Southwest Airlines 2010 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2010 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

2. Merger and Related Matters
On September 26, 2010, the Company, AirTran Holdings, Inc. (“AirTran”), and Guadalupe Holdings Corp.
(“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), providing for the
acquisition of AirTran by the Company. The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Merger Sub, a wholly owned subsidiary of the Company formed
for the sole purpose of effecting the merger, will be merged with and into AirTran, with AirTran continuing as
the surviving corporation and as a wholly owned subsidiary of the Company (the “Merger”). Immediately
following the effective time of the Merger, AirTran will merge with and into a wholly owned limited liability
company subsidiary of the Company.
Subject to the terms and conditions of the Merger Agreement, which has been unanimously approved by the
boards of directors of the respective parties, if the Merger is completed, each outstanding share of AirTran
common stock will be converted into the right to receive 0.321 shares of Southwest Airlines Co. common stock,
which exchange ratio may be adjusted as discussed below, and $3.75 in cash, without interest. If the average
closing price of Southwest common stock for the 20 consecutive trading day period ending on (and including) the
third trading day prior to the closing of the Merger (the “Southwest Average Share Price”) is greater than $12.46,
then the exchange ratio will be adjusted to equal $4.00 divided by the Southwest Average Share Price, rounded to
the nearest thousandth. If the Southwest Average Share Price is less than $10.90, then, subject to the next
sentence, the exchange ratio will be adjusted to equal $3.50 divided by the Southwest Average Share Price,
rounded to the nearest thousandth. If the Southwest Average Share Price is less than $10.90, the Company must
deliver, at its election, 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.
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 any 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) authorization of the listing
on the New York Stock Exchange of the shares of Southwest common stock to be issued to AirTran stockholders
pursuant to the Merger. 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.
The Company and AirTran may mutually agree to terminate the Merger Agreement at any time prior to the
effectiveness of the Merger. In addition, either party may terminate the Merger Agreement (i) if the Merger is not
consummated on or before September 26, 2011 (subject to extension by mutual agreement of the parties), (ii) if
the approval of AirTran’s stockholders is not obtained, (iii) in connection with certain competing transactions,
and (iv) for certain other reasons, as set forth in the Merger Agreement. The Merger Agreement further provides
that, upon termination of the Merger Agreement under specified circumstances, including termination of the
Merger Agreement in connection with a competing transaction, AirTran may be required to pay to the Company
a termination fee of $39 million.
The foregoing description of the Merger Agreement is only a summary, does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement, which is attached as Exhibit 2.1 to the
Company’s Current Report on Form 8-K as filed with the SEC on September 27, 2010.
73