þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the quarterly period ended September 30, 2007
or
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the transition period from ________ to
________
|
TEXAS
|
74-1563240
|
(State
or other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization)
|
Identification
No.)
|
P.O.
Box 36611, Dallas, Texas
|
75235-1611
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Number
of shares of Common Stock outstanding as of the close of business
on
October 17, 2007:
|
September
30, 2007
|
December
31, 2006
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ |
1,050
|
$ |
1,390
|
||||
Short-term
investments
|
507
|
369
|
||||||
Accounts
and other receivables
|
326
|
241
|
||||||
Inventories
of parts and supplies, at cost
|
204
|
181
|
||||||
Fuel
derivative contracts
|
697
|
369
|
||||||
Prepaid
expenses and other current assets
|
86
|
51
|
||||||
Total
current assets
|
2,870
|
2,601
|
||||||
Property
and equipment, at cost:
|
||||||||
Flight
equipment
|
12,698
|
11,769
|
||||||
Ground
property and equipment
|
1,458
|
1,356
|
||||||
Deposits
on flight equipment purchase contracts
|
655
|
734
|
||||||
14,811
|
13,859
|
|||||||
Less
allowance for depreciation and amortization
|
4,144
|
3,765
|
||||||
10,667
|
10,094
|
|||||||
Other
assets
|
987
|
765
|
||||||
$ |
14,524
|
$ |
13,460
|
|||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
735
|
$ |
643
|
||||
Accrued
liabilities
|
1,972
|
1,323
|
||||||
Air
traffic liability
|
1,095
|
799
|
||||||
Current
maturities of long-term debt
|
24
|
122
|
||||||
Total
current liabilities
|
3,826
|
2,887
|
||||||
Long-term
debt less current maturities
|
1,555
|
1,567
|
||||||
Deferred
income taxes
|
2,404
|
2,104
|
||||||
Deferred
gains from sale and leaseback of aircraft
|
110
|
120
|
||||||
Other
deferred liabilities
|
360
|
333
|
||||||
Stockholders'
equity:
|
||||||||
Common
stock
|
808
|
808
|
||||||
Capital
in excess of par value
|
1,171
|
1,142
|
||||||
Retained
earnings
|
4,685
|
4,307
|
||||||
Accumulated
other comprehensive income
|
723
|
582
|
||||||
Treasury
stock, at cost
|
(1,118 | ) | (390 | ) | ||||
Total
stockholders' equity
|
6,269
|
6,449
|
||||||
$ |
14,524
|
$ |
13,460
|
|||||
See
accompanying notes.
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
OPERATING
REVENUES:
|
||||||||||||||||
Passenger
|
$ |
2,482
|
$ |
2,258
|
$ |
7,069
|
$ |
6,558
|
||||||||
Freight
|
32
|
30
|
95
|
103
|
||||||||||||
Other
|
74
|
54
|
205
|
149
|
||||||||||||
Total
operating revenues
|
2,588
|
2,342
|
7,369
|
6,810
|
||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Salaries,
wages, and benefits
|
832
|
771
|
2,413
|
2,273
|
||||||||||||
Fuel
and oil
|
660
|
563
|
1,831
|
1,581
|
||||||||||||
Maintenance
materials and repairs
|
160
|
117
|
450
|
341
|
||||||||||||
Aircraft
rentals
|
38
|
39
|
116
|
119
|
||||||||||||
Landing
fees and other rentals
|
145
|
128
|
422
|
374
|
||||||||||||
Depreciation
and amortization
|
140
|
131
|
411
|
381
|
||||||||||||
Other
operating expenses
|
362
|
332
|
1,062
|
981
|
||||||||||||
Total
operating expenses
|
2,337
|
2,081
|
6,705
|
6,050
|
||||||||||||
OPERATING
INCOME
|
251
|
261
|
664
|
760
|
||||||||||||
OTHER
EXPENSES (INCOME):
|
||||||||||||||||
Interest
expense
|
28
|
32
|
86
|
100
|
||||||||||||
Capitalized
interest
|
(13 | ) | (12 | ) | (39 | ) | (38 | ) | ||||||||
Interest
income
|
(9 | ) | (23 | ) | (36 | ) | (62 | ) | ||||||||
Other
(gains) losses, net
|
(32 | ) |
186
|
(221 | ) |
71
|
||||||||||
Total
other expenses (income)
|
(26 | ) |
183
|
(210 | ) |
71
|
||||||||||
INCOME
BEFORE INCOME TAXES
|
277
|
78
|
874
|
689
|
||||||||||||
PROVISION
FOR INCOME TAXES
|
115
|
30
|
341
|
247
|
||||||||||||
NET
INCOME
|
$ |
162
|
$ |
48
|
$ |
533
|
$ |
442
|
||||||||
NET
INCOME PER SHARE, BASIC
|
$.22
|
$.06
|
$.70
|
$.56
|
||||||||||||
NET
INCOME PER SHARE, DILUTED
|
$.22
|
$.06
|
$.69
|
$.53
|
||||||||||||
WEIGHTED
AVERAGE SHARES
|
||||||||||||||||
OUTSTANDING:
|
||||||||||||||||
Basic
|
739
|
789
|
765
|
796
|
||||||||||||
Diluted
|
752
|
821
|
777
|
827
|
||||||||||||
See
accompanying notes.
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||||||||||
Net
income
|
$ |
162
|
$ |
48
|
$ |
533
|
$ |
442
|
|||||||||
Adjustments
to reconcile net income to
|
|||||||||||||||||
cash
provided by operating activities:
|
|||||||||||||||||
Depreciation
and amortization
|
140
|
131
|
411
|
381
|
|||||||||||||
Deferred
income taxes
|
105
|
24
|
272
|
238
|
|||||||||||||
Amortization
of deferred gains on sale and
|
|||||||||||||||||
leaseback
of aircraft
|
(4 | ) | (4 | ) | (11 | ) | (12 | ) | |||||||||
Share-based
compensation expense
|
4
|
20
|
30
|
66
|
|||||||||||||
Excess
tax benefits from share-based
|
|||||||||||||||||
compensation
arrangements
|
(2 | ) | (25 | ) | (30 | ) | (55 | ) | |||||||||
Changes
in certain assets and liabilities:
|
|||||||||||||||||
Accounts
and other receivables
|
(5 | ) |
3
|
(85 | ) | (29 | ) | ||||||||||
Other
current assets
|
(69 | ) |
121
|
(218 | ) |
47
|
|||||||||||
Accounts
payable and accrued liabilities
|
(144 | ) | (744 | ) |
686
|
(173 | ) | ||||||||||
Air
traffic liability
|
(27 | ) |
10
|
296
|
319
|
||||||||||||
Other,
net
|
(6 | ) |
97
|
(133 | ) |
39
|
|||||||||||
Net
cash provided by (used in) operating activities
|
154
|
(319 | ) |
1,751
|
1,263
|
||||||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||||||||||
Purchases
of property and equipment, net
|
(319 | ) | (381 | ) | (981 | ) | (1,046 | ) | |||||||||
Purchases
of short-term investments
|
(1,535 | ) | (1,277 | ) | (3,607 | ) | (3,348 | ) | |||||||||
Proceeds
from sales of short-term investments
|
1,538
|
1,319
|
3,469
|
3,245
|
|||||||||||||
Proceeds
from ATA Airlines, Inc.
|
|||||||||||||||||
debtor
in possession loan
|
-
|
-
|
-
|
20
|
|||||||||||||
Other,
net
|
-
|
-
|
-
|
1
|
|||||||||||||
Net
cash used in investing activities
|
(316 | ) | (339 | ) | (1,119 | ) | (1,128 | ) | |||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||||||
Proceeds
from Employee stock plans
|
36
|
90
|
128
|
226
|
|||||||||||||
Payments
of long-term debt and capital lease obligations
|
(101 | ) | (1 | ) | (116 | ) | (137 | ) | |||||||||
Payments
of cash dividends
|
(3 | ) | (4 | ) | (14 | ) | (14 | ) | |||||||||
Repurchase
of common stock
|
(327 | ) | (98 | ) | (1,001 | ) | (600 | ) | |||||||||
Excess
tax benefits from share-based
|
|||||||||||||||||
compensation
arrangements
|
2
|
25
|
30
|
55
|
|||||||||||||
Other,
net
|
-
|
1
|
1
|
2
|
|||||||||||||
Net
cash provided by (used in) financing activities
|
(393 | ) |
13
|
(972 | ) | (468 | ) | ||||||||||
NET
CHANGE IN CASH AND
|
|||||||||||||||||
CASH
EQUIVALENTS
|
(555 | ) | (645 | ) | (340 | ) | (333 | ) | |||||||||
CASH
AND CASH EQUIVALENTS AT
|
|||||||||||||||||
BEGINNING
OF PERIOD
|
1,605
|
2,592
|
1,390
|
2,280
|
|||||||||||||
CASH
AND CASH EQUIVALENTS
|
|||||||||||||||||
AT
END OF PERIOD
|
$ |
1,050
|
$ |
1,947
|
$ |
1,050
|
$ |
1,947
|
|||||||||
CASH
PAYMENTS FOR:
|
|||||||||||||||||
Interest,
net of amount capitalized
|
$ |
21
|
$ |
20
|
$ |
50
|
$ |
58
|
|||||||||
Income
taxes
|
$ |
68
|
$ |
7
|
$ |
72
|
$ |
10
|
|||||||||
See
accompanying notes.
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
NUMERATOR:
|
||||||||||||||||
Net
income available to
|
||||||||||||||||
common
stockholders
|
$ |
162
|
$ |
48
|
$ |
533
|
$ |
442
|
||||||||
DENOMINATOR:
|
||||||||||||||||
Weighted-average
shares
|
||||||||||||||||
outstanding,
basic
|
739
|
789
|
765
|
796
|
||||||||||||
Dilutive
effect of Employee stock
|
||||||||||||||||
options
|
13
|
32
|
12
|
31
|
||||||||||||
Adjusted
weighted-average shares
|
||||||||||||||||
outstanding,
diluted
|
752
|
821
|
777
|
827
|
||||||||||||
NET
INCOME PER SHARE:
|
||||||||||||||||
Basic
|
$.22
|
$.06
|
$.70
|
$.56
|
||||||||||||
Diluted
|
$.22
|
$.06
|
$.69
|
$.53
|
Three
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Fuel
hedge (gains) included in Fuel and oil expense
|
$ | (188 | ) | $ | (201 | ) | |||
Mark-to-market
impact from fuel contracts settling in future
|
|||||||||
periods
- included in Other (gains) losses, net
|
(44 | ) |
123
|
||||||
Ineffectiveness
from fuel hedges settling in future periods -
|
|||||||||
included
in Other (gains) losses, net
|
(11 | ) |
18
|
||||||
Realized
ineffectiveness and mark-to-market (gains) or
|
|||||||||
losses
- included in Other (gains) losses, net
|
7
|
32
|
|||||||
Premium
cost of fuel contracts included in Other (gains) losses,
net
|
14
|
13
|
Nine
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Fuel
hedge (gains) included in Fuel and oil expense
|
$ | (439 | ) | $ | (515 | ) | |||
Mark-to-market
impact from fuel contracts settling in future
|
|||||||||
periods
- included in Other (gains) losses, net
|
(216 | ) |
18
|
||||||
Ineffectiveness
from fuel hedges settling in future periods -
|
|||||||||
included
in Other (gains) losses, net
|
(4 | ) |
22
|
||||||
Realized
ineffectiveness and mark-to-market (gains) or
|
|||||||||
losses
- included in Other (gains) losses, net
|
(45 | ) | (3 | ) | |||||
Premium
cost of fuel contracts included in Other (gains) losses,
net
|
43
|
37
|
September
30,
|
December
31,
|
|||||||
(In
millions)
|
2007
|
2006
|
||||||
|
|
|
||||||
Fair
value of current fuel contracts (Fuel derivative
contracts)
|
$ |
697
|
$ |
369
|
||||
Fair
value of noncurrent fuel contracts (Other assets)
|
848
|
630
|
||||||
Due
from third parties for settled fuel contracts (Accounts
|
||||||||
and
other receivables)
|
71
|
42
|
||||||
Net
unrealized gains from fuel hedges, net of tax (Accumulated
|
||||||||
other
comprehensive income)
|
725
|
584
|
Three
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Net
income
|
$ |
162
|
$ |
48
|
|||||
Unrealized
gain (loss) on derivative instruments,
|
|||||||||
net
of deferred taxes of ($18) and ($240)
|
(29 | ) | (386 | ) | |||||
Other,
net of deferred taxes of $0 and $1
|
-
|
1
|
|||||||
Total
other comprehensive income (loss)
|
(29 | ) | (385 | ) | |||||
Comprehensive
income (loss)
|
$ |
133
|
$ | (337 | ) |
Nine
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Net
income
|
$ |
533
|
$ |
442
|
|||||
Unrealized
gain (loss) on derivative instruments,
|
|||||||||
net
of deferred taxes of $87 and ($118)
|
141
|
(175 | ) | ||||||
Other,
net of deferred taxes of $0 and $1
|
-
|
2
|
|||||||
Total
other comprehensive income (loss)
|
141
|
(173 | ) | ||||||
Comprehensive
income
|
$ |
674
|
$ |
269
|
Accumulated
|
||||||||||||
Fuel
|
other
|
|||||||||||
hedge
|
comprehensive
|
|||||||||||
(In
millions)
|
derivatives
|
Other
|
income
(loss)
|
|||||||||
Balance
at June 30, 2007
|
$ |
754
|
$ | (2 | ) | $ |
752
|
|||||
Third
quarter 2007 changes in value
|
78
|
-
|
78
|
|||||||||
Reclassification
to earnings
|
(107 | ) |
-
|
(107 | ) | |||||||
Balance
at September 30, 2007
|
$ |
725
|
$ | (2 | ) | $ |
723
|
|||||
Accumulated
|
||||||||||||
Fuel
|
other
|
|||||||||||
hedge
|
comprehensive
|
|||||||||||
(In
millions)
|
derivatives
|
Other
|
income
(loss)
|
|||||||||
Balance
at December 31, 2006
|
$ |
584
|
$ | (2 | ) | $ |
582
|
|||||
2007
changes in value
|
383
|
-
|
383
|
|||||||||
Reclassification
to earnings
|
(242 | ) |
-
|
(242 | ) | |||||||
Balance
at September 30, 2007
|
$ |
725
|
$ | (2 | ) | $ |
723
|
September
30,
|
December
31,
|
|||||||
(In
millions)
|
2007
|
2006
|
||||||
|
|
|
||||||
Noncurrent
fuel hedge contracts, at fair value
|
$ |
848
|
$ |
630
|
||||
Other
|
139
|
135
|
||||||
Other
assets
|
$ |
987
|
$ |
765
|
||||
September
30,
|
December
31,
|
|||||||
(In
millions)
|
2007
|
2006
|
||||||
|
||||||||
Retirement
Plans
|
$ |
106
|
$ |
165
|
||||
Aircraft
Rentals
|
118
|
128
|
||||||
Vacation
Pay
|
164
|
151
|
||||||
Advances
and deposits
|
1,159
|
546
|
||||||
Deferred
income taxes
|
137
|
78
|
||||||
Other
accrued benefits
|
148
|
101
|
||||||
Other
|
140
|
154
|
||||||
Accrued
liabilities
|
$ |
1,972
|
$ |
1,323
|
Three
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
|
2006
|
||||||
|
|
|
|||||||
Service
cost
|
$ |
4
|
$ |
4
|
|||||
Interest
cost
|
1
|
1
|
|||||||
Amortization
of prior service cost
|
1
|
-
|
|||||||
Recognized
actuarial loss
|
-
|
||||||||
Net
periodic postretirement benefit cost
|
$ |
6
|
$ |
5
|
|||||
Nine months ended September 30, | |||||||||
(In
millions)
|
2007
|
|
2006
|
||||||
|
|||||||||
Service
cost
|
$ |
11
|
$ |
11
|
|||||
Interest
