Exhibit 10.1
SOUTHWEST AIRLINES
CO.
INDEMNIFICATION
AGREEMENT
This Agreement
(“Agreement”) is made and entered into as of the
day of
, 2009, by and between Southwest Airlines Co., a Texas corporation
(the “Company”), and [Name] (“Indemnitee”),
who is a director of the Company.
RECITALS
A. Highly competent and experienced
persons are reluctant to serve corporations as directors unless
they are provided with adequate protection through insurance and
indemnification against claims and actions against them arising out
of their service to and activities on behalf of the
Company.
B. The Board of Directors of the
Company (the “Board”) has determined that the inability
to attract and retain such persons would be detrimental to the best
interests of the Company and its shareholders and that the Company
should act to assure such persons that there will be increased
certainty of such protection in the future.
C. The Board has also determined
that it is reasonable, prudent and necessary for the Company, in
addition to purchasing and maintaining directors’ and
officers’ liability insurance (or otherwise providing for
adequate arrangements of self-insurance), contractually to obligate
itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be adequately
protected.
D. Indemnitee is willing to serve,
continue to serve and to take on additional service for or on
behalf of the Company on the condition that Indemnitee be so
indemnified to the fullest extent permitted by law.
E. Section 1 of Article VIII of
the bylaws of the Company provides for indemnification of directors
to the fullest extent permitted by law. The indemnification rights
in this Agreement are intended to be in addition to those provided
in the bylaws of the Company.
In consideration of the foregoing
and the mutual covenants herein contained, and other good and
valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
Certain
Definitions
As used herein, the following words
and terms shall have the following respective meanings (whether
singular or plural):
“Acquiring Person” means
any Person other than (i) the Company, (ii) any of the
Company’s Subsidiaries, (iii) any employee benefit plan
of the Company or of a Subsidiary of
the Company or of a Company owned directly or
indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or
(iv) any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or of a Subsidiary of the
Company or of a Company owned directly or indirectly by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
“Change in Control”
means the occurrence of any of the following events:
(i) The acquisition by any Person of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 40% or more of either (x) the then
outstanding shares of Common Stock of the Company (the
“Outstanding Company Common Stock”) or (y) the
combined voting power of the then outstanding Voting Securities of
the Company (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
Subparagraph (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any entity controlled by
the Company or (D) any acquisition by any corporation pursuant
to a transaction that complies with clauses (A), (B) and
(C) of paragraph (iii) below; or
(ii) Members of the Incumbent Board
cease for any reason to constitute at least a majority of the
Board; or
(iii) Consummation of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or an acquisition of assets of another entity (a
“Business Combination”), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common
equity and the combined voting power of the then outstanding Voting
Securities of the entity resulting from such Business Combination
(including an entity that as a result of such transaction owns the
Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding any employee benefit plan (or
related trust) of the Company or the entity resulting from such
Business Combination) beneficially owns, directly or indirectly,
40% or more of, respectively, the then outstanding shares of common
equity of the entity resulting from such Business Combination or
the combined voting power of the then outstanding Voting Securities
of such entity except to the extent that such ownership results
solely from ownership of the Company that existed prior to the
Business Combination, and (C) at least a majority of the
members of the board of directors or other similar governing body
of the entity resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
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(iv) Approval by the shareholders of
the Company of a complete liquidation or dissolution of the
Company.
“Claim” means an actual
or threatened claim or request for relief that was, is or may be
made by reason of anything done or not done by Indemnitee in, or by
reason of any event or occurrence related to, Indemnitee’s
Corporate Status.
“Corporate Status” means
the status of a person who is, becomes, was or may deemed to be or
to have been a director, controlling person, officer, employee,
agent or fiduciary of the Company or is, becomes or was serving at
the request of the Company as a director, controlling person,
officer, partner, member, shareholder, venturer, proprietor,
trustee, employee, agent, fiduciary or similar functionary of
another foreign or domestic corporation, partnership, limited
liability company, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise. For purposes of this
Agreement, the Company agrees that Indemnitee’s service on
behalf of or with respect to any Subsidiary of the Company shall be
deemed to be at the request of the Company.
“Disinterested Director”
with respect to any request by Indemnitee for indemnification
hereunder, means a director of the Company who at the time of the
vote is not a named defendant or respondent in the Proceeding in
respect of which indemnification is sought by
Indemnitee.
“Exchange Act” means the
Securities Exchange Act of 1934.
