UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material Pursuant to §240.14a-12

SPIRIT AIRLINES, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☒	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED AUGUST 25, 2022

 

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Spirit Airlines, Inc.:

You are cordially invited to attend a special meeting of stockholders of Spirit Airlines, Inc., a Delaware corporation (which we refer to as “Spirit”) virtually, via live webcast on the Internet at www.virtualshareholdermeeting.com/SAVE2022SM2 on                 , 2022, at                 , Eastern Time (which we refer to as the “special meeting”). The purpose of the special meeting is to consider and vote on the proposed acquisition of Spirit by JetBlue Airways Corporation, a Delaware corporation (which we refer to as “JetBlue”) for the cash amounts described below.

On July 28, 2022, Spirit entered into an Agreement and Plan of Merger (which we refer to as the “merger agreement”) with JetBlue and Sundown Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of JetBlue (which we refer to as “Merger Sub”). Under the merger agreement, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation and a direct, wholly owned subsidiary of JetBlue, in a transaction we refer to as the “merger.” We entered into the merger agreement following the agreement with Frontier Group Holdings, Inc. (“Frontier”), on July 27, 2022, to mutually terminate the previously announced merger agreement entered into as of February 5, 2022 (the “Frontier merger agreement”).

Pursuant to the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger, each outstanding share of Spirit common stock, par value $0.0001 per share, (which we refer to as the “Spirit common stock”) (except for dissenting shares, treasury stock, and shares owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries) will be converted into the right to receive an amount in cash per share, without interest, equal to (i) $33.50 minus (ii) (A) $2.50 (which we refer to as the “approval prepayment amount”), to the extent paid upon the adoption by Spirit stockholders of the merger agreement at the special meeting (or, in the event that the closing of the merger occurs after the record date of, but before the payment date of, such prepayment amount, to the extent payable after the closing), and (B) an additional per share prepayment amount calculated as the product of $0.10 (which we refer to as the “additional prepayment amount”) and the number of additional prepayments paid in accordance with the terms of the merger agreement (or, in the event the closing occurs after the record date of, but before the payment date of any such additional prepayment, to the extent payable after the closing), not to exceed $1.15 per share, by JetBlue to Spirit stockholders in accordance with the merger agreement after December 31, 2022. If the closing occurs during or later than January 2024, the total cash received by Spirit stockholders, including the approval prepayment amount and the aggregate additional prepayment amounts, will increase over time up to a maximum of $34.15 per share in the event the transaction is consummated on the outside date in July 2024.

At the special meeting, the Spirit stockholders will be asked (i) to consider and vote on a proposal to adopt the merger agreement (which we refer to as the “merger proposal”), (ii) to consider and vote on a non-binding advisory proposal to approve the compensation that may be paid or become payable to the named executive officers of Spirit that is based on or otherwise relates to the merger (which we refer to as the “compensation proposal”) and (iii) to consider and vote on a proposal to approve the adjournment of the special meeting, if necessary or appropriate, including adjournment to permit further solicitation of proxies in favor of the merger proposal (which we refer to as the “adjournment proposal”).

The board of directors of Spirit (which we refer to as the “Spirit board of directors”) has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in

the best interests of Spirit and its stockholders, (ii) declared that the merger agreement, the merger and the other transactions contemplated thereby are advisable and (iii) approved the execution, delivery and performance by Spirit of the merger agreement and the transactions contemplated thereby, including the merger. The Spirit board of directors unanimously recommends that the Spirit stockholders vote “FOR” the merger proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal, if necessary or appropriate, including to solicit additional votes for approval of the merger proposal.

Your vote is important. Whether or not you plan to virtually attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the merger proposal is important, and we encourage you to vote promptly. The merger cannot be completed unless the merger agreement is adopted by stockholders holding a majority of the outstanding shares of Spirit common stock entitled to vote on such matter. The failure to vote will have the same effect as a vote “AGAINST” the merger proposal.

After reading the accompanying proxy statement, please make sure to vote your shares promptly by completing, signing and dating the accompanying proxy card and returning it in the enclosed prepaid envelope or by voting by telephone or through the Internet by following the instructions on the accompanying proxy card. If you hold shares through an account with a bank, broker, trust or other nominee, please follow the instructions you receive from it to vote your shares. Thank you in advance for your continued support and your consideration of this matter.

H. McIntyre Gardner

Chairman

Spirit Airlines, Inc.

Neither the United States Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger or the other transactions contemplated by the merger agreement, passed upon the merits or fairness of the merger or the other transactions contemplated by the merger agreement or passed upon the adequacy or accuracy of the disclosure in this letter or the accompanying proxy statement. Any representation to the contrary is a criminal offense.

The date of this proxy statement is                 , 2022, and it is first being mailed or otherwise delivered to the Spirit stockholders on or about                 , 2022.