cost
|
4
|
4
|
|||||||
Amortization
of prior service cost
|
2
|
1
|
|||||||
Recognized
actuarial loss
|
-
|
-
|
|||||||
Net
periodic postretirement benefit cost
|
$ |
17
|
$ |
16
|
Three
months ended September 30,
|
||||||||||||
2007
|
2006
|
Change
|
||||||||||
|
|
|
|
|||||||||
Revenue
passengers carried
|
23,553,366
|
21,558,982
|
9.3 | % | ||||||||
Enplaned
passengers
|
27,242,613
|
24,880,646
|
9.5 | % | ||||||||
Revenue
passenger miles (RPMs) (000s)
|
19,685,690
|
17,767,128
|
10.8 | % | ||||||||
Available
seat miles (ASMs) (000s)
|
25,715,957
|
23,784,615
|
8.1 | % | ||||||||
Load
factor
|
76.6 | % | 74.7 | % |
1.9
|
pts. | ||||||
Average
length of passenger haul (miles)
|
836
|
824
|
1.5 | % | ||||||||
Average
aircraft stage length (miles)
|
633
|
625
|
1.3 | % | ||||||||
Trips
flown
|
297,782
|
279,032
|
6.7 | % | ||||||||
Average
passenger fare
|
$105.37
|
$104.75
|
0.6 | % | ||||||||
Passenger
revenue yield per RPM (cents)
|
12.61
|
12.71
|
(0.8 | )% | ||||||||
Operating
revenue yield per ASM (cents)
|
10.06
|
9.85
|
2.1 | % | ||||||||
Operating
expenses per ASM (cents)
|
9.09
|
8.75
|
3.9 | % | ||||||||
Operating
expenses per ASM, excluding fuel (cents)
|
6.52
|
6.38
|
2.2 | % | ||||||||
Fuel
costs per gallon, excluding fuel tax
|
$1.69
|
$1.56
|
8.3 | % | ||||||||
Fuel
consumed, in gallons (millions)
|
388
|
359
|
8.1 | % | ||||||||
Full-time
equivalent Employees at period-end
|
33,787
|
32,144
|
5.1 | % | ||||||||
Size
of fleet at period-end
|
511
|
475
|
7.6 | % |
Nine
months ended September 30,
|
||||||||||||
2007
|
2006
|
Change
|
||||||||||
|
|
|
|
|||||||||
Revenue
passengers carried
|
66,956,318
|
62,757,726
|
6.7 | % | ||||||||
Enplaned
passengers
|
77,035,110
|
72,202,988
|
6.7 | % | ||||||||
Revenue
passenger miles (RPMs) (000s)
|
54,813,530
|
50,891,473
|
7.7 | % | ||||||||
Available
seat miles (ASMs) (000s)
|
74,377,009
|
68,748,057
|
8.2 | % | ||||||||
Load
factor
|
73.7 | % | 74.0 | % |
(.3)
|
pts. | ||||||
Average
length of passenger haul (miles)
|
819
|
811
|
1.0 | % | ||||||||
Average
aircraft stage length (miles)
|
630
|
620
|
1.6 | % | ||||||||
Trips
flown
|
865,329
|
812,428
|
6.5 | % | ||||||||
Average
passenger fare
|
$105.57
|
$104.50
|
1.0 | % | ||||||||
Passenger
revenue yield per RPM (cents)
|
12.90
|
12.89
|
0.1 | % | ||||||||
Operating
revenue yield per ASM (cents)
|
9.91
|
9.91
|
0.0 | % | ||||||||
Operating
expenses per ASM (cents)
|
9.01
|
8.80
|
2.4 | % | ||||||||
Operating
expenses per ASM, excluding fuel (cents)
|
6.55
|
6.50
|
0.8 | % | ||||||||
Fuel
costs per gallon, excluding fuel tax
|
$1.64
|
$1.53
|
7.2 | % | ||||||||
Fuel
consumed, in gallons (millions)
|
1,114
|
1,032
|
7.9 | % | ||||||||
Full-time
equivalent Employees at period-end
|
33,787
|
32,144
|
5.1 | % | ||||||||
Size
of fleet at period-end
|
511
|
475
|
7.6 | % |
Three
months ended September 30,
|
Per
ASM
|
Percent
|
|||||||||||||||
2007
|
2006
|
Change
|
Change
|
||||||||||||||
|
|
|
|
|
|
||||||||||||
Salaries,
wages, and benefits
|
3.23
|
3.24
|
(.01 | ) | (.3 | ) | |||||||||||
Fuel
and oil
|
2.57
|
2.37
|
.20
|
8.4
|
|||||||||||||
Maintenance
materials
|
|||||||||||||||||
and
repairs
|
.62
|
.49
|
.13
|
26.5
|
|||||||||||||
Aircraft
rentals
|
.15
|
.16
|
(.01 | ) | (6.3 | ) | |||||||||||
Landing
fees and other rentals
|
.57
|
.54
|
.03
|
5.6
|
|||||||||||||
Depreciation
|
.54
|
.55
|
(.01 | ) | (1.8 | ) | |||||||||||
Other
operating expenses
|
1.41
|
1.40
|
.01
|
.7
|
|||||||||||||
Total
|
9.09
|
8.75
|
.34
|
3.9
|
Three
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Mark-to-market
impact from fuel contracts settling in future
|
|||||||||
periods
- included in Other (gains) losses, net
|
$ | (44 | ) | $ |
123
|
||||
Ineffectiveness
from fuel hedges settling in future periods -
|
|||||||||
included
in Other (gains) losses, net
|
(11 | ) |
18
|
||||||
Realized
ineffectiveness and mark-to-market (gains) or
|
|||||||||
losses
- included in Other (gains) losses, net
|
7
|
32
|
|||||||
Premium
cost of fuel contracts included in Other (gains) losses,
net
|
14
|
13
|
|||||||
Other
|
2
|
-
|
|||||||
$ | (32 | ) | $ |
186
|
Nine
months ended September 30,
|
Per
ASM
|
Percent
|
|||||||||||||||
2007
|
2006
|
Change
|
Change
|
||||||||||||||
|
|
|
|
|
|
||||||||||||
Salaries,
wages, and benefits
|
3.24
|
3.31
|
(.07 | ) | (2.1 | ) | |||||||||||
Fuel
and oil
|
2.46
|
2.30
|
.16
|
7.0
|
|||||||||||||
Maintenance
materials
|
|||||||||||||||||
and
repairs
|
.60
|
.50
|
.10
|
20.0
|
|||||||||||||
Aircraft
rentals
|
.16
|
.17
|
(.01 | ) | (5.9 | ) | |||||||||||
Landing
fees and other rentals
|
.57
|
.54
|
.03
|
5.6
|
|||||||||||||
Depreciation
|
.55
|
.55
|
-
|
-
|
|||||||||||||
Other
operating expenses
|
1.43
|
1.43
|
-
|
-
|
|||||||||||||
Total
|
9.01
|
8.80
|
.21
|
2.4
|
Nine
months ended September 30,
|
|||||||||
(In
millions)
|
2007
|
2006
|
|||||||
|
|
|
|
||||||
Mark-to-market
impact from fuel contracts settling in future
|
|||||||||
periods
- included in Other (gains) losses, net
|
$ | (216 | ) | $ |
18
|
||||
Ineffectiveness
from fuel hedges settling in future periods -
|
|||||||||
included
in Other (gains) losses, net
|
(4 | ) |
22
|
||||||
Realized
ineffectiveness and mark-to-market (gains) or
|
|||||||||
losses
- included in Other (gains) losses, net
|
(45 | ) | (3 | ) | |||||
Premium
cost of fuel contracts included in Other (gains) losses,
net
|
43
|
37
|
|||||||
Other
|
1
|
(3 | ) | ||||||
$ | (221 | ) | $ |
71
|
Average
|
Number
|
Number
|
Number
|
|||||||||||||||||||
737
Type
|
Seats
|
Age
(Yrs)
|
of
Aircraft
|
Owned
|
Leased
|
|||||||||||||||||
-300
|
137
|
16.4
|
194
|
112
|
82
|
|||||||||||||||||
-500
|
122
|
16.4
|
25
|
16
|
9
|
|||||||||||||||||
-700
|
137
|
4.1
|
292
|
288
|
4
|
|||||||||||||||||
TOTALS
|
9.4
|
511
|
416
|
95
|
|
(ii)
|
our
ability to timely and effectively prioritize our revenue and cost
reduction initiatives and our related ability to timely and effectively
implement and maintain the necessary information technology systems
and
infrastructure to support these
initiatives;
|
|
(iii)
|
the
extent and timing of our investment of incremental operating expenses
and
capital expenditures to develop and implement our initiatives and
our
corresponding ability to effectively control our operating
expenses;
|
|
(iv)
|
our
dependence on third party arrangements to assist with implementation
of
certain of our initiatives;
|
(v)
|
the
impact of governmental regulations on our operating costs, as well
as our
operations generally;
|
(vi)
|
the
impact of certain pending technological initiatives in the Company’s
technology infrastructure, including its point of sale, ticketing,
revenue
accounting, payroll and financial reporting
areas;
|
(viii)
|
other
factors as set forth in our filings with the Securities and Exchange
Commission, including the detailed factors discussed under the
heading
“Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2006.
|
(a)
|
(b)
|
(c)
|
(d)
|
|||||||||||||
Total
number of
|
Maximum
dollar
|
|||||||||||||||
shares
purchased
|
value
that may
|
|||||||||||||||
Total
number
|
Average
|
as
part of publicly
|
yet
be purchased
|
|||||||||||||
of
shares
|
price
paid
|
announced
plans
|
under
the plans
|
|||||||||||||
Period
|
purchased
|
per
share
|
or
programs
|
or
programs
|
||||||||||||
|
|
|
|
|||||||||||||
July
1, 2007 through July 31, 2007
|
12,750,000
|
$ |
15.42
|
12,750,000
|
$ |
129,940,913
|
||||||||||
August
1, 2007 through August 31, 2007
|
8,100,000
|
$ |
15.65
|
8,100,000
|
$ |
3,146,478
|
||||||||||
September
1, 2007 through September 30, 2007
|
208,000
|
$ |
15.13
|
208,000
|
$ |
-
|
||||||||||
Total
|
21,058,000
|
21,058,000
|
a)
|
Exhibits
|
3.1
|
Restated
Articles of Incorporation of Southwest (incorporated by reference
to
|
|
Exhibit 4.1
to Southwest’s Registration Statement on
Form S-3 (File
|
||
No. 33-52155));
Amendment to Restated Articles of Incorporation of
Southwest
|
||
(incorporated
by reference to Exhibit 3.1 to Southwest’s Quarterly Report
on
|
||
Form 10-Q
for the quarter ended June 30, 1996 (File
No. 1-7259));
|
||
Amendment
to Restated Articles of Incorporation of Southwest (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 1998 (File No. 1-7259)); Amendment to Restated
Articles of
|
||
Incorporation
of Southwest (incorporated by reference to Exhibit 4.2 to
Southwest’s
|
||
Registration
Statement on Form S-8 (File No. 333-82735));
|
||
Amendment
to Restated Articles of Incorporation of Southwest (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 2001 (File No. 1-7259)); Articles of Amendment
to
|
||
Articles
of Incorporation of Southwest Airlines Co. (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 2007 (File No. 1-7259)).
|
||
3.2
|
Amended
and Restated Bylaws of Southwest, effective September 20,
2007
|
|
(incorporated
by reference to Exhibit 3.1 to Southwest’s Current
Report
|
||
on
Form 8-K dated September 20, 2007 (File
No. 1-7259)).
|
||
10.1
|
Supplemental
Agreement No. 54 to Purchase Agreement No. 1810,
|
|
dated
January 19, 1994, between The Boeing Company and
Southwest.(1)
|
||
10.2
|
Supplemental
Agreement No. 55 to Purchase Agreement No. 1810,
|
|
dated
January 19, 1994, between The Boeing Company and
Southwest.(1)
|
||
10.3
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Herbert
D. Kelleher.
|
||
10.4
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Gary
C. Kelly.
|
||
10.5
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Colleen
C. Barrett.
|
||
31.1
|
Rule
13a-14(a) Certification of Chief Executive Officer
|
|
31.2
|
Rule
13a-14(a) Certification of Chief Financial Officer
|
|
32.1
|
Section
1350 Certifications of Chief Executive Officer and Chief
Financial
|
|
Officer
|
SOUTHWEST
AIRLINES CO.
|
||
October
19, 2007
|
By
|
/s/ Laura
Wright
|
Laura
Wright
|
||
Chief
Financial Officer
|
||
(On
behalf of the Registrant and in
|
||
her
capacity as Principal Financial
|
||
and
Accounting Officer)
|
||
3.1
|
Restated
Articles of Incorporation of Southwest (incorporated by reference
to
|
|
Exhibit 4.1
to Southwest’s Registration Statement on
Form S-3 (File
|
||
No. 33-52155));
Amendment to Restated Articles of Incorporation of
Southwest
|
||
(incorporated
by reference to Exhibit 3.1 to Southwest’s Quarterly Report
on
|
||
Form 10-Q
for the quarter ended June 30, 1996 (File
No. 1-7259));
|
||
Amendment
to Restated Articles of Incorporation of Southwest (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 1998 (File No. 1-7259)); Amendment to Restated
Articles of
|
||
Incorporation
of Southwest (incorporated by reference to Exhibit 4.2 to
Southwest’s
|
||
Registration
Statement on Form S-8 (File No. 333-82735));
|
||
Amendment
to Restated Articles of Incorporation of Southwest (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 2001 (File No. 1-7259)); Articles of Amendment
to
|
||
Articles
of Incorporation of Southwest Airlines Co. (incorporated
by
|
||
reference
to Exhibit 3.1 to Southwest’s Quarterly Report on Form 10-Q for
the
|
||
quarter
ended June 30, 2007 (File No. 1-7259)).
|
||
3.2
|
Amended
and Restated Bylaws of Southwest, effective September 20,
2007
|
|
(incorporated
by reference to Exhibit 3.1 to Southwest’s Current
Report
|
||
on
Form 8-K dated September 20, 2007 (File
No. 1-7259)).
|
||
10.1
|
Supplemental
Agreement No. 54 to Purchase Agreement No. 1810,
|
|
dated
January 19, 1994, between The Boeing Company and
Southwest.(1)
|
||
10.2
|
Supplemental
Agreement No. 55 to Purchase Agreement No. 1810,
|
|
dated
January 19, 1994, between The Boeing Company and
Southwest.(1)
|
||
10.3
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Herbert
D. Kelleher.
|
||
10.4
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Gary
C. Kelly.
|
||
10.5
|
Employment
Contract, dated as of July 15, 2007, between Southwest
and
|
|
Colleen
C. Barrett.
|
||
31.1
|
Rule
13a-14(a) Certification of Chief Executive Officer
|
|
31.2
|
Rule
13a-14(a) Certification of Chief Financial Officer
|
|
32.1
|
Section
1350 Certifications of Chief Executive Officer and Chief
Financial
|
|
Officer
|
2.
|
Table
1 is deleted in its entirety and replaced by a
new
Table 1 which is attached hereto and is incorporated into the Agreement
by
this reference.
|
3.
|
Table
2 is deleted in its entirety and replaced by a new Table 2 which
is
attached hereto and is incorporated into the Agreement by this
reference.
