Plan will expire on
August 16, 2008.
No modification, extension, renewal or other change in any option
granted under this Plan shall be made after the grant of such option unless
the same is consistent with the provisions of this Plan.
7. Exercisability and Duration of Options.
(a) Exercisability. Options granted under this Plan shall become
exercisable pursuant to the vesting schedule and requirements set forth in
Exhibit A attached hereto.
(b) Duration. The unexercised portion of any option granted under this
Plan shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:
(1) August 16, 2008;
(2) The expiration of three months from the date of termination of
the Optionee's employment with the Company (unless such termination was as
a result of the circumstances set forth in subparagraph (3) below);
provided that if the Optionee shall die during such 3-month period the
provisions of subparagraph (3) below shall apply; or
(3) The expiration of 12 months from the Optionee's death if such
death occurs during his employment with the Company.
In the case of subparagraphs (2) and (3) above, the Optionee shall
have the right to exercise any Option prior to such expiration to the extent
it was exercisable at the date of such termination of employment and shall
not have been exercised.
8. Exercise of Options.
(a) Procedure. The options granted herein shall be exercised by the
Optionee (or by the person who acquires such options by will or the laws of
descent and distribution or otherwise by reason of the death of the Optionee)
as to all or part of the shares covered by the option (but in no event less
than 100 shares, unless such exercise is for all remaining shares) by giving
written notice of the exercise thereof (the "Notice") to the Company. From
time to time the Committee may establish procedures relating to effecting
such exercises. No fractional shares shall be issued as a result of
exercising an Option.
(b) Payment. In the Notice, the Optionee shall elect whether he or she
is to pay for his or her shares in cash or in Common Stock of the Company,
or both. If payment is to be made in cash, the Optionee shall deliver to
the Company a cashier's check or electronic funds transfer in the amount of
the exercise price on or before the exercise date. If payment is to be made
in Common Stock, (a) it shall be valued at its fair market value on the date
of such notice, as determined pursuant to Paragraph 4 hereof; (b) such
Common Stock must have been owned by the Optionee for at least six months
prior to the exercise date; and (c) the Notice shall be accompanied by a
certificate for at least the number of shares of Common Stock to be used as
payment.
(c) Irrevocable Election. The giving of such written notice to the
Company shall constitute an irrevocable election to purchase the number
Of shares specified in the notice on the date specified in the notice.
(d) Withholding Taxes. To the extent that the exercise of any Option
granted pursuant to this Plan or the disposition of shares of Common Stock
acquired by exercise of an Option results in compensation income to the
Optionee for federal or state income tax purposes, the Optionee shall
deliver to the Company at the time of such exercise or disposition such
amount of money as the Company may require to meet its obligation under
applicable tax laws or regulations, and, if the Optionee fails to do so,
the Company is authorized to (a) withhold delivery of certificates upon
exercise and (b) withhold from remuneration then or thereafter payable to
Optionee any tax required to be withheld by reason of such resulting
compensation income.
(e) Delivery of Shares. The Company shall cause shares to be delivered
to the Optionee (or the person exercising the Optionee's options in the
event of death) as soon as practicable after the exercise date.
9. Nontransferability of Options. No option granted under this Plan or
any right evidenced thereby shall be transferable by the Optionee other
than by will or the laws of descent and distribution. During the lifetime
of an Optionee, only the Optionee (or his or her guardian or legal
representative) may exercise his or her options.
In the event of the Optionee's death during his or her employment
with the Company or during the three-month period following the date of
termination of such employment, the Optionee's options shall thereafter be
exercisable, as provided in paragraph 7(b), by his or her executor or
administrator, or by the person who acquires such options by will or the
laws of descent and distribution or otherwise by reason of the death of the
Optionee.
10. Rights of Optionee. Neither the Optionee nor his or her executors,
administrators, or legal representatives shall have any of the rights of a
shareholder of the Company with respect to the shares subject to an option
granted under this Plan until certificates for such shares shall have been
issued upon the exercise of such option.
11. Right to Terminate Employment. Nothing in this Plan or in any option
granted under this Plan shall confer upon any Optionee the right to continue
in the employment of the Company or affect the right of the Company or any of
its subsidiaries to terminate the Optionee's employment at any time; subject,
however, to the provisions of the Agreement.
12. Adjustment Upon Changes in Capitalization, Etc.
(a) The existence of the Plan and the options granted hereunder shall
not affect in any way the right or power of the Board of Directors or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of debt or equity securities ahead of or affecting Common Stock or
the rights thereof, the dissolution or liquidation of the Company or any
sale, lease, exchange or other disposition of all or any part of its assets
or business or any other corporate act or proceeding.
