Southwest Airlines 2010 Annual Report Download - page 29

upon its ability to retain key management personnel and other key employees of AirTran. Current and
prospective employees of AirTran may experience uncertainty about their roles within the Company following
the merger, which may have an adverse effect on the ability of the Company to retain key management and other
key personnel. Accordingly, no assurance can be given that the Company will be able to retain key management
personnel and other key employees of AirTran.
Several lawsuits have been filed against the Company and AirTran challenging the merger, and one or
more adverse rulings may prevent the merger from being completed.
The Company and AirTran, as well as certain officers of AirTran and the members of AirTran’s board of
directors, were named as defendants in several lawsuits brought by AirTran stockholders challenging the
proposed merger and seeking, among other things, injunctive relief to enjoin the defendants from completing the
merger on the agreed-upon terms. Additional lawsuits may be filed against the Company, AirTran, or the
directors and officers of either company in connection with the merger. These lawsuits are discussed in more
detail below under “Item 3. Legal Proceedings.”
One of the conditions to the closing of the merger is that no order issued by a governmental authority of
competent jurisdiction or law or other legal restraint or prohibition making the merger illegal or permanently
restraining, enjoining, or otherwise prohibiting or preventing the consummation of the merger or the other
transactions contemplated by the merger agreement be in effect. Consequently, if the plaintiffs secure injunctive
or other relief prohibiting, delaying, or otherwise adversely affecting the defendants’ ability to complete the
merger, then such injunctive or other relief may prevent the merger from becoming effective within the expected
time frame or at all.
While the Company believes that each of the four currently pending lawsuits is without merit, the parties to
two of such suits entered into a Memorandum of Understanding (“MOU”) on January 26, 2011 to settle those
lawsuits. The settlement provides for the inclusion of additional disclosures with respect to various aspects of the
merger in the proxy statement/prospectus to be sent to AirTran stockholders soliciting approval of the merger. In
addition, it provides for the payment of plaintiffs’ attorneys’ fees and expenses, subject to court approval. The
MOU further provides that the parties will enter into a stipulation of settlement which will provide, among other
things, for the conditional certification of a settlement class. The MOU and stipulation of settlement are subject
to various conditions, including court approval following notice to AirTran stockholders, completion of certain
discovery, and consummation of the merger. If the settlement is finally approved, it will resolve and release on
behalf of the entire class of AirTran stockholders, all claims that were or could have been brought challenging
any aspect of the merger, the merger agreement, and any disclosure made in connection therewith, among other
claims.
Failure to complete the merger could negatively impact the stock price and the future business and
financial results of the Company.
If the merger is not completed, the ongoing business of the Company may be adversely affected, and the
Company will be subject to several risks, including the following:
• having to pay certain costs relating to the merger, such as legal, accounting, financial advisor and printing
fees; and
• having had the focus of Company management on the merger instead of on pursuing other opportunities
that could have been beneficial to the Company.
If the merger is not completed, there can be no assurance that these risks will not materialize and will not
materially adversely affect the business, financial results and stock price of the Company.
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