|
THE
BOEING COMPANY
|
SOUTHWEST
AIRLINES CO.
|
By:
/s/ Nobuko Wiles
|
By:
/s/
Laura Wright
|
Its:
Attorney-In-Fact
|
Its:
SVP
Finance & CFO
|
Page
|
SA
|
||
Number
|
Number
|
||
ARTICLES
|
|||
1.
|
Subject
Matter of Sale
|
1-1
|
SA-13
|
2.
|
Delivery,
Title and Risk of Loss
|
2-1
|
SA-28
|
3.
|
Price
of Aircraft
|
3-1
|
SA-47
|
4.
|
Taxes
|
4-1
|
|
5.
|
Payment
|
5-1
|
|
6.
|
Excusable
Delay
|
6-1
|
|
7.
|
Changes
to the Detail Specification
|
7-1
|
SA-1
|
8.
|
Federal
Aviation Requirements and Certificates and Export License
|
8-1
|
|
9.
|
Representatives,
Inspection, Flights and Test Data
|
9-1
|
|
10.
|
Assignment,
Resale or Lease
|
10-1
|
|
|
|||
11.
|
Termination
for Certain Events
|
11-1
|
|
12.
|
Product
Assurance; Disclaimer and Release; Exclusion of
Liabilities:
|
||
Customer
Support;
Indemnification
and Insurance
|
12-1
|
||
13.
|
Buyer
Furnished Equipment and Spare Parts
|
13-1
|
|
14.
|
Contractual
Notices and Requests
|
14-1
|
|
15.
|
Miscellaneous
|
15-1
|
|
SA
|
||
Number
|
||
TABLE
|
||
1.
|
Aircraft
Information Table
|
SA-54
|
2.
|
Option
Aircraft Information Table
|
SA-54
|
|
EXHIBITS
|
A
|
Aircraft
Configuration
|
SA-47
|
|
B
|
Product
Assurance Document
|
SA-1
|
|
C
|
Customer
Support Document
|
||
D
|
Price
Adjustments Due to Economic Fluctuations - Aircraft
|
||
E
|
Buyer
Furnished Equipment
|
||
Provisions
Document
|
|||
F
|
Defined
Terms Document
|
||
1810-1
|
Waiver
of Aircraft Demonstration Flight
|
SA
|
||
Number
|
||
RESTRICTED
LETTER AGREEMENTS
|
||
6-1162-RLL-2036
|
Amortization
of Costs for Customer Unique Changes
|
SA-1 |
6-1162-RLL-2037
|
Reconciliation
of the Aircraft Basic Price
|
SA-1
|
6-1162-RLL-2073
|
Maintenance
Training Matters
|
SA-1
|
6-1162-KJJ-054R1
|
Business
Matters
|
|
6-1162-KJJ-055R1
|
Structural
Matters
|
SA-25
|
6-1162-KJJ-056
|
Noise
and Emission Matters
|
SA-13
|
6-1162-KJJ-057
|
Product
Development Matters
|
SA-13
|
6-1162-KJJ-058
|
Additional
Substitution Rights
|
SA-13
|
6-1162-KJJ-150
|
Flight
Control Computer & Mode Control Panel Spares Matter
|
SA-14
|
6-1162-MSA-185R3
|
Delivery
Change Contractual Matters
|
SA-21
|
6-1162-JMG-669R
8
|
***
|
SA-54
|
6-1162-JMG-747R1
|
***
|
SA-36
|
6-1162-CHL-217
|
Rescheduled
Flight Test Aircraft
|
SA-32
|
6-1162-NIW-606R1
|
***
|
SA-36
|
6-1162-NIW-640
|
Early
Delivery of Two April 2004 Aircraft
|
SA-35
|
6-1162-NIW-889
|
Warranty
- Exterior Color Schemes and Markings for YA143 and on
|
SA-39
|
6-1162-NIW-1142
|
***
|
SA-43
|
6-1162-NIW-1369
|
***
|
SA-46
|
Base
Aircraft Price
|
Special
Features
|
Aircraft
Basic Price
|
Base
Year Dollars
|
||
Block
A, B, C, D & E Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
F & G Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
H Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
I Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
J Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
K Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
K-W Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
L Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
T Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W-1 / T-W-1a Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W-2 / T-W-2a Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
K-W Aircraft: Block K airplanes with production winglets
installation
|
|||||
Block
T-W Aircraft: Block T airplanes with production winglets
installation
|
|||||
Block
T-W-1 / T-W-1a Aircraft: Firm Aircraft contracted to deliver
from May 1, 2006 through June 2008 at the
signing
|
|||||
of
SA-47 -- (T-W-1a Aircraft -- Advance Payment Schedule per LA
6-1162-JGM-669)
|
|||||
Block
T-W-2 / T-W-2a Aircraft: U-W-1 Option Aircraft which becomes Firm
Aircraft
after signing of SA-47 and
|
|||||
Firm
Aircaft contracted to deliver in July 2008 and on at the signing
of SA47
--
|
|||||
(T-W-2a
Aircraft -- Advance Payment Schedule per LA
6-1162-JGM-669)
|
Escalation
Estimate
|
||||
Delivery
|
Number
of
|
Aircraft
|
Adv
Payment Base
|
|
Date
|
Aircraft
|
Block
|
Price
Per A/P
|
Serial
Number
|
Dec-2000
|
2
|
E
|
***
|
|
Jan-2001
|
1
|
E
|
***
|
|
Feb-2001
|
1
|
E
|
***
|
|
Mar-2001
|
2
|
E
|
***
|
|
Jun-2001
|
3
|
E
|
***
|
|
Sep-2001
|
3
|
E
|
***
|
|
Oct-1998
|
1
|
F
|
***
|
|
Nov-1998
|
2
|
F
|
***
|
|
Dec-1998
|
2
|
F
|
***
|
|
Mar-1999
|
2
|
G
|
***
|
|
Jun-1999
|
2
|
H
|
***
|
|
Jul-1999
|
1
|
H
|
***
|
|
Aug-1999
|
1
|
H
|
***
|
|
Sep-1999
|
2
|
H
|
***
|
|
Oct-1999
|
1
|
H
|
***
|
|
Mar-2000
|
1
|
H
|
***
|
|
Apr-2000
|
2
|
H
|
***
|
|
Sep-2000
|
1
|
H
|
***
|
|
Oct-2000
|
2
|
H
|
***
|
|
Mar-2001
|
2
|
H
|
***
|
|
Apr-2001
|
1
|
H
|
***
|
|
Oct-2001
|
3
|
H
|
***
|
|
Nov-2001
|
2
|
I
|
***
|
|
Dec-2001
|
1
|
I
|
***
|
|
Jan-2002
|
1
|
I
|
***
|
|
Mar-2002
|
4
|
I
|
***
|
|
Apr-2002
|
2
|
I
|
***
|
|
Dec-2002
|
2
|
I
|
***
|
|
May-2003
|
1
|
I
|
***
|
|
Jun-2003
|
2
|
I
|
***
|
|
Jul-2003
|
1
|
I
|
***
|
|
Aug-2003
|
1
|
I
|
***
|
|
Sep-2003
|
3
|
I
|
***
|
|
Nov-2002
|
1
|
J
|
***
|
|
Dec-2002
|
1
|
J
|
***
|
|
Nov-2003
|
2
|
J
|
***
|
|
Dec-2003
|
2
|
J
|
***
|
|
Mar-2004
|
1
|
J
|
***
|
|
Mar-2004
|
1
|
K
|
***
|
|
Apr-2004
|
3
|
K
|
***
|
|
May-2004
|
1
|
K
|
***
|
|
Jun-2004
|
2
|
K
|
***
|
|
Jul-2004
|
2
|
K
|
***
|
|
Sep-2004
|
1
|
K-W
|
***
|
Oct-2004
|
4
|
K-W
|
***
|
|
Oct-1999
|
1
|
L
|
***
|
|
Nov-1999
|
2
|
L
|
***
|
|
Dec-1999
|
1
|
L
|
***
|
|
Jun-2000
|
3
|
L
|
***
|
|
Jul-2000
|
3
|
L
|
***
|
|
Sep-2000
|
1
|
L
|
***
|
|
Oct-2000
|
1
|
L
|
***
|
|
Nov-2000
|
4
|
L
|
***
|
|
Dec-2000
|
1
|
L
|
***
|
|
Jan-2001
|
1
|
L
|
***
|
|
Feb-2001
|
1
|
L
|
***
|
|
Jul-2001
|
1
|
L
|
***
|
|
Sep-2001
|
1
|
L
|
***
|
|
Oct-2001
|
1
|
L
|
***
|
|
Mar-2003
|
2
|
L
|
***
|
|
Jul-2003
|
1
|
L
|
***
|
|
Aug-2003
|
2
|
L
|
***
|
|
Nov-2001
|
1
|
T
|
***
|
|
Feb-2002
|
1
|
T
|
***
|
|
Jan-2004
|
2
|
T
|
***
|
|
Feb-2004
|
1
|
T
|
***
|
|
Apr-2004
|
3
|
T
|
***
|
|
May-2004
|
1
|
T
|
***
|
|
Jun-2004
|
6
|
T
|
***
|
|
Jul-2004
|
2
|
T
|
***
|
|
Aug-2004
|
6
|
T-W
|
***
|
|
Sep-2004
|
4
|
T-W
|
***
|
|
Oct-2004
|
0
|
T-W
|
***
|
|
Nov-2004
|
3
|
T-W
|
***
|
|
Dec-2004
|
3
|
T-W
|
***
|
|
Jan-2005
|
5
|
T-W
|
***
|
|
Feb-2005
|
3
|
T-W
|
***
|
|
Mar-2005
|
4
|
T-W
|
***
|
|
Apr-2005
|
4
|
T-W
|
***
|
|
May-2005
|
2
|
T-W
|
***
|
|
Jun-2005
|
4
|
T-W
|
***
|
|
Jul-2005
|
2
|
T-W
|
***
|
|
Aug-2005
|
2
|
T-W
|
***
|
|
Sep-2005
|
3
|
T-W
|
***
|
|
Oct-2005
|
2
|
T-W
|
***
|
|
Nov-2005
|
2
|
T-W
|
***
|
|
Dec-2005
|
1
|
T-W
|
***
|
|
Jan-2006
|
1
|
T-W
|
***
|
|
Feb-2006
|
4
|
T-W
|
***
|
|
Mar-2006
|
3
|
T-W
|
***
|
|
Apr-2006
|
2
|
T-W
|
***
|
|
May-2006
|
5
|
T-W-1
|
***
|
Jun-2006
|
5
|
T-W-1
|
***
|
|
Jul-2006
|
3
|
T-W-1
|
***
|
|
Aug-2006
|
3
|
T-W-1
|
***
|
|
Sep-2006
|
3
|
T-W-1
|
***
|
|
Oct-2006
|
1
|
T-W-1
|
***
|
|
Nov-2006
|
2
|
T-W-1
|
***
|
|
Dec-2006
|
2
|
T-W-1
|
***
|
|
Jan-2007
|
2
|
T-W-1
|
***
|
|
Feb-2007
|
3
|
T-W-1
|
***
|
|
Mar-2007
|
2
|
T-W-1
|
***
|
|
Apr-2007
|
3
|
T-W-1
|
***
|
|
May-2007
|
3
|
T-W-1
|
***
|
|
Jun-2007
|
2
|
T-W-1
|
***
|
|
Jun-2007
|
1
|
T-W-1a
|
***
|
36528
|
Jul-2007
|
2
|
T-W-1
|
***
|
|
Jul-2007
|
1
|
T-W-1a
|
***
|
36610
|
Aug-2007
|
2
|
T-W-1
|
***
|
|
Aug-2007
|
3
|
T-W-1a
|
***
|
36611,
36632 & 36633
|
Sep-2007
|
2
|
T-W-1
|
***
|
|
Sep-2007
|
1
|
T-W-1a
|
***
|
36612
|
Oct-2007
|
2
|
T-W-1
|
***
|
|
Oct-2007
|
1
|
T-W-1a
|
***
|
36613
|
Nov-2007
|
2
|
T-W-1
|
***
|
|
Nov-2007
|
1
|
T-W-1a
|
***
|
36614
|
Dec-2007
|
2
|
T-W-1
|
***
|
|
Dec-2007
|
1
|
T-W-1a
|
***
|
36615
|
Jan-2008
|
1
|
T-W-1
|
***
|
|
Jan-2008
|
2
|
T-W-1a
|
***
|
36616
& 36617
|
Jan-2008
|
1
|
T-W-2
|
***
|
36887
|
Feb-2008
|
1
|
T-W-1
|
***
|
|
Feb-2008
|
3
|
T-W-1a
|
***
|
36618,
36619 & 36620
|
Mar-2008
|
1
|
T-W-1
|
***
|
|
Mar-2008
|
2
|
T-W-1a
|
***
|
36621
& 36622
|
Mar-2008
|
1
|
T-W-2
|
***
|
36888
|
Apr-2008
|
1
|
T-W-1
|
***
|
|
Apr-2008
|
2
|
T-W-1a
|
***
|
36623
& 36624
|
May-2008
|
1
|
T-W-1
|
***
|
|
May-2008
|
2
|
T-W-1a
|
***
|
36625
& 36626
|
Jun-2008
|
1
|
T-W-1
|
***
|
|
Jun-2008
|
2
|
T-W-1a
|
***
|
36627
& 36628
|
Jul-2008
|
2
|
T-W-2a
|
***
|
|
Jul-2008
|
2
|
T-W-2
|
***
|
36889
& 36890
|
Aug-2008
|
1
|
T-W-2
|
***
|
36891
|
Oct-2008
|
1
|
T-W-2a
|
***
|
|
Nov-2008
|
1
|
T-W-2a
|
***
|
|
Dec-2008
|
1
|
T-W-2a
|
***
|
|
Jan-2009
|
1
|
T-W-2a
|
***
|
|
Feb-2009
|
2
|
T-W-2a
|
***
|
Mar-2009
|
2
|
T-W-2a
|
***
|
|
Apr-2009
|
2
|
T-W-2a
|
***
|
|
May-2009
|
2
|
T-W-2a
|
***
|
|
Jun-2009
|
2
|
T-W-2a
|
***
|
|
Jul-2009
|
2
|
T-W-2a
|
***
|
|
Aug-2009
|
1
|
T-W-2a
|
***
|
|
Sep-2009
|
1
|
T-W-2a
|
***
|
|
Oct-2009
|
1
|
T-W-2a
|
***
|
|
Nov-2009
|
1
|
T-W-2a
|
***
|
|
Dec-2009
|
1
|
T-W-2a
|
***
|
|
Jan-2010
|
1
|
T-W-2a
|
***
|
|
Feb-2010
|
1
|
T-W-2a
|
***
|
|
Mar-2010
|
1
|
T-W-2a
|
***
|
|
Apr-2010
|
1
|
T-W-2a
|
***
|
|
May-2010
|
1
|
T-W-2a
|
***
|
|
Jun-2010
|
1
|
T-W-2a
|
***
|
|
Jul-2010
|
1
|
T-W-2a
|
***
|
|
Aug-2010
|
1
|
T-W-2a
|
***
|
|
Sep-2010
|
1
|
T-W-2a
|
***
|
|
Oct-2010
|
1
|
T-W-2a
|
***
|
|
Jan-2011
|
1
|
T-W-2a
|
***
|
|
Feb-2011
|
1
|
T-W-2a
|
***
|
|
Mar-2011
|
1
|
T-W-2a
|
***
|
|
Apr-2011
|
1
|
T-W-2a
|
***
|
|
May-2011
|
1
|
T-W-2a
|
***
|
|
Jun-2011
|
1
|
T-W-2a
|
***
|
|
Jul-2011
|
1
|
T-W-2a
|
***
|
|
Aug-2011
|
1
|
T-W-2a
|
***
|
|
Sep-2011
|
1
|
T-W-2a
|
***
|
|
Oct-2011
|
1
|
T-W-2a
|
***
|
|
Jan-2012
|
1
|
T-W-2a
|
***
|
|
Feb-2012
|
1
|
T-W-2a
|
***
|
|
Mar-2012
|
1
|
T-W-2a
|
***
|
|
Apr-2012
|
1
|
T-W-2a
|
***
|
|
May-2012
|
1
|
T-W-2a
|
***
|
|
Jun-2012
|
1
|
T-W-2a
|
***
|
|
Jul-2012
|
1
|
T-W-2a
|
***
|
|
Aug-2012
|
1
|
T-W-2a
|
***
|
|
Sep-2012
|
1
|
T-W-2a
|
***
|
|
Oct-2012
|
1
|
T-W-2a
|
***
|
|
Jan-2013
|
2
|
T-W-2a
|
***
|
|
Feb-2013
|
1
|
T-W-2a
|
***
|
|
Mar-2013
|
1
|
T-W-2a
|
***
|
|
Mar-2013
|
1
|
T-W-2
|
***
|
|
Apr-2013
|
1
|
T-W-2
|
***
|
|
May-2013
|
1
|
T-W-2
|
***
|
|
Jun-2013
|
2
|
T-W-2
|
***
|
|
Jul-2013
|
1
|
T-W-2
|
***
|
|
Aug-2013
|
2
|
T-W-2
|
***
|
|
Sep-2013
|
2
|
T-W-2
|
***
|
|
Oct-2013
|
2
|
T-W-2
|
***
|
|
Nov-2013
|
1
|
T-W-2
|
***
|
|
Dec-2013
|
2
|
T-W-2
|
***
|
|
Jan-2014
|
1
|
T-W-2
|
***
|
|
Feb-2014
|
1
|
T-W-2
|
***
|
|
Mar-2014
|
1
|
T-W-2
|
***
|
|
Apr-2014
|
1
|
T-W-2
|
***
|
|
May-2014
|
1
|
T-W-2
|
***
|
|
Jun-2014
|
1
|
T-W-2
|
***
|
|
Jul-2014
|
1
|
T-W-2
|
***
|
|
Aug-2014
|
1
|
T-W-2
|
***
|
|
Sep-2014
|
1
|
T-W-2
|
***
|
|
Oct-2014
|
1
|
T-W-2
|
***
|
|
Aircraft
|
Number
of
|
Option
|
Adv
Payment Base
|
|
Delivery
|
Option
|
Aircraft
|
Price
Per
|
|
Mo.