(b) The shares with respect to which options may be granted are shares
of Common Stock as presently constituted, but if, and whenever, prior to
the expiration of an option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which such
option may thereafter be exercised (i) in the event of an increase in the
number of outstanding shares shall be proportionately increased, and the
purchase price per share shall be proportionately reduced, and (ii) in the
event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased; likewise, the number of shares to be granted
pursuant to the schedule set forth in Exhibit A shall be appropriately
adjusted. In the event of any such change in the outstanding Common Stock,
the aggregate number of shares available under the Plan shall be
appropriately adjusted by the Board of Directors of the Company, whose
determination shall be conclusive.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an option theretofore granted
the Optionee shall be entitled to purchase under such option, in lieu of
the number of shares of Common Stock as to which such option shall then be
exercisable, the number and class of shares of stock and securities to which
the Optionee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the
Optionee had been the holder of record of the number of shares of Common
Stock as to which such option is hen exercisable. If the Company shall not
be the surviving entity in any merger or consolidation (or survives only as
a subsidiary of an entity other than a previously wholly-owned subsidiary of
the Company) or if the Company is to be dissolved or liquidated, then unless
a surviving corporation assumes or substitutes new options for Options then
outstanding hereunder (i) the time at which such Options may be exercised
shall be accelerated and such Options shall become exercisable in full on or
before a date fixed by the Company prior to the effective date of such merger
or consolidation or such dissolution or liquidation, and (ii) upon such
effective date Options shall expire.
(d) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor, or upon conversion
of shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
of shares of Common Stock subject to options theretofore granted or to be
granted or the purchase price per share.
13. Purchase for Investment and Legality. The Optionee, by acceptance of
any option granted under this Plan, shall represent and warrant to the
Company that the purchase or receipt of shares of Common Stock upon the
exercise thereof shall be for investment and not with a view to distribution,
provided that such representation and warranty shall be inoperative if, in
the opinion of counsel to the Company, a proposed sale or distribution of
such shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933 or is, without such representation and
warranty, exempt from registration under such Act. The Company shall file a
Registration Statement on Form S-8 pursuant to the Securities Act of 1933,
as amended, covering the shares to be offered pursuant to the Plan and will
use its best efforts to maintain such registration at all times necessary to
permit holders of options to exercise them.
The obligation of the Company to issue shares upon the exercise of an
option shall also be subject as conditions precedent to compliance with
applicable provisions of the Securities Act of 1933, the Securities Exchange
Act of 1934, state securities laws, rules and regulations under any of the
foregoing and applicable requirements of any securities exchange upon which
the Company's securities shall be listed.
The Company may endorse an appropriate legend referring to the
Foregoing restrictions upon the certificate or certificates representing any
shares issued or transferred to the Optionee upon the exercise of any option
granted under this Plan.
14. Effective Date of Plan. This Plan shall become effective on the latter
Of the following to occur: (a) its adoption by the Board of Directors of the
Company and (b) ratification of the Agreement by the IBT membership.
EXHIBIT A
Initial Grants
On the Effective Date of the Agreement, options will be granted to
persons employed as Stock Clerks by the Company according to the following
schedule. Initial Grants are based on the Stock Clerk's years of service
for pay purposes as of the Effective Date of the Agreement. Options will
vest annually on August 16 of subsequent years.
STOCK OPTION VESTING SCHEDULE
Year of August 16,
Service Effective
as of TOTAL Date of Plan 2001 2001 2003 2004 2005 2006 2007
Effective GRANT Date of
Date of Plan Ratification
1st 5,650 550 600 650 700 750 800 800 800
2nd 5,900 600 650 700 750 800 800 800 800
3rd 6,100 650 700 750 800 800 800 800 800
4th 6,250 700 750 800 800 800 800 800 800
5th 6,350 750 800 800 800 800 800 800 800
Thereafter 6,400 800 800 800 800 800 800 800 800
Subsequent Grants
On August 16 of each year, commencing August 16, 2001, through August 16,
2007, options will be granted to persons employed as Stock Clerks by the
Company who have completed probation during the previous 12 months (except
those receiving an Initial Grant on November 17, 2000). Options will vest
annually on the anniversary of the Grant Date as follows:
Grant STOCK OPTION VESTING SCHEDULE
Date
8/16 8/16/01 8/16/02 8/16/03 8/16/04 8/16/05 8/16/06 8/16/07 TOTAL
GRANT
2001 550 600 650 700 750 800 800 4,850
2002 0 550 600 650 700 750 800 4,050
2003 0 0 550 600 650 700 700 3,250
2004 0 0 0 550 600 650 700 2,500
2005 0 0 0 0 550 600 650 1,800
2006 0 0 0 0 0 550 600 1,150
2007 0 0 0 0 0 0 550 550
Vesting Requirements
Options will vest on the applicable vesting date under the following
circumstances, and no other:
(a) For Optionees who are Employees of the Company on paid status and
on the Stock Clerk seniority list as of the applicable vesting date; and
(b) For Optionees who are Employees of the Company on unpaid status and
on the Stock Clerk seniority list as of the applicable vesting date (e.g.,
medical leave, military leave, union leave, maternity leave etc.) who accrue
hours of service during the calendar year prior to the year in which the
vesting date occurs sufficient to qualify for a profitsharing contribution
under the Company's Profitsharing Plan for such calendar year. By way of
example, if an Optionee is on unpaid medical leave on August 16, 2001, but
during calendar year 2000 accrues sufficient hours of service to qualify for
a profitsharing contribution for 2000, such Optionee's options will vest on
August 16, 2001, as if that Optionee had been on paid status as of August 16,
2001.
Provided, however, that options may vest for former Stock Clerks meeting the
requirements set forth above (except the requirement for being on the
seniority list), plus those set forth in paragraph 3(e) of the Plan.
2000 STOCK CLERKS NON-QUALIFIED STOCK OPTION PLAN