(v) subsequent to Board service, (a) if the Director has served at least ten terms, lifetime free travel on Southwest Airlines for the Director and the Director’s spouse; (b) if the Director has served five or more terms but less than ten terms, free travel on Southwest Airlines for the Director and the Director’s spouse for a ten year term; (c) if the Director has served less than five terms, free travel on Southwest Airlines for the Director and the Director’s Spouse for a five year term (clauses (b) and (c) described herein as “partial benefits”); and (d) if the Director is deceased, free travel on Southwest Airlines for the Director’s spouse for the lifetime of the spouse, if the Director has served as least ten terms, or for the number of years remaining (if any) in the Director’s partial benefits, if the Director has served less than ten terms (credit for the length of service for the full term will be granted in the case of a Director’s appointment or retirement occurring between the Company’s annual meetings of shareholders);
(vi) eligibility to receive equity grants pursuant to the Southwest Airlines Co. Amended and Restated 2007 Equity Incentive Plan (for 2024, prior to Mr. Fornaro’s appointment to the Board, Board members received common stock awards with a grant date value of approximately $170,000); and
(vii) eligibility for a retirement payment under the Southwest Airlines Co. Severance Plan for Directors (which provides for a cash payment of $35,000 for non-employee Directors who have served at least five years as of the date of retirement and $75,000 for non-employee Directors who have served at least ten years as of the date of retirement).
Mr. Fornaro was party to an Advisory Agreement, effective as of January 1, 2023, by and between Mr. Fornaro and the Company (the “Advisory Agreement”), whereby the Company paid Mr. Fornaro a monthly fee of $23,000 since the beginning of the last fiscal year, plus reasonable expenses incurred for services. Mr. Fornaro was also party to a Consultant Retention Letter, effective as of July 5, 2024, by and among Mr. Fornaro, the Company and Kirkland & Ellis LLP (the “Consultant Letter”), governed by the terms of the Advisory Agreement and whereby the Company did not pay Mr. Fornaro an additional fee. The Advisory Agreement and the Consultant Letter were terminated on September 26, 2024, prior to Mr. Fornaro’s appointment to the Board.
Mr. Fornaro’s son-in-law, Eric Hall, is a Director level Employee of the Company. During 2023 and 2024 year-to-date, respectively, Mr. Hall was paid a combined $296,107.81 and $255,775.87 in base salary, bonus, and grant date fair value of equity compensation awards for financial statement purposes, and also participated in benefit plans generally available to the Company’s employees. Mr. Fornaro disclaims any interest in Mr. Hall’s compensation.
Mr. Fornaro has not been appointed to any Board committees and is not a party to any arrangement or understanding with any other person pursuant to which he was selected as a director. Because of the Advisory Agreement and Consultant Letter, the Board has determined that Mr. Fornaro is not independent under the standards of the New York Stock Exchange.
