EXHIBIT 10.9
AMENDMENT NO. 2
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 (the "Plan") is hereby amended in the following respects
only, effective as the dates set forth herein:
(1) Article VI, Section 6.4, subparagraph (b)(4), is hereby amended in
its entirety, effective January 1, 1998, to read as follows:
"(4) Maximum Permissible DC Amount: The Maximum Permissible DC
Amount for a given Limitation Year is equal to the lesser of (i) 25% of
compensation or, effective January 1, 1995, (ii) $30,000. For purposes
of this subparagraph (b)(4), 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 $30,000 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."
(2) Article II, Paragraph (ff) of Section 2.1, is hereby amended in its
entirety, effective January 1, 2002:
"(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."
(3) Article VII, Section 7.1, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"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
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nonforfeitable. If a Member continues in the service of the Company
beyond his Normal Retirement Date, he shall continue to participate in
the Plan."
(4) Effective January 1, 2002, Article VIII shall be amended to add
Section 8.1 to read as follows, and Sections 8.1, 8.2 and 8.3 shall be
renumbered as Sections 8.2, 8.3 and 8.4, respectively:
"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."
(5) Effective January 1, 2002, Article IX shall be amended to add
Section 9.1 to read as follows, and Section 9.1 shall be renumbered as Section
9.2:
"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."
(6) Article X, Section 10.3, shall be amended in its entirety,
effective January 1, 2002, to read as follows:
"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 separation from service occurs."
(7) Article XV, Section 15.1, is hereby amended in its entirety,
effective January 1, 2002, to read as follows:
"15.1. 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 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."
(8) Article XV, Section 15.2, is hereby amended in its entirety,
effective January 1, 2002, except as otherwise specified herein, as follows:
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"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 Five Thousand and No/100 Dollars
($5,000.00), 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 ninety (90) 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
ninety (90) 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 70 1/2 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
70 1/2. Subject to the provisions of Section 18.11 hereof, distribution
of the entire Individual Account of a Member who attains age 70 1/2 on
or after September 15, 2000 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 70 1/2 prior to September 15, 2000, or in the case of
a Member who is a Five Percent 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. Effective January 1, 2003, during such
Member's
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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 70 1/2 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 70 1/2 (or by December 31, 1997 in the
case of a Member who attains age 70 1/2 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 70 1/2 (or by December 31,
1997 in the case of a Member who attains age 70 1/2 in 1996), and any
such distributions shall comply with the provisions of the preceding
paragraph. Furthermore, any Member who attains age 70 1/2 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 70 1/2. 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
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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."
(9) Article XV, Section 15.3, is hereby amended, effective January 1,
2002, to read as follows:
"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."
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(10) Article XXI is hereby added to read as follows:
"ARTICLE XXI
Amendments Pursuant to the Economic Growth and
Tax Relief Reconciliation Act of 2001
21.1 Preamble:
a. Adoption and Effective Date of Amendments: This
Article 21 reflects certain provisions of the Economic Growth
and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This
Article is intended as good faith compliance with the
requirements of EGTRRA and is to be construed in accordance
with EGTRRA and guidance issued thereunder. Except as
otherwise provided, the provisions of this Article 21 shall be
effective for Plan Years beginning on or after January 1,
2002.
b. Inconsistent provisions superseded: The provisions
of this Article 21 shall supersede the provisions of the Plan
to the extent those provisions are inconsistent with the
provisions of this Article.
21.2 Limitations on Contributions: The Annual Additions that
may be contributed or allocated to a Member's Individual Account under
the Plan for any Limitation Year shall not exceed the lesser of:
a. $40,000, as adjusted for increases in the
cost-of-living under section 415(d) of the Code, or
b. 100% of the Member's Compensation, within the
meaning of Section 6.4(b)(4) of the Plan, for the Limitation
Year. The compensation limit referred to in this subparagraph
(b) 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.
21.3 Increase in Annual Compensation Limit: The Annual
Compensation of each Member taken into account in determining
allocations for any Plan Year beginning after December 31, 2001, shall
not exceed $200,000, as adjusted for cost-of-living increases in
accordance with section 401(a)(17)(B) of the Code. Annual Compensation
means compensation during the Plan Year. The cost-of-living adjustment
in effect for a calendar year applies to Annual Compensation for the
Plan Year that begins with or within such calendar year."
21.4 Modification of Top-Heavy Rules:
a. Determination of top-heavy status.
(i) Key Employee. Key Employee means 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 6.4(b)(4) of the Plan. The
determination of
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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.
(ii) Determination of present values and
amounts. This subsection (ii) shall apply for
purposes of determining the present values of accrued
benefits and the amounts of Individual Account
balances of Employees as of the Determination Date.
(1) Distributions during year ending
on the Determination Date. The present
values of accrued benefits and the amounts
of Individual Account balances 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."
(2) Employees not performing
services during year ending on the
Determination Date. The accrued benefits and
Individual Accounts 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.
(b) Minimum benefits. Company Matching Contributions
under the Southwest Airlines Co. 401(k) 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."
21.5 Direct Rollovers of Plan Distributions: For purposes of
the direct rollover provisions in Section 15.6 of the Plan, for plan
distributions on or after January 1, 2002, 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. The definition of eligible retirement
plan shall also apply in the case of a distribution to a surviving
spouse, or to a spouse or former spouse who is the
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alternate payee under a qualified domestic relation order, as defined
in section 414(p) of the Code. Furthermore, for purposes of the direct
rollover provisions in Section 15.6 of the Plan, for plan distributions
on or after January 1, 2002, a portion of a distribution shall not fail
to be an eligible rollover distribution merely because the portion
consists of after-tax employee contributions that are not includible in
gross income. However, such portion 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 described
in Section 401(a) or 403(a) 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."
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising Amendment No. 2 to the Southwest Airlines Co.
Profit Sharing Plan, the Company 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 21 day of November, 2002.
SOUTHWEST AIRLINES CO.
By: /s/ JAMES F. PARKER
-----------------------------------------
James F. Parker, Chief Executive Officer
ATTEST:
/s/ DEBORAH ACKERMAN
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Deborah Ackerman, Assistant Secretary
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this 21 day of November, 2002, personally appeared JAMES F. PARKER, 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/ MARILYN STRICKLAND
---------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: 05/31/05
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