& Yr.
|
Aircraft
|
Block
|
Option
Aircraft
|
Option
Exercise
|
Apr-2009
|
2
|
U-W-1
|
***
|
December
3, 2007
|
May-2009
|
1
|
U-W-1
|
***
|
January
1, 2008
|
Jun-2009
|
1
|
U-W-1
|
***
|
February
1, 2008
|
Jul-2009
|
2
|
U-W-1
|
***
|
March
3, 2008
|
Aug-2009
|
1
|
U-W-1
|
***
|
April
1, 2008
|
Oct-2009
|
1
|
U-W-1
|
***
|
June
2, 2008
|
Nov-2009
|
1
|
U-W-1
|
***
|
July
1, 2008
|
Dec-2009
|
1
|
U-W-1
|
***
|
August
1, 2008
|
Jan-2010
|
1
|
U-W-1
|
***
|
September
1, 2008
|
Feb-2010
|
1
|
U-W-1
|
***
|
October
1, 2008
|
Mar-2010
|
1
|
U-W-1
|
***
|
November
3, 2008
|
Apr-2010
|
1
|
U-W-1
|
***
|
December
1, 2008
|
May-2010
|
2
|
U-W-1
|
***
|
January
1, 2009
|
Jun-2010
|
3
|
U-W-1
|
***
|
February
2, 2009
|
Jul-2010
|
2
|
U-W-1
|
***
|
March
2, 2009
|
Aug-2010
|
2
|
U-W-1
|
***
|
April
1, 2009
|
Sep-2010
|
2
|
U-W-1
|
***
|
May
1, 2009
|
Oct-2010
|
3
|
U-W-1
|
***
|
June
1, 2009
|
Nov-2010
|
3
|
U-W-1
|
***
|
July
1, 2009
|
Dec-2010
|
3
|
U-W-1
|
***
|
August
3, 2009
|
Jan-2011
|
1
|
U-W-1
|
***
|
September
1, 2009
|
Feb-2011
|
2
|
U-W-1
|
***
|
October
1, 2009
|
Mar-2011
|
1
|
U-W-1
|
***
|
November
2, 2009
|
Apr-2011
|
1
|
U-W-1
|
***
|
December
1, 2009
|
May-2011
|
2
|
U-W-1
|
***
|
January
1, 2010
|
Jun-2011
|
2
|
U-W-1
|
***
|
February
1, 2010
|
Jul-2011
|
2
|
U-W-1
|
***
|
March
1, 2010
|
Aug-2011
|
2
|
U-W-1
|
***
|
April
1, 2010
|
Sep-2011
|
2
|
U-W-1
|
***
|
May
3, 2010
|
Oct-2011
|
2
|
U-W-1
|
***
|
June
1, 2010
|
Nov-2011
|
3
|
U-W-1
|
***
|
July
1, 2010
|
Dec-2011
|
2
|
U-W-1
|
***
|
August
2, 2010
|
Jan-2012
|
3
|
U-W-1
|
***
|
September
1, 2010
|
Feb-2012
|
3
|
U-W-1
|
***
|
October
1, 2010
|
Mar-2012
|
2
|
U-W-1
|
***
|
November
1, 2010
|
Apr-2012
|
3
|
U-W-1
|
***
|
December
1, 2010
|
May-2012
|
3
|
U-W-1
|
***
|
January
3, 2011
|
Jun-2012
|
3
|
U-W-1
|
***
|
February
1, 2011
|
Jul-2012
|
2
|
U-W-1
|
***
|
March
1, 2011
|
Aug-2012
|
2
|
U-W-1
|
***
|
April
1, 2011
|
Sep-2012
|
2
|
U-W-1
|
***
|
May
2, 2011
|
Oct-2012
|
2
|
U-W-1
|
***
|
June
1, 2011
|
Nov-2012
|
3
|
U-W-1
|
***
|
July
1, 2011
|
Dec-2012
|
2
|
U-W-1
|
***
|
August
1, 2011
|
Total
|
86
|
Subject:
|
***
|
THE
BOEING COMPANY
|
By:
/s/ Nobuko Wiles
|
Its:
Attorney-In-Fact
|
SOUTHWEST
AIRLINES CO.
|
By:/s/
Scott Topping
|
Its:
VP
Treasurer
|
Model:
|
737-300/-500
|
Project
Title:
|
AVIONICS
UPGRADE - SECOND FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) AND INSTALLATION
AND ACTIVATION OF DUAL GLOBAL POSITIONING SYSTEM SENSOR (GPSS) -
PHASE
I
|
|
Description
of Change
:
|
|
BACKGROUND:
|
|
This
effort shall be accomplished in two
phases:
|
|
Phase
II - Installation of Large Area Displays with activation of
RNP/SAAAR.
|
|
Each
phase will be independently accomplished with a FAA certification
and
Service Bulletin at the completion of each
phase.
|
|
PHASE
I REQUIREMENTS
|
|
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
S242A600-1001
|
BFE
|
1
|
CDU
|
||
10-62225-003
|
BFE
|
1
|
FMC
|
||
TBD
|
BFE
|
1
|
WXR
Control Panel
|
||
822-2189-001
|
BFE
|
2
|
GNS
4000S
|
||
822-2033-001
|
BFE
|
2
|
GNS
ANTENNA
|
||
69-73713-17
|
BFE
|
1
|
Mode
Select Panel
|
||
69-37399-12
|
BFE
|
2
|
IRS
MASTER CAUTION UNIT
|
10-62038-new
|
BFE
|
2
|
Flight
Control Computer
|
||
TBD
|
BFE
|
2
|
Smart
Display Unit
|
||
TBD
|
BFE
|
2
|
EFIS
Control Panel
|
||
TBD
|
BFE
|
1
|
ISDS
(Integrated Standby Display System)
|
||
TBD
|
BFE
|
1
|
Dedicated
Battery Charger
|
||
TBD
|
BFE
|
1
|
OPS,
Smart Display
|
||
980-4700-042
|
BFE
|
Digital
Flight Data Recorder
|
|||
967-0212-001
|
BFE
|
Digital
Flight Data Acquisition Unit
|
|||
TBD
|
BFE
|
2
|
Display
Control Panel
|
Southwest
Airlines Co.
|
Project ID:
|
47917
|
Change No:
|
3162MK3580
|
|
Dated:
|
5/25/2007
|
Similar
To
|
Part
Number
|
CAT
|
Part
Qty
|
Part
Description
|
Supplier
Name
|
þ
|
998-2512-504
|
BFE
|
1
|
DFDAU
Mandatory Software (disk 963-2000-025)
|
Honeywell
|
þ
|
998-2513-504
|
BFE
|
1
|
DFDAU
429 Broadcast Software (disk 963-2100-025)
|
Honeywell
|
þ
|
L034870003
|
BFE
|
1
|
DFDAU
Software (disk 360-03834-003)
|
SAGEM
|
þ
|
3102-TDY-M14-01
|
BFE
|
1
|
DFDAU
Software (disk 2237274-06) (requires -8XX LRU part number)
|
Teledyne
|
Southwest
Airlines Co.
|
Project ID:
|
47918
|
Change No:
|
3461MK3AIY
|
|
Dated:
|
5/25/2007
|
Similar
To
|
Part
Number
|
CAT
|
Part
Qty
|
Part
Description
|
Supplier
Name
|
þ
|
4082260-939
(Boeing Spec #: 10-62038-239)
|
BFE
|
1
|
Mode
Control Panel
|
Honeywell
|
2.
|
Table
1 is deleted in its entirety and replaced by a new Table 1 attached
hereto, reflecting deletion of one Block T-W-1 Aircraft with a Contract
Delivery Month of November 2007
|
THE
BOEING COMPANY
|
SOUTHWEST
AIRLINES CO.
|
By:
/s/ Nobuko Wiles
|
By:
/s/
Scott Topping
|
Its:
Attorney-In-Fact
|
Its:
VP
& Treasurer
|
Page
|
SA
|
||
Number
|
Number
|
||
ARTICLES
|
|||
1.
|
Subject
Matter of Sale
|
1-1
|
SA-13
|
2.
|
Delivery,
Title and Risk of Loss
|
2-1
|
SA-28
|
3.
|
Price
of Aircraft
|
3-1
|
SA-47
|
4.
|
Taxes
|
4-1
|
|
5.
|
Payment
|
5-1
|
|
6.
|
Excusable
Delay
|
6-1
|
|
7.
|
Changes
to the Detail
|
|
|
Specification
|
7-1
|
SA-1
|
|
8.
|
Federal
Aviation Requirements and Certificates and Export License
|
8-1
|
|
9.
|
Representatives,
Inspection, Flights and Test Data
|
9-1
|
|
10.
|
Assignment,
Resale or Lease
|
10-1
|
|
11.
|
Termination
for Certain Events
|
11-1
|
|
12.
|
Product
Assurance; Disclaimer and Release; Exclusion of Liabilities;
Customer
|
||
Support;
Indemnification and Insurance
|
12-1
|
||
13.
|
Buyer
Furnished Equipment and Spare Parts
|
13-1
|
|
14.
|
Contractual
Notices and Requests
|
14-1
|
|
15.
