Airtran 2010 Annual Report Download - page 44

In addition, in the event that the Southwest Average Share Price is less than $10.90, Southwest must deliver, at its
election, as Merger Consideration, an additional amount of cash, an additional number (or fraction) of shares of Southwest
common stock, or a combination of both such that, after giving effect to such election, the aggregate value of the Merger
Consideration is equal to $7.25.
The exchange ratio adjustment mechanism provides at least $7.25 in value and up to $7.75 in value (based on the
Southwest average share price) per share of AirTran common stock. Based on the closing price of Southwest common
stock on the NYSE on September 24, 2010, the last trading day before public announcement of the merger, the Merger
Consideration represented approximately $7.69 in value for each share of AirTran common stock. Based on the closing
price of Southwest common stock on the NYSE on January 31, 2011, the merger consideration represented $7.55 in value
for each share of AirTran common stock.
AirTran and Southwest have made customary representations, warranties and covenants in the Merger Agreement.
Subject to certain exceptions, each of AirTran and Southwest is required, among other things, to conduct its business in
the ordinary course in all material respects during the interim period between the execution of the Merger Agreement and
the consummation of the Merger. In addition, AirTran may not solicit alternative business combination transactions
and, subject to certain exceptions, may not engage in discussions or negotiations regarding any alternative business
combination transactions. The Merger Agreement also contains covenants that require AirTran to call and hold a special
stockholders meeting and, subject to certain exceptions, require the AirTran board of directors to recommend to its
stockholders the adoption of the Merger Agreement.
Completion of the Merger is subject to certain conditions, including, among others: (i) adoption of the Merger Agreement
by AirTran’s stockholders, (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (iii) receipt of other material governmental consents and approvals
required to consummate the Merger, (iv) the absence of any governmental order, law, or legal restraint prohibiting the
consummation of the Merger, (v) the registration statement on Form S-4 used to register the Southwest common stock to
be issued as consideration for the Merger having been declared effective by the Securities and Exchange Commission (the
SEC), and (vi) the listing of the Southwest common stock to be issued to AirTran stockholders in the Merger on the
NYSE having been authorized. The obligation of each party to consummate the Merger is also conditioned upon the
accuracy of the other party’s representations and warranties and the other party having performed in all material respects
its obligations under the Merger Agreement.
If consummated, the proposed acquisition of AirTran by Southwest will combine AirTran with the largest low cost airline
in the United States. We believe Southwest possesses one of the strongest brands in the industry and, based on U.S.
Department of Transportation data as of June 30, 2010, was the largest domestic air carrier in the United States based on
the number of originating passengers boarded. The acquisition, if consummated, will have material impacts on the
business strategy, liquidity, operating results, financial commitments, and financial position of AirTran. The discussion in
this report generally does not address or quantify the impacts of the proposed acquisition of AirTran by Southwest.
Southwest and AirTran currently expect the closing of the Merger to occur in the second quarter of 2011. However, the
Merger is subject to regulatory clearance and the satisfaction or waiver of other conditions as described in the Merger
Agreement, and it is possible that factors outside the control of Southwest and AirTran could result in the Merger being
completed at a later time, or not at all.
The Merger Agreement contains certain termination rights for both AirTran and Southwest, including if the Merger is not
consummated on or before September 26, 2011 (subject to extension by mutual agreement of the parties) or if the
approval of AirTran’s stockholders is not obtained. The Merger Agreement further provides that, upon termination of the
Merger Agreement under specified circumstances, including termination of the Merger Agreement by AirTran as a result
of an adverse change in the recommendation of AirTran’s board of directors, AirTran may be required to pay to
Southwest a termination fee of $39 million.
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