“Expenses” means all
attorneys’ fees and disbursements, retainers,
accountant’s fees and disbursements, private investigator
fees and disbursements, court costs, transcript costs, fees and
expenses of experts, witness fees and expenses, travel expenses,
duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements, costs
or expenses of the types customarily incurred in connection with
prosecuting, defending (including affirmative defenses and
counterclaims), preparing to prosecute or defend, investigating,
settling, appealing (including the premium, security for, and other
costs relating to any cost bonds, supersedeas bonds or other appeal
bonds or their equivalent), being or preparing to be a witness in,
or participating in or preparing to participate in (including on
appeal) a Proceeding or in connection with a Claim, and all
judgments, penalties (including excise or similar taxes), fines,
amounts paid in settlement, and all interest or finance charges
attributable to any thereof. Should any payments by the Company
under this Agreement be determined to be subject to any federal,
state or local income or excise tax, “Expenses” shall
also include such amounts as are necessary to place Indemnitee in
the same after-tax position (after giving effect to all applicable
taxes) as Indemnitee would have been in had no such tax been
determined to apply to such payments.
“Incumbent Board” means
the individuals who, as of the date of this Agreement, constitute
the Board and any other individual who becomes a director of the
Company after that date and whose election or appointment by the
Board or nomination for election by the Company’s
shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Incumbent Board.
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“Independent Counsel”
means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither contemporaneously is, nor in
the five years theretofore has been, retained to represent:
(a) the Company or Indemnitee in any matter material to either
such party (other than as Independent Counsel under this Agreement
or similar agreements), (b) any other party to the Proceeding
giving rise to a claim for indemnification hereunder, or
(c) the beneficial owner, directly or indirectly, of
securities of the Company representing 5% or more of the combined
voting power of the Outstanding Company Voting Securities (other
than, in each such case, with respect to matters concerning the
rights of Indemnitee under this Agreement or of other indemnitees
under other indemnification agreements). Notwithstanding the
foregoing, the term “Independent Counsel” shall not
include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an
action to determine Indemnitee’s rights under this
Agreement.
“Independent Directors”
means the directors on the Board that are independent directors as
defined in Section 303A of the New York Stock Exchange Listed
Company Manual or successor provision, or, if the Company’s
common stock is not then quoted on the New York Stock Exchange,
that qualify as independent, disinterested, or a similar term as
defined in the rules of the principal securities exchange or
inter-dealer quotation system on which the Company’s common
stock is then listed or quoted.
“Person” means any
individual, entity or group (within the meaning of Sections
13(d)(3) and 14(d)(2) of the Exchange Act).
“Potential Change in
Control” shall be deemed to have occurred if (i) any
Person shall have announced publicly an intention to effect a
Change in Control, or commenced any action (such as the
commencement of a tender offer for the Company’s Common Stock
or the solicitation of proxies for the election of any of the
Company’s directors) that, if successful, could reasonably be
expected to result in the occurrence of a Change in Control;
(ii) the Company enters into an agreement, the consummation of
which would constitute a Change in Control; or (iii) any other
event occurs that the Board declares to be a Potential Change of
Control.
“Proceeding” means any
threatened, pending or completed action, suit, arbitration,
investigation, inquiry, alternate dispute resolution mechanism,
administrative or legislative hearing, or any other proceeding
(including any securities laws action, suit, arbitration,
alternative dispute resolution mechanism, hearing or procedure)
whether civil, criminal, administrative, arbitrative or
investigative and whether or not based upon events occurring, or
actions taken, before the date hereof, and any appeal in or related
to any such action, suit, arbitration, investigation, hearing or
proceeding and any inquiry or investigation (including discovery),
whether conducted by or in the right of the Company or any other
Person, that Indemnitee in good faith believes could lead to any
such action, suit, arbitration, alternative dispute resolution
mechanism, hearing or other proceeding or appeal
thereof.
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“Subsidiary” means, with
respect to any Person, any corporation or other entity of which a
majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by that
Person.
“TBCA” means the Texas
Business Corporation Act and any successor statute thereto
(including the Texas Business Organization Code) when such
successor statute becomes applicable to the Company, as either of
them may from time to time be amended.
“Voting Securities”
means any securities that vote generally in the election of
directors, in the admission of general partners, or in the
selection of any other similar governing body.
ARTICLE II
Services by
Indemnitee
Indemnitee is serving as a director
of the Company. Indemnitee may from time to time also agree to
serve, as the Company may request from time to time, in another
capacity for the Company (including an officer position or another
director position) or as a director, officer, partner, member,
venturer, proprietor, trustee, employee, agent, fiduciary or
similar functionary of another foreign or domestic corporation,
partnership, joint venture, limited liability company, sole
proprietorship, trust, employee benefit plan or other enterprise.