|
Miscellaneous
|
15-1
|
SA
|
||
Number
|
||
RESTRICTED
LETTER AGREEMENTS
|
||
6-1162-RLL-932R2
|
Promotional
Support
|
SA-13
|
6-1162-RLL-933R20
|
Option
Aircraft
|
SA-47
|
6-1162-RLL-934R3
|
Disclosure
of Confidential Information
|
SA-14
|
6-1162-RLL-935R1
|
Performance
Guarantees
|
SA-1
|
6-1162-NIW-890
|
***
-
|
SA-39
|
6-1162-RLL-936R4
|
Certain
Contractual Matters
|
SA-4
|
6-1162-RLL-937
|
Alternate
Advance Payment Schedule
|
|
6-1162-RLL-938
|
***
|
|
6-1162-RLL-939R1
|
Certification
Flight Test Aircraft
|
SA-1
|
6-1162-RLL-940R1
|
Training
Matters
|
SA-1
|
6-1162-RLL-941R2
|
Other
Matters
|
SA-13
|
6-1162-RLL-942
|
Open
Configuration Matters
|
|
6-1162-RLL-943R1
|
Substitution
Rights
|
SA-6
|
6-1162-RLL-944
|
***
|
|
6-1162-RLL-945
|
Comparison
of 737-7H4 and 737-3H4 Block Fuel Burn
|
|
6-1162-RLL-1855R3
|
Additional
Contractual Matters
|
SA-4
|
6-1162-RLL-1856
|
***
|
SA-1
|
|
||
6-1162-RLL-1857
|
Service
Ready Validation Program Field Test
|
SA-1
|
6-1162-RLL-1858R1
|
Escalation
Matters
|
SA-4
|
Base
Aircraft Price
|
Special
Features
|
Aircraft
Basic Price
|
Base
Year Dollars
|
||
Block
A, B, C, D & E Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
F & G Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
H Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
I Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
J Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
K Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
K-W Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
L Aircraft
|
***
|
***
|
***
|
July
1992
|
|
Block
T Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W-1 / T-W-1a Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
T-W-2 / T-W-2a Aircraft
|
***
|
***
|
***
|
July
1999
|
|
Block
K-W Aircraft: Block K airplanes with production winglets
installation
|
|||||
Block
T-W Aircraft: Block T airplanes with production winglets
installation
|
|||||
Block
T-W-1 / T-W-1a Aircraft: Firm Aircraft contracted to deliver
from May 1, 2006 through June 2008 at the
signing
|
|||||
of
SA-47 -- (T-W-1a Aircraft -- Advance Payment Schedule per LA
6-1162-JGM-669)
|
|||||
Block
T-W-2 / T-W-2a Aircraft: U-W-1 Option Aircraft which became Firm
Aircraft
after signing of SA-47 and
|
|||||
Firm
Aircraft contracted to deliver in July 2008 forward at the signing
of SA47
--
|
|||||
(T-W-2a
Aircraft -- Advance Payment Schedule per LA
6-1162-JGM-669)
|
|
|
|
Escalation
Estimate
|
|
Delivery
|
Number
of
|
Aircraft
|
Adv
Payment Base
|
|
Date
|
Aircraft
|
Block
|
Price
Per A/P
|
Serial
Number
|
Dec-2000
|
2
|
E
|
***
|
|
Jan-2001
|
1
|
E
|
***
|
|
Feb-2001
|
1
|
E
|
***
|
|
Mar-2001
|
2
|
E
|
***
|
|
Jun-2001
|
3
|
E
|
***
|
|
Sep-2001
|
3
|
E
|
***
|
|
Oct-1998
|
1
|
F
|
***
|
|
Nov-1998
|
2
|
F
|
***
|
|
Dec-1998
|
2
|
F
|
***
|
|
Mar-1999
|
2
|
G
|
***
|
|
Jun-1999
|
2
|
H
|
***
|
|
Jul-1999
|
1
|
H
|
***
|
|
Aug-1999
|
1
|
H
|
***
|
|
Sep-1999
|
2
|
H
|
***
|
|
Oct-1999
|
1
|
H
|
***
|
|
Mar-2000
|
1
|
H
|
***
|
|
Apr-2000
|
2
|
H
|
***
|
|
Sep-2000
|
1
|
H
|
***
|
|
Oct-2000
|
2
|
H
|
***
|
|
Mar-2001
|
2
|
H
|
***
|
|
Apr-2001
|
1
|
H
|
***
|
|
Oct-2001
|
3
|
H
|
***
|
|
Nov-2001
|
2
|
I
|
***
|
|
Dec-2001
|
1
|
I
|
***
|
|
Jan-2002
|
1
|
I
|
***
|
|
Mar-2002
|
4
|
I
|
***
|
|
Apr-2002
|
2
|
I
|
***
|
|
Dec-2002
|
2
|
I
|
***
|
|
May-2003
|
1
|
I
|
***
|
|
Jun-2003
|
2
|
I
|
***
|
|
Jul-2003
|
1
|
I
|
***
|
|
Aug-2003
|
1
|
I
|
***
|
|
Sep-2003
|
3
|
I
|
***
|
|
Nov-2002
|
1
|
J
|
***
|
|
Dec-2002
|
1
|
J
|
***
|
|
Nov-2003
|
2
|
J
|
***
|
|
Dec-2003
|
2
|
J
|
***
|
|
Mar-2004
|
1
|
J
|
***
|
|
Mar-2004
|
1
|
K
|
***
|
|
Apr-2004
|
3
|
K
|
***
|
|
May-2004
|
1
|
K
|
***
|
|
Jun-2004
|
2
|
K
|
***
|
|
Jul-2004
|
2
|
K
|
***
|
|
Sep-2004
|
1
|
K-W
|
***
|
|
Oct-2004
|
4
|
K-W
|
***
|
|
Oct-1999
|
1
|
L
|
***
|
|
Nov-1999
|
2
|
L
|
***
|
|
Dec-1999
|
1
|
L
|
***
|
|
Jun-2000
|
3
|
L
|
***
|
|
Jul-2000
|
3
|
L
|
***
|
|
Sep-2000
|
1
|
L
|
***
|
|
Oct-2000
|
1
|
L
|
***
|
|
Nov-2000
|
4
|
L
|
***
|
|
Dec-2000
|
1
|
L
|
***
|
|
Jan-2001
|
1
|
L
|
***
|
|
Feb-2001
|
1
|
L
|
***
|
|
Jul-2001
|
1
|
L
|
***
|
|
Sep-2001
|
1
|
L
|
***
|
|
Oct-2001
|
1
|
L
|
***
|
|
Mar-2003
|
2
|
L
|
***
|
|
Jul-2003
|
1
|
L
|
***
|
|
Aug-2003
|
2
|
L
|
***
|
|
Nov-2001
|
1
|
T
|
***
|
|
Feb-2002
|
1
|
T
|
***
|
|
Jan-2004
|
2
|
T
|
***
|
|
Feb-2004
|
1
|
T
|
***
|
|
Apr-2004
|
3
|
T
|
***
|
|
May-2004
|
1
|
T
|
***
|
|
Jun-2004
|
6
|
T
|
***
|
|
Jul-2004
|
2
|
T
|
***
|
|
Aug-2004
|
6
|
T-W
|
***
|
|
Sep-2004
|
4
|
T-W
|
***
|
|
Oct-2004
|
0
|
T-W
|
***
|
|
Nov-2004
|
3
|
T-W
|
***
|
|
Dec-2004
|
3
|
T-W
|
***
|
|
Jan-2005
|
5
|
T-W
|
***
|
|
Feb-2005
|
3
|
T-W
|
***
|
|
Mar-2005
|
4
|
T-W
|
***
|
|
Apr-2005
|
4
|
T-W
|
***
|
|
May-2005
|
2
|
T-W
|
***
|
|
Jun-2005
|
4
|
T-W
|
***
|
|
Jul-2005
|
2
|
T-W
|
***
|
|
Aug-2005
|
2
|
T-W
|
***
|
|
Sep-2005
|
3
|
T-W
|
***
|
|
Oct-2005
|
2
|
T-W
|
***
|
|
Nov-2005
|
2
|
T-W
|
***
|
|
Dec-2005
|
1
|
T-W
|
***
|
|
Jan-2006
|
1
|
T-W
|
***
|
|
Feb-2006
|
4
|
T-W
|
***
|
|
Mar-2006
|
3
|
T-W
|
***
|
|
Apr-2006
|
2
|
T-W
|
***
|
|
May-2006
|
5
|
T-W-1
|
***
|
|
Jun-2006
|
5
|
T-W-1
|
***
|
|
Jul-2006
|
3
|
T-W-1
|
***
|
|
Aug-2006
|
3
|
T-W-1
|
***
|
|
Sep-2006
|
3
|
T-W-1
|
***
|
|
Oct-2006
|
1
|
T-W-1
|
***
|
|
Nov-2006
|
2
|
T-W-1
|
***
|
|
Dec-2006
|
2
|
T-W-1
|
***
|
|
Jan-2007
|
2
|
T-W-1
|
***
|
|
Feb-2007
|
3
|
T-W-1
|
***
|
|
Mar-2007
|
2
|
T-W-1
|
***
|
|
Apr-2007
|
3
|
T-W-1
|
***
|
|
May-2007
|
3
|
T-W-1
|
***
|
|
Jun-2007
|
2
|
T-W-1
|
***
|
|
Jun-2007
|
1
|
T-W-1a
|
***
|
36528
|
Jul-2007
|
2
|
T-W-1
|
***
|
|
Jul-2007
|
1
|
T-W-1a
|
***
|
36610
|
Aug-2007
|
2
|
T-W-1
|
***
|
|
Aug-2007
|
3
|
T-W-1a
|
***
|
36611,
36632 & 36633
|
Sep-2007
|
2
|
T-W-1
|
***
|
|
Sep-2007
|
1
|
T-W-1a
|
***
|
36612
|
Oct-2007
|
3
|
T-W-1
|
***
|
|
Oct-2007
|
1
|
T-W-1a
|
***
|
36613
|
Nov-2007
|
1
|
T-W-1
|
***
|
|
Nov-2007
|
1
|
T-W-1a
|
***
|
36614
|
Dec-2007
|
2
|
T-W-1
|
***
|
|
Dec-2007
|
1
|
T-W-1a
|
***
|
36615
|
Jan-2008
|
1
|
T-W-1
|
***
|
|
Jan-2008
|
2
|
T-W-1a
|
***
|
36616
& 36617
|
Jan-2008
|
1
|
T-W-2
|
***
|
36887
|
Feb-2008
|
1
|
T-W-1
|
***
|
|
Feb-2008
|
3
|
T-W-1a
|
***
|
36618,
36619 & 36620
|
Mar-2008
|
1
|
T-W-1
|
***
|
|
Mar-2008
|
2
|
T-W-1a
|
***
|
36621
& 36622
|
Mar-2008
|
1
|
T-W-2
|
***
|
36888
|
Apr-2008
|
1
|
T-W-1
|
***
|
|
Apr-2008
|
2
|
T-W-1a
|
***
|
36623
& 36624
|
May-2008
|
1
|
T-W-1
|
***
|
|
May-2008
|
2
|
T-W-1a
|
***
|
36625
& 36626
|
Jun-2008
|
1
|
T-W-1
|
***
|
|
Jun-2008
|
2
|
T-W-1a
|
***
|
36627
& 36628
|
Jul-2008
|
2
|
T-W-2a
|
***
|
|
Jul-2008
|
2
|
T-W-2
|
***
|
36889
& 36890
|
Aug-2008
|
1
|
T-W-2a
|
***
|
|
Oct-2008
|
1
|
T-W-2a
|
***
|
|
Nov-2008
|
1
|
T-W-2a
|
***
|
|
Dec-2008
|
1
|
T-W-2a
|
***
|
|
Jan-2009
|
1
|
T-W-2a
|
***
|
|
Feb-2009
|
2
|
T-W-2a
|
***
|
|
Mar-2009
|
2
|
T-W-2a
|
***
|
|
Apr-2009
|
2
|
T-W-2a
|
***
|
|
May-2009
|
2
|
T-W-2a
|
***
|
|
Jun-2009
|
2
|
T-W-2a
|
***
|
|
Jul-2009
|
2
|
T-W-2a
|
***
|
|
Aug-2009
|
1
|
T-W-2a
|
***
|
|
Sep-2009
|
1
|
T-W-2a
|
***
|
|
Oct-2009
|
1
|
T-W-2a
|
***
|
|
Nov-2009
|
1
|
T-W-2a
|
***
|
|
Dec-2009
|
1
|
T-W-2a
|
***
|
|
Jan-2010
|
1
|
T-W-2a
|
***
|
|
Feb-2010
|
1
|
T-W-2a
|
***
|
|
Mar-2010
|
1
|
T-W-2a
|
***
|
|
Apr-2010
|
1
|
T-W-2a
|
***
|
|
May-2010
|
1
|
T-W-2a
|
***
|
|
Jun-2010
|
1
|
T-W-2a
|
***
|
|
Jul-2010
|
1
|
T-W-2a
|
***
|
|
Aug-2010
|
1
|
T-W-2a
|
***
|
|
Sep-2010
|
1
|
T-W-2a
|
***
|
|
Oct-2010
|
1
|
T-W-2a
|
***
|
|
Jan-2011
|
1
|
T-W-2a
|
***
|
|
Feb-2011
|
1
|
T-W-2a
|
***
|
|
Mar-2011
|
1
|
T-W-2a
|
***
|
|
Apr-2011
|
1
|
T-W-2a
|
***
|
|
May-2011
|
1
|
T-W-2a
|
***
|
|
Jun-2011
|
1
|
T-W-2a
|
***
|
|
Jul-2011
|
1
|
T-W-2a
|
***
|
|
Aug-2011
|
1
|
T-W-2a
|
***
|
|
Sep-2011
|
1
|
T-W-2a
|
***
|
|
Oct-2011
|
1
|
T-W-2a
|
***
|
|
Jan-2012
|
1
|
T-W-2a
|
***
|
|
Feb-2012
|
1
|
T-W-2a
|
***
|
|
Mar-2012
|
1
|
T-W-2a
|
***
|
|
Apr-2012
|
1
|
T-W-2a
|
***
|
|
May-2012
|
1
|
T-W-2a
|
***
|
|
Jun-2012
|
1
|
T-W-2a
|
***
|
|
Jul-2012
|
1
|
T-W-2a
|
***
|
|
Aug-2012
|
1
|
T-W-2a
|
***
|
|
Sep-2012
|
1
|
T-W-2a
|
***
|
|
Oct-2012
|
1
|
T-W-2a
|
***
|
|
Jan-2013
|
1
|
T-W-2
|
***
|
36891
|
Jan-2013
|
1
|
T-W-2a
|
***
|
|
Feb-2013
|
1
|
T-W-2a
|
***
|
|
Mar-2013
|
1
|
T-W-2a
|
***
|
|
Mar-2013
|
1
|
T-W-2
|
***
|
|
Apr-2013
|
1
|
T-W-2
|
***
|
|
May-2013
|
1
|
T-W-2
|
***
|
|
Jun-2013
|
2
|
T-W-2
|
***
|
|
Jul-2013
|
1
|
T-W-2
|
***
|
|
Aug-2013
|
2
|
T-W-2
|
***
|
|
Sep-2013
|
2
|
T-W-2
|
***
|
|
Oct-2013
|
2
|
T-W-2
|
***
|
|
Nov-2013
|
1
|
T-W-2
|
***
|
|
Dec-2013
|
2
|
T-W-2
|
***
|
|
Jan-2014
|
1
|
T-W-2
|
***
|
|
Feb-2014
|
1
|
T-W-2
|
***
|
|
Mar-2014
|
1
|
T-W-2
|
***
|
|
Apr-2014
|
1
|
T-W-2
|
***
|
|
May-2014
|
1
|
T-W-2
|
***
|
|
Jun-2014
|
1
|
T-W-2
|
***
|
|
Jul-2014
|
1
|
T-W-2
|
***
|
|
Aug-2014
|
1
|
T-W-2
|
***
|
|
Sep-2014
|
1
|
T-W-2
|
***
|
|
Oct-2014
|
1
|
T-W-2
|
***
|
A.
|
POSITIONS;
RETIREMENT FROM OFFICE; AND CONTINUED EMPLOYMENT.
The
Employee shall perform such corporate duties and discharge such
corporate
responsibilities as are designated by the Board of Directors and
he shall
serve as both Chairman of the Board and Chairman of the Executive
Committee of the Board without additional compensation
hereunder. Effective at the Annual Meeting of Shareholders for
Southwest to be held in May 2008, the Employee shall retire from
the Board
of Directors of Southwest and from his positions as Chairman of
the Board
and Chairman of the Executive Committee of the
Board. Notwithstanding such retirements, Employee shall remain
an employee of Southwest through July 14, 2013, and during the
period of
such employment the Employee shall discharge the obligations set
forth in
Paragraph I-B of this Agreement. The Employee may elect to
terminate his employment at any time prior to July 15, 2013 as
provided in
Paragraph V-E of this Agreement.
|
B.
|
DUTIES.
For
so long as Employee remains Chairman of the Board of Directors
hereunder,
the Employee’s duties shall include responsibility for overseeing the
implementation of Southwest’s current and long range business policies and
programs and handling such other functions or segments of Southwest’s
business as may be directed from time to time by the Board of
Directors. Thereafter, the Employee agrees that he shall make
himself generally available at the offices of Southwest in order
to
consult, upon request, with the Chief Executive Officer of Southwest,
or
his designees, as to the business, properties or operations of
Southwest. At all times during his employment the Employee
shall generally conform to all policies of Southwest as they may
apply to
an employee of his level of duties and
obligations.
|
C.
|
AUTHORITY.
The
Employee shall be vested with all authority reasonably necessary
to carry
out his duties and responsibilities as set forth in this Article
I.
|
D.
|
NECESSARY
SUPPORT AND ENVIRONMENT.
Throughout the term of this
Agreement, the Employee shall be provided with the office suite
and
appurtenances thereto that he occupied, and utilized, on July 15,
2007 and
with the staff support that he received as of such
date.
|
A.
|
TIME
AND EFFORTS.
During the term of his employment
hereunder, the Employee shall devote such time and effort as is
required
to discharge his duties hereunder.
|
B.
|
NON-COMPETITION.
The
Employee recognizes and understands that in performing the duties
and
responsibilities of his employment as outlined in this Agreement
and
pursuant to his employment at Southwest prior to the execution
of this
Agreement, the Employee has occupied and will occupy a position
of trust
and confidence, pursuant to which the Employee has developed and
acquired
and will develop and acquire experience and knowledge with respect
to
various aspects of the business of Southwest and the manner in
which such
business is conducted. It is the expressed intent and agreement
of the Employee and Southwest that such knowledge and experience
shall be
used in the furtherance of the business interests of Southwest
and not in
any manner which would be detrimental to such business interests
of
Southwest. The Employee therefore agrees that, so long as the
Employee is employed pursuant to this Agreement, unless he first
secures
the consent of the Board of Directors of Southwest, the Employee
will not
invest, engage or participate in any manner whatsoever, either
personally
or in any status or capacity (other than as a shareholder of less
than one
percent [1%] of the capital stock of a publicly owned corporation),
in any
business or other entity organized for profit engaged in significant
competition with Southwest in the conduct of its air carrier operations
anywhere in the States of Texas, Louisiana, Oklahoma, New Mexico,
Missouri, Arizona, Nevada, California, Arkansas, Alabama, Tennessee,
Kentucky, Michigan, Indiana, Ohio, Maryland, Illinois, Utah, Washington,
Oregon, Nebraska, Florida, Idaho, Mississippi, New Hampshire, New
York,
Rhode Island, Connecticut, North Carolina, Virginia, Pennsylvania,
and
Colorado. Although the Employee and Southwest regard such
restrictions as reasonable for the purpose of preserving Southwest
and its
proprietary rights, in the event that the provisions of this Paragraph
II-B should ever be deemed to exceed the time or geographic limitations
permitted by applicable laws, then such provisions shall be reformed
to
the maximum time or geographic limitations permitted by applicable
laws.
|
A.
|
TERM.