Indemnitee and the Company each acknowledge that they have entered
into this Agreement as a means of inducing Indemnitee to serve, or
continue to serve, the Company in such capacities. Indemnitee may
at any time and for any reason resign from such position or
positions (subject to any other contractual obligation or any
obligation imposed by operation of law). The Company shall have no
obligation under this Agreement to continue Indemnitee in any such
position or positions.
ARTICLE III
Indemnification
Section 3.1 General .
Subject to the provisions set forth in Article IV, the Company
shall indemnify, and advance Expenses to, Indemnitee to the fullest
extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may hereafter from time to
time permit. The other provisions set forth in this Agreement are
provided in addition to and as a means of furtherance and
implementation of, and not in limitation of, the obligations
expressed in this Article III. No requirement, condition to or
limitation of any right to indemnification or to advancement of
Expenses under this Article III shall in any way limit the rights
of Indemnitee under Article VII.
Section 3.2 Additional
Indemnity of the Company . Indemnitee shall be entitled to
indemnification pursuant to this Section 3.2 if, by reason of
anything done or not done by Indemnitee in, or by reason of any
event or occurrence related to (or arising in part out of),
Indemnitee’s Corporate Status, Indemnitee is, was or becomes,
or is threatened to be made, a party to, or witness or other
participant in any Proceeding. Pursuant to this Section 3.2,
Indemnitee shall be indemnified against any and all Expenses,
losses, claims, damages, liabilities, judgments, penalties
(including excise or similar taxes), fines and amounts paid
in
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settlement (including all interest, assessments
and other charges paid or payable in connection with or in respect
of any such Expenses, losses, claims, damages, liabilities,
judgments, penalties (including excise or similar taxes), fines and
amounts paid in settlement), joint or several, actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf
in connection with such Proceeding or any Claim, issue or matter
therein. Notwithstanding the foregoing, the obligations of the
Company under this Section 3.2 shall be subject to the
condition that no determination (which, in any case in which
Independent Counsel is involved, shall be in a form of a written
opinion) shall have been made pursuant to Article IV that
Indemnitee would not be permitted to be indemnified under
applicable law. Nothing in this Section 3.2 shall limit the
benefits of Section 3.1, Section 3.3 or any other Section
hereunder.
Section 3.3 Advancement of
Expenses . The Company shall pay all Expenses reasonably
incurred by, or in the case of retainers to be incurred by, or on
behalf of Indemnitee (or, if applicable, reimburse Indemnitee for
any and all Expenses reasonably incurred by Indemnitee and
previously paid by Indemnitee) in connection with any Claim or
Proceeding (including any amount actually paid in settlement of
such Claim or Proceeding), whether brought by the Company or
otherwise, in advance of any determination respecting entitlement
to indemnification pursuant to Article IV hereof (and shall
continue to pay such Expenses after such determination and until it
shall ultimately be determined (in a final adjudication by a court
from which there is no further right of appeal or in a final
adjudication of an arbitration pursuant to Section 5.1 if
Indemnitee elects to seek such arbitration) that Indemnitee is not
entitled to be indemnified by the Company against such Expenses)
within 10 days after the receipt by the Company of a written
request from Indemnitee requesting such payment or payments from
time to time, whether prior to or after final disposition of such
Proceeding. Any such payment by the Company is referred to in this
Agreement as an “Expense Advance.” Any dispute as to
the reasonableness of the incurrence of any Expense shall not delay
an Expense Advance by the Company, and the Company agrees that any
such dispute shall be resolved only upon the disposition or
conclusion of the underlying Claim or Proceeding against
Indemnitee. Indemnitee hereby undertakes and agrees that Indemnitee
will reimburse and repay the Company without interest for any
Expense Advances to the extent that it shall ultimately be
determined (in a final adjudication by a court from which there is
no further right of appeal or in a final adjudication of an
arbitration pursuant to Section 5.1 if Indemnitee elects to
seek such arbitration) that Indemnitee is not entitled to be
indemnified by the Company against such Expenses. Indemnitee shall
not be required to provide collateral or otherwise secure the
undertaking and agreement described in the prior sentence. The
Company shall make all advances pursuant to this Section 3.3
without regard to the financial ability of Indemnitee to make
repayment and without regard to the prospect of whether Indemnitee
may ultimately be found to be entitled to indemnification under the
provisions of this Agreement.