This
Agreement and the Employee’s employment hereunder shall commence and
become effective on and as of July 15, 2007. The term of such
employment shall expire on July 15, 2013, unless extended by consent
of
the parties hereto or earlier terminated pursuant to the provisions
of
Article V.
|
A.
|
BASE
SALARY.
The Employee’s annual Base Salary for each
year during the term of this Agreement shall be $400,000. The
Employee’s Base Salary shall be payable to the Employee in equal
semi-monthly installments and shall be subject to such payroll
and
withholding deductions as may be required by
law.
|
B.
|
PERFORMANCE
BONUS.
The Board of Directors of Southwest (or the
Compensation Committee thereof) may grant a Performance Bonus to
the
Employee, in addition to his Base Salary, at such times and in
such
amounts as such Board (or Committee) may
determine.
|
C.
|
DEFERRED
COMPENSATION.
In addition to the Base Salary provided
for in Paragraph IV-A above, Southwest shall continue to set aside on
its books, as provided in Paragraph IV-C of each of the Old Contracts,
a
special ledger Deferred Compensation Account (the “Account”) for the
Employee, and shall credit thereto Deferred Compensation determined
as
hereinafter provided. (Southwest at its election may fund the
payment of Deferred Compensation by setting aside and investing
such funds
as Southwest may from time to time determine. Neither the
establishment of the Account, the crediting of Deferred Compensation
thereto, nor the setting aside of any funds shall be deemed to
create a
trust. Legal and equitable title to any funds set aside shall
remain in Southwest, and the Employee shall have no security or
other
interest in such funds. Any funds so set aside or invested
shall remain subject to the claims of the creditors of Southwest,
present
and future.) For each full or partial calendar year as the
Employee shall remain in the employment of Southwest under this
Agreement,
Deferred Compensation shall accumulate in an amount equal to any
contributions (including forfeitures but excluding any elective
deferrals
actually returned to the Employee) which would otherwise have been
made by
Southwest on behalf of the Employee to the Southwest Airlines Co.
Profitsharing Plan and Southwest Airlines Co. 401(k) Plan, but
which
exceed the amount permitted to be so contributed due to the limitations
under Sections 415(c) (the “415(c) Excess Amount”) and 401(a)(17) of the
Internal Revenue Code. If such employment shall terminate prior
to December 31 in any calendar year, then Deferred Compensation
shall
accumulate and be calculated as provided under the terms of Southwest’s
Profitsharing Plan. Employee hereby elects not to invest the
415(c) Excess Amount in Southwest’s 2005 Excess Benefit Plan (or any
successor plan).
|
D.
|
DISABILITY
INSURANCE.
During the term of this Agreement,
Southwest shall provide long term disability insurance providing
for
payment, in the event of disability of the Employee, of $10,000
per month
to age eighty-two (82). Except as to amounts payable, the terms
and conditions of such policy shall be identical, or substantially
similar, to the disability insurance provided by Southwest for
its other
officers as of the date of this
Agreement.
|
E.
|
MEDICAL
AND DENTAL EXPENSES.
During the term of this
Agreement, the Employee shall remain eligible to participate in
any
medical benefit plan or program that Southwest makes available
to its
employees generally. Upon termination of his employment with Southwest,
the Employee shall be eligible to participate in any non-contract
retiree
medical benefit plan or program that Southwest may then make available
to
its retirees generally. Southwest shall reimburse the Employee
for all his
out-of-pocket expenses (including specifically all premiums and
deductibles) that the Employee may incur for himself and his spouse
under
any such Southwest plan or program during the term of this
Agreement.
|
F.
|
STOCK
OPTION GRANT.
In connection with its approval of the
terms of this Agreement on July 19, 2007, the Compensation Committee
of
the Board of Directors granted to the Employee ten-year options
to
purchase 60,000 shares of its common stock. Such options were granted
pursuant to the Company’s 2007 Equity Incentive Plan and became
exercisable with respect to 100% of the shares of Common Stock
covered
thereby on the date of grant. Such options shall be incentive
stock options to the maximum extent permissible under the terms
of the
2007 Equity Incentive Plan. The exercise price of such options
shall be the fair market value of Southwest’s common stock on July 19,
2007 or the date of approval of the form of this Agreement by the
Compensation Committee, whichever is
higher.
|
G.
|
OTHER
BENEFITS
. The Employee shall be eligible to continue
to participate in all employee pension, profit-sharing, stock purchase,
group insurance and other benefit plans or programs in effect for
Southwest managerial employees generally to the extent of and in
accordance with the rules and agreements governing such plans or
programs,
so long as same shall be in effect, with full service credit where
relevant for the Employee’s prior employment by
Southwest. Southwest shall reimburse the Employee for
reasonable expenses incurred by him in the performance of his duties
and
responsibilities hereunder. The Employee shall be entitled to vacation
of
three (3) weeks per year or such longer period as may be established
from
time to time by Southwest for its managerial employees
generally.
|
A.
|
EXPIRATION
OR DEATH.
The Employee’s employment hereunder shall
terminate on July 15, 2013 (or such later date to which the term
of this
Agreement may be extended by consent of the parties hereto, in
either case
without prejudice to the Employee’s privilege to remain an employee of
Southwest thereafter), or upon the Employee’s death, whichever shall first
occur, without further obligation or liability of either party
hereunder,
except for Southwest’s obligation to pay Deferred Compensation as provided
in Paragraph IV-C of this
Agreement.
|
B.
|
TERMINATION
FOR CAUSE.
Southwest may terminate the Employee’s
employment hereunder upon the determination by a majority of its
whole
Board of Directors that the Employee has willfully failed and refused
to
perform his duties and to discharge his responsibilities
hereunder. Such determination shall be final and
conclusive. If the Board of Directors of Southwest makes such
determination, Southwest may (a) terminate the Employee’s employment,
effective immediately or at a subsequent date, or (b) condition his
continued employment upon the circumstances and place a reasonable
limitation upon the time within which the Employee shall comply
with such
considerations or requirements. If termination is so effected,
Southwest shall have no further liability to the Employee hereunder
except
for the obligation to pay Deferred Compensation as provided in
Paragraph IV-C hereof.
|
C.
|
TERMINATION
FOR DISABILITY.
Southwest may terminate the Employee’s
employment hereunder on account of any disabling illness, hereby
defined
to include any emotional or mental disorders, physical diseases
or
injuries as a result of which the Employee is, for a continuous
period of
ninety (90) days, unable to perform his duties
hereunder. Southwest shall give to the Employee ninety (90)
days’ notice of its intention to effect such termination pursuant to
this
Paragraph V-C. If, within such notice period, the Employee
shall have recovered from his disability sufficiently well to resume
performance of his duties (although still undergoing treatment
or
rehabilitation), Southwest shall not have the right to effect such
termination. If such disabling illness occurs as a result of a
job-related cause, Southwest shall continue to pay the Employee
regular
installments of his Base Salary in effect at the time of such termination
for the remainder of the term of this Agreement in accordance with
Southwest’s regular payroll practices; provided that, payment shall be
deferred to the extent necessary to cause such payment to comply
with the
six month deferral rule described in Section 409A(a)(2)(B) of the
Internal
Revenue Code if Employee at his termination of employment with
Southwest
is a “specified employee” as defined in such section. It is expressly
understood and agreed, however, that any obligation of Southwest
to
continue to pay the Employee his Base Salary pursuant to this
Paragraph V-C shall be reduced by the amount of any proceeds of
long-term disability insurance provided for the Employee pursuant
to
Paragraph IV-D above, and shall also be reduced by the amount of the
proceeds of any worker’s compensation or other benefits which the Employee
receives as a result of or growing out of his disabling
illness.
|
D.
|
CHANGE
OF CONTROL TERMINATION.
In the event of any change of
control of Southwest, the Employee may, at his option, terminate
his
employment hereunder by giving to Southwest notice thereof no later
than
sixty (60) days after the Employee shall have determined or ascertained
that such change has occurred, irrespective whether Southwest shall
have
purported to terminate this Agreement after such event but prior
to
receipt of such notice. If termination is so effected, no later
than the date of such termination Southwest shall pay the Employee
as
“severance pay” a lump sum equal to (i) $750,000 plus (ii) an
amount equal to the unpaid installments of his Base Salary in effect
at
the time of such termination for the remaining term of this Agreement;
provided, however, that if Employee is at his termination of employment
with Southwest a “specified employee” within the meaning of Section
409A(a)(2)(B) of the Internal Revenue Code, payment of the “severance pay”
shall be deferred to the extent necessary to cause such payment
to comply
with the six month deferral rule described in such section. If
termination is so effected, Southwest shall have no other further
liability to the Employee hereunder except for its obligation to
pay
Deferred Compensation as provided in Paragraph IV-C
above. For purposes of this Paragraph V-D, a “change of
control of Southwest” shall be deemed to occur if (i) a third person,
including a “group” as determined in accordance with Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes the beneficial owner
of
shares of Southwest having twenty percent (20%) or more of the
total
number of votes that may be cast for the election of directors
of
Southwest, or (ii) as a result of, or in connection with, any cash
tender or exchange offer, merger or other business combination,
sale of
assets or contested election, or any combination of the foregoing
transactions (herein called a “Transaction”), the persons who were
directors of Southwest before the Transaction shall cease to constitute
a
majority of the Board of Directors of Southwest or any successor
to
Southwest.
|
E.
|
VOLUNTARY
TERMINATION.
The Employee’s employment hereunder shall
terminate forthwith upon his resignation and its acceptance by
Southwest,
without further obligation or liability of either party hereunder,
except
for Southwest’s obligation to pay Deferred Compensation as provided in
Paragraph IV-C above.
|
A.
|
ASSIGNABILITY,
ETC.
The rights and obligations of Southwest hereunder
shall inure to the benefit of and shall be binding upon the successors
and
assigns of Southwest; provided, however, Southwest’s obligations hereunder
may not be assigned without the prior approval of the
Employee. This Agreement is personal to the Employee and may
not be assigned by him.
|
B.
|
NO
WAIVERS.
Failure to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such provision
or any
other provision hereof.
|
C.
|
AMENDMENTS.
This
Agreement may not be modified except by an agreement in writing
executed
by the parties hereto.
|
D.
|
NOTICES.
Any
notice required or permitted to be given under this Agreement shall
be in
writing and shall be deemed to have been given to the person affected
by
such notice when personally delivered or when deposited in the
United
States mail, certified mail, return receipt requested and postage
prepaid,
and addressed to the party affected by such notice at the address
indicated on the signature page
hereof.
|
E.
|
SEVERABILITY.
The
invalidity or unenforceability of any provision hereof shall not
affect
the validity or enforceability of any other provision
hereof.
|
F.
|
COUNTERPARTS.
This
Agreement may be executed in multiple counterparts, each of which
shall be
deemed an original but all of which taken together shall constitute
a
single instrument.
|
G.
|
ENTIRE
AGREEMENT.
This Agreement contains all of the terms
and conditions agreed upon by the parties hereto respecting the
subject
matter hereof, and all other prior agreements, oral or otherwise,
regarding the subject matter of this Agreement shall be deemed
to be
superseded as of the date of this Agreement and not to bind either
of the
parties hereto.
|
H.
|
GOVERNING
LAW.
This Agreement shall be subject to and governed
by the laws of the State of
Texas.
|
By
|
/s/ David
Biegler
|
|
David
Biegler
|
||
Chairman,
Compensation Committee of the
|
||
Board
of Directors
|
||
By
|
/s/ Herbert
D. Kelleher
|
|
Herbert
D. Kelleher
|
||
Address: P.O.
Box 36611
|
||
Dallas,
Texas 75235-1611
|
||
A.
|
POSITIONS,
DUTIES AND RESPONSIBILITIES.
The Employee shall serve
as Chief Executive Officer of Southwest, and, for so long as he shall
be
elected to the Board of Directors of Southwest and so designated
by the
Board, he shall serve as Vice Chairman of the Board without additional
compensation hereunder. The Employee’s duties and
responsibilities as Chief Executive Officer shall include general
oversight of the operational performance of Southwest; managing costs
and
generating revenues in order to achieve excellent financial performance;
representing Southwest to its multitude of exterior constituencies;
implementing Southwest’s current and long range business policies and
programs; handling, or overseeing, major contract negotiations; and,
in
general, maintaining employee morale and
esprit de
corps.
In addition, he shall perform such other corporate
duties and discharge such other corporate responsibilities as are
specified in the bylaws of Southwest or are designated from time
to time
by either the Chairman of the Board of Directors of Southwest or
the full
Board of Directors.
|
B.
|
AUTHORITY.
The
Employee shall be vested with all authority reasonably necessary
to carry
out his duties and responsibilities as set forth in this Article
I.
|
C.
|
NECESSARY
SUPPORT AND ENVIRONMENT.
The Employee shall be
provided with the secretarial and other support personnel (including
a
full-time administrative assistant) and general working environment
(including a private, furnished office) reasonably necessary for
him to
carry out his duties and responsibilities as set forth in this Article
I.
|
A.
|
TIME
AND EFFORT.
During the term of his employment
hereunder, the Employee shall devote such time and effort as is required
to perform his duties and to discharge his responsibilities
hereunder. The Employee shall generally conform with all
policies of Southwest as they apply to a person of his level of duties
and
responsibilities.
|
B.
|
NON-COMPETITION.
The
Employee recognizes and understands that in performing the duties
and
responsibilities of his employment as outlined in this Agreement
and
pursuant to his employment at Southwest prior to the execution of
this
Agreement, the Employee has occupied and will occupy a position of
trust
and confidence, pursuant to which the Employee has developed and
acquired
and will develop and acquire experience and knowledge with respect
to
various aspects of the business of Southwest and the manner in which
such
business is conducted. It is the expressed intent and agreement
of the Employee and Southwest that such knowledge and experience
shall be
used in the furtherance of the business interests of Southwest and
not in
any manner which would be detrimental to such business interests
of
Southwest. The Employee therefore agrees that, so long as the
Employee is employed pursuant to this Agreement, unless he first
secures
the consent of the Board of Directors of Southwest, the Employee
will not
invest, engage or participate in any manner whatsoever, either personally
or in any status or capacity (other than as a shareholder of less
than one
percent [1%] of the capital stock of a publicly owned corporation),
in any
business or other entity organized for profit engaged in significant
competition with Southwest in the conduct of its air carrier operations
anywhere in the States of Texas, Louisiana, Oklahoma, New Mexico,
Missouri, Arizona, Nevada, California, Arkansas, Alabama, Tennessee,
Kentucky, Michigan, Indiana, Ohio, Maryland, Illinois, Utah, Washington,
Oregon, Nebraska, Florida, Idaho, Mississippi, New Hampshire, New
York,
Pennsylvania, Rhode Island, Connecticut, North Carolina, Virginia,
and
Colorado. Although the Employee and Southwest regard such
restrictions as reasonable for the purpose of preserving Southwest
and its
proprietary rights, in the event that the provisions of this Paragraph
II-B should ever be deemed to exceed the time or geographic limitations
permitted by applicable laws, then such provisions shall be reformed
to
the maximum time or geographic limitations permitted by applicable
laws.
|
A.
|
TERM.
This
Agreement and the Employee’s employment hereunder shall commence and
become effective on and as of July 15, 2007. The term of such
employment shall expire on February 1, 2011, unless extended by consent
of
the parties hereto or earlier terminated pursuant to the provisions
of
Article V.
|
A.
|
BASE
SALARY.
The Employee’s annual Base Salary shall be
$424,065. The Board of Directors of Southwest (or the
Compensation Committee thereof) may grant a raise to the Employee
at such
times and in such amounts as such Board (or Committee) may determine.
The
Employee’s Base Salary shall be payable to the Employee in equal
semi-monthly installments. The Employee’s Base Salary
installment payments shall be subject to such payroll and withholding
deductions as may be required by
law.
|
B.
|
PERFORMANCE
BONUS.
The Board of Directors of Southwest (or the
Compensation Committee thereof) may grant a Performance Bonus to
the
Employee, in addition to his Base Salary, at such times and in such
amounts as such Board (or Committee) may
determine.
|
C.
|
DEFERRED
COMPENSATION.
In addition to the Base Salary provided
for in Paragraph IV-A above, Southwest shall continue to set aside on
its books, as provided in Paragraph IV-C of the Old Contract, a
special ledger Deferred Compensation Account (the “Account”) for the
Employee, and shall credit thereto Deferred Compensation determined
as
hereinafter provided. (Southwest at its election may fund the
payment of Deferred Compensation by setting aside and investing such
funds
as Southwest may from time to time determine. Neither the
establishment of the Account, the crediting of Deferred Compensation
thereto, nor the setting aside of any funds shall be deemed to create
a
trust. Legal and equitable title to any funds set aside shall
remain in Southwest, and the Employee shall have no security or other
interest in such funds. Any funds so set aside or invested
shall remain subject to the claims of the creditors of Southwest,
present
and future.) For each full or partial calendar year as the
Employee shall remain in the employment of Southwest under this Agreement,
Deferred Compensation shall accumulate in an amount equal to
any contributions (including forfeitures but excluding any elective
deferrals actually returned to the Employee) which would otherwise
have
been made by Southwest on behalf of the Employee to the Southwest
Airlines
Co. Profitsharing Plan and Southwest Airlines Co. 401(k) Plan, but
which
exceed the amount permitted to be so contributed due to the limitations
under Sections 415(c) (the “415(c) Excess Amount”) and 401(a)(17) of the
Internal Revenue Code.. If such employment shall terminate
prior to December 31 in any calendar year, then Deferred Compensation
shall accumulate and be calculated as provided under the terms of
Southwest’s Profitsharing Plan. Employee hereby elects not to
invest the 415(c) Excess Amount in Southwest’s 2005 Excess Benefit Plan
(or any successor plan).
The
Deferred Compensation credited to the Account (including the Interest
hereinafter provided) shall be paid to the Employee at the rate
of $200,000 per calendar year (subject to such payroll and withholding
deductions as may be required by law), commencing with the calendar
year
following the year in which (i) the Employee shall become sixty-five
(65)
or (ii) the Employee’s employment with Southwest shall terminate (whether
such termination is under this Agreement or otherwise and whether
it is
before, on or after the expiration of the initial term set forth
in
Paragraph III-A above, and irrespective of the cause thereof), whichever
shall occur later, and continuing until the entire amount of Deferred
Compensation and Interest credited to the Account shall have been
paid. Although the total amount of Deferred Compensation
ultimately payable to the Employee hereunder shall be computed in
accordance with the provisions set forth above, there shall be accrued
and
credited to the Account, beginning on January 1, 2007 (if not so
accrued
and credited pursuant to the Old Contract, and if so accrued and
credited,
then beginning on January 1, 2008) and continuing annually thereafter
until the entire balance of the account has been distributed (whether
such
distribution takes place during the term of this Agreement or thereafter),
amounts equal to simple interest at the rate of ten percent (10%)
per
annum, compounded annually (“Interest”), on the accrued and unpaid balance
of the Deferred Compensation credited to the Account as of the preceding
December 31. The Deferred Compensation and Interest to be paid
in any one calendar year shall be paid on the first business day
of such
calendar year; provided, however, that if the event triggering
commencement of payment of Deferred Compensation and Interest is
Employee’s termination of employment with Southwest, payment of the first
of such annual Deferred Compensation and Interest payments shall
be
deferred to the extent necessary to cause such payment to comply
with the
six month deferral rule described in Section 409A(a)(2)(B) of the
Internal
Revenue Code if Employee at his termination of employment with Southwest
is a “specified employee” within the meaning of such
section. Notwithstanding the foregoing, in the event of the
Employee’s death, then the unpaid balance of the Deferred Compensation
(together with any accrued Interest thereon) shall be paid to the
executors or administrators of the Employee’s estate in cash in one lump
sum on the first business day of the calendar year next following
the
calendar year in which the Employee shall have died. No right,
title, interest or benefit under this Paragraph IV-C shall ever be
liable
for or charged with any of the torts or obligations of the Employee
or any
person claiming under him, or be subject to seizure by any creditor
of the
Employee or any person claiming under him. Neither the Employee
nor any person claiming under him shall have the power to anticipate
or
dispose of any right, title, interest or benefit under this Paragraph
IV-C
in any manner until the same shall have been actually distributed
by
Southwest.
|
D.
|
DISABILITY
INSURANCE.
During the term of this Agreement,
Southwest shall provide long term disability insurance providing
for
payment, in the event of disability of the Employee, of $10,000 per
month
to age seventy (70). Except as to amounts payable, the terms
and conditions of such policy shall be identical, or substantially
similar, to the disability insurance provided by Southwest for its
other
officers as of the date of this
Agreement.
|
E.
|
MEDICAL
AND DENTAL EXPENSES.
During the term of this
Agreement, the Employee shall remain eligible to participate in any
medical benefit plan or program that Southwest makes available to
its
employees generally. Upon termination of his employment with Southwest,
the Employee shall be eligible to participate in any non-contract
retiree
medical benefit plan or program that Southwest may then make available
to
its retirees generally. Southwest shall reimburse the Employee for
all his
out-of-pocket expenses (including specifically all premiums and
deductibles) that the Employee may incur for himself, his spouse
and his
children under any such Southwest plan or program during the term
of this
Agreement. In addition, Southwest shall pay Employee the sum of
$10,000 per year to be applied to any supplemental insurance needs
he may
have, such amount to be payable on August 1 of each year during the
term
of this Agreement, beginning August 1,
2007.
|
F.
|
STOCK
OPTION GRANT.
In connection with its approval of the
terms of this Agreement on July 19, 2007, the Compensation Committee
of
the Board of Directors granted to the Employee ten-year options to
purchase 150,000 shares of its common stock. Such options were granted
pursuant to the Company’s 2007 Equity Incentive Plan and one-third of such
options were exercisable immediately and one-third will become exercisable
on each of July 15, 2008 and July 15, 2009. Such options shall
be incentive stock options to the maximum extent permissible under
the
terms of the 2007 Equity Incentive Plan. The exercise price of
such options shall be the fair market value of Southwest’s common stock on
July 19, 2007 or the date of approval of the form of this Agreement
by the
Compensation Committee, whichever is
higher.
|
G.
|
OTHER
BENEFITS
. The Employee shall be eligible to continue
to participate in all employee pension, profit-sharing, stock purchase,
group insurance and other benefit plans or programs in effect for
Southwest managerial employees generally to the extent of and in
accordance with the rules and agreements governing such plans or
programs,
so long as same shall be in effect, with full service credit where
relevant for the Employee’s prior employment by
Southwest. Southwest shall reimburse the Employee for
reasonable expenses incurred by him in the performance of his duties
and
responsibilities hereunder. The Employee shall be entitled to
vacation of three (3) weeks per year or such longer period as may
be
established from time to time by Southwest for its managerial employees
generally.
|
A.
|
EXPIRATION
OR DEATH.
The Employee’s employment hereunder shall
terminate on February 1, 2011 (or such later date to which the term
of
this Agreement may be extended by consent of the parties hereto,
in either
case without prejudice to the Employee’s privilege to remain an employee
of Southwest thereafter), or upon the Employee’s death, whichever shall
first occur, without further obligation or liability of either party
hereunder, except for Southwest’s obligation to pay Deferred Compensation
as provided in Paragraph IV-C of this
Agreement.
|
B.
|
TERMINATION
FOR CAUSE.
Southwest may terminate the Employee’s
employment hereunder upon the determination by a majority of its
whole
Board of Directors that the Employee has willfully failed and refused
to
perform his duties and to discharge his responsibilities
hereunder. Such determination shall be final and
conclusive. If the Board of Directors of Southwest makes such
determination, Southwest may (a) terminate the Employee’s employment,
effective immediately or at a subsequent date, or (b) condition his
continued employment upon the circumstances and place a reasonable
limitation upon the time within which the Employee shall comply with
such
considerations or requirements. If termination is so effected,
Southwest shall have no further liability to the Employee hereunder
except
for the obligation to pay Deferred Compensation as provided in
Paragraph IV-C hereof.
|
C.
|
TERMINATION
FOR DISABILITY.
Southwest may terminate the Employee’s
employment hereunder on account of any disabling illness, hereby
defined
to include any emotional or mental disorders, physical diseases or
injuries as a result of which the Employee is, for a continuous period
of
ninety (90) days, unable to perform his duties
hereunder. Southwest shall give to the Employee ninety (90)
days’ notice of its intention to effect such termination pursuant to this
Paragraph V-C. If, within such notice period, the Employee
shall have recovered from his disability sufficiently well to resume
performance of his duties (although still undergoing treatment or
rehabilitation), Southwest shall not have the right to effect such
termination. If such disabling illness occurs as a result of a
job-related cause, Southwest shall continue to pay the Employee regular
installments of his Base Salary in effect at the time of such termination
for the remainder of the term of this Agreement in accordance with
Southwest’s regular payroll practices; provided that, payment shall be
deferred to the extent necessary to cause such payment to comply
with the
six month deferral rule described in Section 409A(a)(2)(B) of the
Internal
Revenue Code if Employee at his termination of employment with Southwest
is a “specified employee” as defined in such section. It is expressly
understood and agreed, however, that any obligation of Southwest
to
continue to pay the Employee his Base Salary pursuant to this
Paragraph V-C shall be reduced by the amount of any proceeds of
long-term disability insurance provided for the Employee pursuant
to
Paragraph IV-D above, and shall also be reduced by the amount of the
proceeds of any worker’s compensation or other benefits which the Employee
receives as a result of or growing out of his disabling
illness.
|
D.
|
CHANGE
OF CONTROL TERMINATION.
In the event of any change of
control of Southwest, the Employee may, at his option, terminate
his
employment hereunder by giving to Southwest notice thereof no later
than
sixty (60) days after the Employee shall have determined or ascertained
that such change has occurred, irrespective whether Southwest shall
have
purported to terminate this Agreement after such event but prior
to
receipt of such notice. If termination is so effected, no later
than the date of such termination Southwest shall pay the Employee
as
“severance pay” a lump sum equal to (i) $750,000 plus (ii) an
amount equal to the unpaid installments of his Base Salary in effect
at
the time of such termination for the remaining term of this Agreement;
provided, however, that if Employee is at his termination of employment
with Southwest a “specified employee” within the meaning of Section
409A(a)(2)(B) of the Internal Revenue Code, payment of the “severance pay”
shall be deferred to the extent necessary to cause such payment to
comply
with the six month deferral rule described in such section. If
termination is so effected, Southwest shall have no other further
liability to the Employee hereunder except for its obligation to
pay
Deferred Compensation as provided in Paragraph IV-C
above. For purposes of this Paragraph V-D, a “change of
control of Southwest” shall be deemed to occur if (i) a third person,
including a “group” as determined in accordance with Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes the beneficial owner
of
shares of Southwest having twenty percent (20%) or more of the total
number of votes that may be cast for the election of directors of
Southwest, or (ii) as a result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale
of
assets or contested election, or any combination of the foregoing
transactions (herein called a “Transaction”), the persons who were
directors of Southwest before the Transaction shall cease to constitute
a
majority of the Board of Directors of Southwest or any successor
to
Southwest.
|
E.
|
VOLUNTARY
TERMINATION.
The Employee’s employment hereunder shall
terminate forthwith upon his resignation and its acceptance by Southwest,
without further obligation or liability of either party hereunder,
except
for Southwest’s obligation to pay Deferred Compensation as provided in
Paragraph IV-C above.
|
A.
|
ASSIGNABILITY,
ETC.
The rights and obligations of Southwest hereunder
shall inure to the benefit of and shall be binding upon the successors
and
assigns of Southwest; provided, however, Southwest’s obligations hereunder
may not be assigned without the prior approval of the
Employee. This Agreement is personal to the Employee and may
not be assigned by him.
|
B.
|
NO
WAIVERS.
Failure to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such provision
or any
other provision hereof.
|
C.
|
AMENDMENTS.
This
Agreement may not be modified except by an agreement in writing executed
by the parties hereto.
|
D.
|
NOTICES.
Any
notice required or permitted to be given under this Agreement shall
be in
writing in the English language and shall be deemed to have been
given to
the person affected by such notice when personally delivered or when
deposited in the United States mail, certified mail, return receipt
requested and postage prepaid, and addressed to the party affected
by such
notice at the address indicated on the signature page
hereof.
|
E.
|
SEVERABILITY.
The
invalidity or unenforceability of any provision hereof shall not
affect
the validity or enforceability of any other provision
hereof.
|
F.
|
COUNTERPARTS.
This
Agreement may be executed in multiple counterparts, each of which
shall be
deemed an original but all of which taken together shall constitute
a
single instrument.
|
G.
|
ENTIRE
AGREEMENT.
This Agreement contains all of the terms
and conditions agreed upon by the parties hereto respecting the subject
matter hereof, and all other prior agreements, oral or otherwise,
regarding the subject matter of this Agreement shall be deemed to
be
superseded as of the date of this Agreement and not to bind either
of the
parties hereto.
|
H.
|
GOVERNING
LAW.
This Agreement shall be subject to and governed
by the laws of the State of
Texas.
|
By
|
/s/ David
Biegler
|
|
David
Biegler
|
||
Chairman,
Compensation Committee of the
|
||
Board
of Directors
|
||
By
|
/s/ Gary
C. Kelly
|
|
Gary
C. Kelly
|
||
Address: P.O.
Box 36611
|
||
Dallas,
Texas 75235-1611
|
||
A.
|
POSITIONS;
RETIREMENT FROM OFFICE; AND CONTINUED EMPLOYMENT.
The
Employee shall serve as President of Southwest and, for so long as
she
shall be a member of the Board of Directors of Southwest, she shall
serve
in such capacity and as Corporate Secretary to the Board without
additional compensation hereunder. Effective at the Annual
Meeting of Shareholders of Southwest to be held in May 2008, the
Employee
shall retire from the Board of Directors of Southwest, and from her
position as Corporate Secretary; effective as of July 15, 2008, the
Employee shall resign her position as President of the Company.
Notwithstanding such retirements and resignations, Employee shall
remain
an employee of Southwest through July 14, 2013, and during the period
of
such employment the Employee shall discharge the obligations set
forth in
Paragraph I-B of this Agreement. The Employee may elect to
terminate her employment at any time prior to July 15, 2013, as provided
in Paragraph V-E of this Agreement; provided, however, that in such
event
Southwest shall be relieved of any obligation to make further payments
to
the Employee under Paragraph IV-A
hereunder
|
B.
|
DUTIES.