Section 3.4 Indemnification
for Additional Expenses . Subject to any limitations of
applicable law, the Company shall indemnify Indemnitee against any
and all costs and expenses (of the types described in the
definition of Expenses in Article I) and, if requested by
Indemnitee, shall (within 10 days of that request) advance those
costs and expenses to Indemnitee, that are incurred by Indemnitee
in connection with any claim asserted against, or action brought
by, Indemnitee for (i) indemnification or an Expense Advance
by the Company under this Agreement or any other agreement or
provision of the Company’s articles of incorporation or
bylaws now or hereafter in effect relating to any Claim or
Proceeding, (ii) recovery under any
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directors’ and officers’ liability
insurance policies maintained by the Company, or
(iii) enforcement of, or claims for breaches of, any provision
of this Agreement, in each of the foregoing situations regardless
of whether Indemnitee ultimately is determined to be entitled to
that indemnification, expense payment (whether as an advance or
reimbursement), insurance recovery, enforcement, or damage claim,
as the case may be and regardless of whether the nature of the
proceeding with respect to such matters is judicial, by
arbitration, or otherwise.
Section 3.5 Partial
Indemnity . If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties (including
excise or similar taxes), and amounts paid in settlement of a Claim
or Proceeding but not, however, for all of the amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover, notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims or Proceedings, or in defense of any
issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
ARTICLE IV
Procedure for Determination of
Entitlement
to Indemnification
Section 4.1 Request by
Indemnitee . To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request for
indemnification containing a brief description of any matter for
which indemnification is then sought under this Agreement. The
request shall be given in accordance with the notice provisions of
Section 7.11 hereof. The Secretary or an Assistant Secretary
of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that Indemnitee has
requested indemnification. In addition, Indemnitee shall provide
the Company, following the Company’s request, with such
documentation and information as is reasonably available to
Indemnitee and that the Company may reasonably require to determine
whether and to what extent Indemnitee is entitled to
indemnification.
Section 4.2 Determination of
Request . Upon written request by Indemnitee for
indemnification pursuant to the first sentence of Section 4.1
hereof, a determination, if required by applicable law, with
respect to whether Indemnitee is permitted under applicable law to
be indemnified shall be made in accordance with the terms of
Section 4.5, in the specific case as follows:
(a) If a Potential Change in Control
or a Change in Control shall have occurred, by Independent Counsel
(selected in accordance with Section 4.3) in a written opinion
to the Board and Indemnitee, unless Indemnitee shall request that
such determination be made by the Board, or a committee of the
Board, or the shareholders of the Company, in which case by the
person or persons specified in the Indemnitee’s request and
in the manner provided for in clause (i), (ii) or
(iv) (as applicable) of paragraph (b) below;
or
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(b) If a Potential Change in Control
or a Change in Control shall not have occurred, by the manner
determined by the Board from among the following choices (subject,
in the case of clause (iv), to the agreement of
Indemnitee):
(i) by the Board by a majority vote
of the Disinterested Directors, regardless of whether the
Disinterested Directors constitute a quorum of the Board,
or
(ii) by a majority vote of a
committee of the Board, if (A) the committee is designated by
a majority vote of the Disinterested Directors, regardless of
whether the Disinterested Directors constitute a quorum of the
Board, and (B) the committee consists solely of one or more
Disinterested Directors, or
(iii) by Independent Counsel
selected by the Board or a committee of the Board by a vote as set
forth in clauses (i) or (ii) of this paragraph (b), or if
such vote is not obtainable and such a committee cannot be
established, by a majority vote of all directors of the Board
(unless such a procedure is not permitted by applicable law),
or
(iv) if Indemnitee and the Company
agree, by the shareholders of the Company in a vote that excludes
the shares held by directors who are not Disinterested
Directors.
If it is so determined that
Indemnitee is permitted to be indemnified under applicable law,
payment to Indemnitee shall be made within 10 days after such
determination. Nothing contained in this Agreement shall require
that any determination be made under this Section 4.2 prior to
the disposition or conclusion of a Claim or Proceeding against
Indemnitee; provided, however, that Expense Advances shall continue
to be made by the Company pursuant to, and to the extent required
by, the provisions of Article III. Indemnitee shall cooperate with
the person or persons making such determination with respect to
Indemnitee’s entitlement to indemnification, including
providing to such person upon reasonable advance request any
documentation or information that is not privileged or otherwise
protected from disclosure and that is reasonably available to
Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys’ fees and
disbursements) incurred by Indemnitee in so cooperating with the
person or persons making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s
entitlement to indemnification), and the Company shall indemnify
and hold harmless Indemnitee therefrom.
Section 4.3 Independent
Counsel . If a Potential Change in Control or a Change in
Control shall not have occurred and the determination of
entitlement to indemnification is to be made by Independent
Counsel, the Company shall give written notice to Indemnitee,
within 10 days after receipt by the Company of Indemnitee’s
request for indemnification, specifying the identity and address of
the Independent Counsel selected in accordance with
Section 4.2(b)(iii). If a Potential Change in Control or a
Change in Control shall have occurred and the determination of
entitlement to indemnification is to be made by Independent
Counsel, the Independent Counsel shall be selected by
Indemnitee