For
so long as Employee remains President hereunder, the Employee’s duties
shall include managing the Customer and Employee relations functions
of
Southwest; achieving excellent Customer and Employee service quality;
preserving the Southwest servant leader culture; and assisting the
Chief
Executive Officer in implementing Southwest’s current and long range
business policies and programs; and in general, maintaining Employee
morale and esprit de corps. In addition, she shall perform such
other corporate duties and discharge such other corporate responsibilities
as are specified in the bylaws of Southwest or as designated from
time to
time by any of the Chairman of the Board of Directors of Southwest,
the
Chief Executive Officer or the full Board of
Directors. Thereafter, the Employee agrees that she shall make
herself generally available at the offices of Southwest in order
to
consult with the Chief Executive Officer of Southwest, or his designees,
as to the business, properties or operations of Southwest. At
all times during her employment the Employee shall generally conform
to
all policies of Southwest as they may apply to an employee of her
level of
duties and obligations.
|
C.
|
AUTHORITY.
The
Employee shall be vested with all authority reasonably necessary
to carry
out her duties and responsibilities as set forth in this Article
I.
|
D.
|
NECESSARY
SUPPORT AND ENVIRONMENT.
Throughout the term of this
Agreement, the Employee shall be provided with the office suite and
appurtenances thereto that she occupied, and utilized, on July 15,
2007
and with the staff support that she received as of such
date.
|
A.
|
TIME
AND EFFORTS.
During the term of her employment
hereunder, the Employee shall devote such time and effort as is required
to discharge her duties hereunder.
|
B.
|
NON-COMPETITION.
The
Employee recognizes and understands that in performing the duties
and
responsibilities of her employment as outlined in this Agreement
and
pursuant to her employment at Southwest prior to the execution of
this
Agreement, the Employee has occupied and will occupy a position of
trust
and confidence, pursuant to which the Employee has developed and
acquired
and will develop and acquire experience and knowledge with respect
to
various aspects of the business of Southwest and the manner in which
such
business is conducted. It is the expressed intent and agreement
of the Employee and Southwest that such knowledge and experience
shall be
used in the furtherance of the business interests of Southwest and
not in
any manner which would be detrimental to such business interests
of
Southwest. The Employee therefore agrees that, so long as the
Employee is employed pursuant to this Agreement, unless she first
secures
the consent of the Board of Directors of Southwest, the Employee
will not
invest, engage or participate in any manner whatsoever, either personally
or in any status or capacity (other than as a shareholder of less
than one
percent [1%] of the capital stock of a publicly owned corporation),
in any
business or other entity organized for profit engaged in significant
competition with Southwest in the conduct of its air carrier operations
anywhere in the States of Texas, Louisiana, Oklahoma, New Mexico,
Missouri, Arizona, Nevada, California, Arkansas, Alabama, Tennessee,
Kentucky, Michigan, Indiana, Ohio, Maryland, Illinois, Utah, Washington,
Oregon, Nebraska, Florida, Idaho, Mississippi, New Hampshire, New
York,
Rhode Island, Connecticut, North Carolina, Virginia, Pennsylvania,
and
Colorado. Although the Employee and Southwest regard such
restrictions as reasonable for the purpose of preserving Southwest
and its
proprietary rights, in the event that the provisions of this Paragraph
II-B should ever be deemed to exceed the time or geographic limitations
permitted by applicable laws, then such provisions shall be reformed
to
the maximum time or geographic limitations permitted by applicable
laws.
|
A.
|
TERM.
This
Agreement and the Employee’s employment hereunder shall commence and
become effective on and as of July 15, 2007. The term of such
employment shall expire on July 15, 2013, unless extended by consent
of
the parties hereto or earlier terminated pursuant to the provisions
of
Article V.
|
A.
|
BASE
SALARY.
The Employee’s annual Base Salary shall be
$368,752 for the year ended July 15, 2008; thereafter the Employee’s
annual Base Salary for the balance of the term of this Agreement
shall be
$400,000. The Employee’s Base Salary shall be payable to the
Employee in equal semi-monthly installments and shall be subject
to such
payroll and withholding deductions as may be required by
law.
|
B.
|
PERFORMANCE
BONUS.
The Board of Directors of Southwest (or the
Compensation Committee thereof) may grant a Performance Bonus to
the
Employee, in addition to her Base Salary, at such times and in such
amounts as such Board (or Committee) may
determine.
|
C.
|
DEFERRED
COMPENSATION.
In addition to the Base Salary provided
for in Paragraph IV-A above, Southwest shall continue to set aside on
its books, as provided in Paragraph IV-C of each of the Old Contracts,
a
special ledger Deferred Compensation Account (the “Account”) for the
Employee, and shall credit thereto Deferred Compensation determined
as
hereinafter provided. (Southwest at its election may fund the
payment of Deferred Compensation by setting aside and investing such
funds
as Southwest may from time to time determine. Neither the
establishment of the Account, the crediting of Deferred Compensation
thereto, nor the setting aside of any funds shall be deemed to create
a
trust. Legal and equitable title to any funds set aside shall
remain in Southwest, and the Employee shall have no security or other
interest in such funds. Any funds so set aside or invested
shall remain subject to the claims of the creditors of Southwest,
present
and future.) For each full or partial calendar year as the
Employee shall remain in the employment of Southwest under this Agreement,
Deferred Compensation shall accumulate in an amountequal to any
contributions (including forfeitures but excluding any elective deferrals
actually returned to the Employee) which would otherwise have been
made by
Southwest on behalf of the Employee to the Southwest Airlines Co.
Profitsharing Plan and Southwest Airlines Co. 401(k) Plan but which
exceed
the amount permitted to be so contributed due to the limitations
under
Sections 415(c) (the “415(c) Excess Amount”) and 401(a)(17) of the
Internal Revenue Code.. If such employment shall terminate
prior to December 31 in any calendar year, then Deferred Compensation
shall accumulate and be calculated as provided under the terms of
Southwest’s Profitsharing Plan. Employee hereby elects not to
invest the 415(c) Excess Amount in Southwest’s 2005 Excess Benefit Plan
(or any successor plan).
|
D.
|
DISABILITY
INSURANCE.
During the term of this Agreement,
Southwest shall provide long term disability insurance providing
for
payment, in the event of disability of the Employee, of $10,000 per
month
to age seventy (70). Except as to amounts payable, the terms
and conditions of such policy shall be identical, or substantially
similar, to the disability insurance provided by Southwest for its
other
officers as of the date of this
Agreement.
|
E.
|
MEDICAL
AND DENTAL EXPENSES.
During the term of this
Agreement, the Employee shall remain eligible to participate in any
medical benefit plan or program that Southwest makes available to
its
employees generally. Upon termination of her employment with Southwest,
the Employee shall be eligible to participate in any non-contract
retiree
medical benefit plan or program that Southwest may then make available
to
its retirees generally. Southwest shall reimburse the Employee for
all her
out-of-pocket expenses (including specifically all premiums and
deductibles) that the Employee may incur under any such Southwest
plan or
program during the term of this
Agreement.
|
F.
|
STOCK
OPTION GRANT.
In connection with its approval of the
terms of this Agreement on July 19, 2007, the Compensation Committee
of
the Board of Directors granted to the Employee ten-year options to
purchase 75,000 shares of its common stock. Such options were granted
pursuant to the Company’s 2007 Equity Incentive Plan and became
exercisable with respect to 100% of the shares of Common Stock covered
thereby on the date of grant. Such options shall be incentive
stock options to the maximum extent permissible under the terms of
the
2007 Equity Incentive Plan. The exercise price of such options
shall be the fair market value of Southwest’s common stock on July 19,
2007 or the date of approval of the form of this Agreement by the
Compensation Committee, whichever is
higher.
|
G.
|
OTHER
BENEFITS
. The Employee shall be eligible to continue
to participate in all employee pension, profit-sharing, stock purchase,
group insurance and other benefit plans or programs in effect for
Southwest managerial employees generally to the extent of and in
accordance with the rules and agreements governing such plans or
programs,
so long as same shall be in effect, with full service credit where
relevant for the Employee’s prior employment by
Southwest. Southwest shall reimburse the Employee for
reasonable expenses incurred by her in the performance of her duties
and
responsibilities hereunder. The Employee shall be entitled to
vacation of three (3) weeks per year or such longer period as may
be
established from time to time by Southwest for its managerial employees
generally.
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A.
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EXPIRATION
OR DEATH.
The Employee’s employment hereunder shall
terminate on July 15, 2013 (or such later date to which the term
of this
Agreement may be extended by consent of the parties hereto, in either
case
without prejudice to the Employee’s privilege to remain an employee of
Southwest thereafter), or upon the Employee’s death, whichever shall first
occur, without further obligation or liability of either party hereunder,
except for Southwest’s obligation to pay Deferred Compensation as provided
in Paragraph IV-C of this
Agreement.
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B.
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TERMINATION
FOR CAUSE.
Southwest may terminate the Employee’s
employment hereunder upon the determination by a majority of its
whole
Board of Directors that the Employee has willfully failed and refused
to
perform her duties and to discharge her responsibilities
hereunder. Such determination shall be final and
conclusive. If the Board of Directors of Southwest makes such
determination, Southwest may (a) terminate the Employee’s employment,
effective immediately or at a subsequent date, or (b) condition her
continued employment upon the circumstances and place a reasonable
limitation upon the time within which the Employee shall comply with
such
considerations or requirements. If termination is so effected,
Southwest shall have no further liability to the Employee hereunder
except
for the obligation to pay Deferred Compensation as provided in
Paragraph IV-C hereof.
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C.
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TERMINATION
FOR DISABILITY.
Southwest may terminate the Employee’s
employment hereunder on account of any disabling illness, hereby
defined
to include any emotional or mental disorders, physical diseases or
injuries as a result of which the Employee is, for a continuous period
of
ninety (90) days, unable to perform her duties
hereunder. Southwest shall give to the Employee ninety (90)
days’ notice of its intention to effect such termination pursuant to this
Paragraph V-C. If, within such notice period, the Employee
shall have recovered from her disability sufficiently well to resume
performance of her duties (although still undergoing treatment or
rehabilitation), Southwest shall not have the right to effect such
termination. If such disabling illness occurs as a result of a
job-related cause, Southwest shall continue to pay the Employee regular
installments of her Base Salary in effect at the time of such termination
for the remainder of the term of this Agreement in accordance with
Southwest’s regular payroll practices; provided that, payment shall be
deferred to the extent necessary to cause such payment to comply
with the
six month deferral rule described in Section 409A(a)(2)(B) of the
Internal
Revenue Code if Employee at her termination of employment with Southwest
is a “specified employee” as defined in such section. It is expressly
understood and agreed, however, that any obligation of Southwest
to
continue to pay the Employee her Base Salary pursuant to this
Paragraph V-C shall be reduced by the amount of any proceeds of
long-term disability insurance provided for the Employee pursuant
to
Paragraph IV-D above, and shall also be reduced by the amount of the
proceeds of any worker’s compensation or other benefits which the Employee
receives as a result of or growing out of her disabling
illness.
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D.
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CHANGE
OF CONTROL TERMINATION.
In the event of any change of
control of Southwest, the Employee may, at her option, terminate
her
employment hereunder by giving to Southwest notice thereof no later
than
sixty (60) days after the Employee shall have determined or ascertained
that such change has occurred, irrespective whether Southwest shall
have
purported to terminate this Agreement after such event but prior
to
receipt of such notice. If termination is so effected, no later
than the date of such termination Southwest shall pay the Employee
as
“severance pay” a lump sum equal to (i) $750,000 plus (ii) an
amount equal to the unpaid installments of her Base Salary in effect
at
the time of such termination for the remaining term of this Agreement;
provided, however, that if Employee is, at her termination of employment
with Southwest, a “specified employee” within the meaning of Section
409A(a)(2)(B) of the Internal Revenue Code, payment of the “severance pay”
shall be deferred to the extent necessary to cause such payment to
comply
with the six month deferral rule described in such section. If
termination is so effected, Southwest shall have no other further
liability to the Employee hereunder except for its obligation to
pay
Deferred Compensation as provided in Paragraph IV-C
above. For purposes of this Paragraph V-D, a “change of
control of Southwest” shall be deemed to occur if (i) a third person,
including a “group” as determined in accordance with Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes the beneficial owner
of
shares of Southwest having twenty percent (20%) or more of the total
number of votes that may be cast for the election of directors of
Southwest, or (ii) as a result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale
of
assets or contested election, or any combination of the foregoing
transactions (herein called a “Transaction”), the persons who were
directors of Southwest before the Transaction shall cease to constitute
a
majority of the Board of Directors of Southwest or any successor
to
Southwest.
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E.
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VOLUNTARY
TERMINATION.
The Employee’s employment hereunder shall
terminate forthwith upon her resignation and its acceptance by Southwest,
without further obligation or liability of either party hereunder,
except
for Southwest’s obligation to pay Deferred Compensation as provided in
Paragraph IV-C above.
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A.
|
ASSIGNABILITY,
ETC.
The rights and obligations of Southwest hereunder
shall inure to the benefit of and shall be binding upon the successors
and
assigns of Southwest; provided, however, Southwest’s obligations hereunder
may not be assigned without the prior approval of the
Employee. This Agreement is personal to the Employee and may
not be assigned by her.
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B.
|
NO
WAIVERS.
Failure to insist upon strict compliance with
any provision hereof shall not be deemed a waiver of such provision
or any
other provision hereof.
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C.
|
AMENDMENTS.
This
Agreement may not be modified except by an agreement in writing executed
by the parties hereto.
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D.
|
NOTICES.
Any
notice required or permitted to be given under this Agreement shall
be in
writing and shall be deemed to have been given to the person affected
by
such notice when personally delivered or when deposited in the United
States mail, certified mail, return receipt requested and postage
prepaid,
and addressed to the party affected by such notice at the address
indicated on the signature page
hereof.
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E.
|
SEVERABILITY.
The
invalidity or unenforceability of any provision hereof shall not
affect
the validity or enforceability of any other provision
hereof.
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F.
|
COUNTERPARTS.
This
Agreement may be executed in multiple counterparts, each of which
shall be
deemed an original but all of which taken together shall constitute
a
single instrument.
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G.
|
ENTIRE
AGREEMENT.
This Agreement contains all of the terms
and conditions agreed upon by the parties hereto respecting the subject
matter hereof, and all other prior agreements, oral or otherwise,
regarding the subject matter of this Agreement shall be deemed to
be
superseded as of the date of this Agreement and not to bind either
of the
parties hereto.
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H.
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GOVERNING
LAW.
This Agreement shall be subject to and governed
by the laws of the State of
Texas.
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By
|
/s/ David
Biegler
|
|
David
Biegler
|
||
Chairman,
Compensation Committee of the
|
||
Board
of Directors
|
||
By
|
/s/ Colleen
C. Barrett
|
|
Colleen
C. Barrett
|
||
Address: P.O.
Box 36611
|
||
Dallas,
Texas 75235-1611
|
||
By:
|
/s/
Gary C. Kelly
|
Gary
C. Kelly
|
|
Chief
Executive Officer and
|
|
Vice
Chairman of the Board
|
|
of
Directors
|
|
By:
|
/s/
Laura Wright
|
Laura
Wright
|
|
Chief
Financial Officer
|
|
By:
|
/s/
Gary C. Kelly
|
Gary
C. Kelly
|
|
Chief
Executive Officer and
|
|
Vice
Chairman of the Board
|
|
of
Directors
|
|
By:
|
/s/
Laura Wright
|
Laura
Wright
|
|
Chief
Financial Officer
|
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