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Spirit Airlines, Inc.:

NOTICE IS HEREBY GIVEN that Spirit Airlines, Inc. (which we refer to as “Spirit”) will hold a special meeting of holders of common stock of Spirit (who we refer to as “Spirit stockholders”) virtually via live webcast on the Internet at www.virtualshareholdermeeting.com/SAVE2022SM2, on                 , 2022, at                  Eastern Time (which we refer to as the “special meeting”) to consider and vote upon the following matters:

 

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a proposal to adopt the Agreement and Plan of Merger, dated as of July 28, 2022, as it may be amended from time to time (which agreement we refer to as the “merger agreement”) by and between Spirit, JetBlue Airways Corporation, a Delaware corporation (which we refer to as “JetBlue”) and Sundown Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of JetBlue (which we refer to as “Merger Sub”), a copy of which is attached as Annex A, pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation and a direct, wholly owned subsidiary of JetBlue (which we refer to as the “merger proposal”);

 

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a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Spirit’s named executive officers that is based on or otherwise relates to the merger (which we refer to as the “compensation proposal”); and

 

•

a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the merger proposal (which we refer to as the “adjournment proposal”).

Spirit has fixed the close of business on     , 2022 as the record date for the special meeting. Only Spirit stockholders of record at that time are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement of the special meeting. At least ten days prior to the date of the special meeting, the list of the stockholders entitled to vote at the special meeting will be available for inspection by Spirit stockholders for any purpose germane to the special meeting during ordinary business hours at 2800 Executive Way, Miramar, Florida, 33025. Approval of the merger proposal requires the affirmative vote of holders of a majority in voting power of the outstanding shares of common stock, $0.0001 par value per share, of Spirit (which we refer to as “Spirit common stock”), entitled to vote on thereon. Approval of each of the compensation proposal and the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spirit common stock which are present in person or by proxy at the special meeting and entitled to vote thereon.

The board of directors of Spirit has unanimously adopted the merger agreement, has determined that the merger, on the terms and conditions set forth in the merger agreement, is advisable and in the best interests of Spirit and its stockholders, and unanimously recommends that Spirit stockholders vote “FOR” the merger proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal.

Your vote is very important. JetBlue and Spirit cannot complete the merger unless Spirit stockholders adopt the merger proposal.

Regardless of whether you plan to attend (via the Internet) the special meeting, please vote as soon as possible by following the voting procedures described on the proxy card. If you do not vote on the merger proposal, it will have the same effect as a vote by you against the merger proposal.

The enclosed proxy statement provides a detailed description of the special meeting, the terms and conditions of the merger, the documents related to the merger and other related matters. We urge you to read the proxy statement, including any documents incorporated in the proxy statement by reference, and its annexes carefully and in their entirety.

 

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Spirit Airlines, Inc. (which we refer to as “Spirit”), from documents filed with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”) that are not included in or delivered with this proxy statement. You can obtain any of the documents filed with or furnished to the SEC by Spirit at no cost from the SEC’s website at http://www.sec.gov. You may also request copies of these documents, including documents incorporated by reference in this proxy statement, at no cost by contacting Spirit at the following address:

Spirit Airlines, Inc.

2800 Executive Way

Miramar, Florida 33025

Attention: Investor Relations

Telephone: (954) 447-7920

You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, Spirit stockholders must request them no later than five business days before the date of the special meeting. This means that Spirit stockholders requesting documents must do so by                 , 2022.

You should rely only on the information contained in, or incorporated by reference into, this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated                 , 2022, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this document is accurate as of the date of such document. Neither the mailing of this document to Spirit stockholders nor the taking of any actions contemplated hereby by Spirit at any time will create any implication to the contrary.

This document does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such proxy solicitation in that jurisdiction.

Please see “Where You Can Find More Information” for more details.

TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS			1
SUMMARY			11
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			24
THE SPIRIT SPECIAL MEETING			25
Date, Time and Place of Meeting			25
Matters to Be Considered			25
Recommendation of the Spirit Board of Directors			25
Spirit Record Date and Quorum			25
Votes Required; Treatment of Abstentions and Failure to Vote			25
Shares Held by Officers and Directors			26
Voting of Proxies; Incomplete Proxies			26
Shares Held in “Street Name”; Broker Non-Votes			27
Revocability of Proxies and Changes to a Spirit Stockholder’s Vote			27
Solicitation of Proxies			28
Householding of Proxy Materials			28
Attending the Spirit Special Meeting (via the Internet)			28
Assistance			28
SPIRIT PROPOSALS			29
Proposal No. 1 — Merger Proposal			29
Proposal No. 2 — Compensation Proposal			29
Proposal No. 3 — Adjournment Proposal			29
INFORMATION ABOUT THE COMPANIES			31
THE MERGER			33
Terms of the Merger			33
Background of the Merger			33
Unaudited Prospective Financial Information			45
Reasons for the Merger; Recommendation of the Spirit Board of Directors			47
Opinion of Barclays Capital Inc.			50
Opinion of Morgan Stanley & Co. LLC			56
Financing			63
Interests of Spirit’s Directors and Executive Officers in the Merger			64
Merger-Related Compensation for Spirit’s Named Executive Officers			73
Delisting and Deregistration of Spirit Common Stock			77
Appraisal Rights in the Merger			77
Regulatory Approvals Required for the Merger			82
Litigation Related to the Merger			83
THE MERGER AGREEMENT			85
Explanatory Note Regarding the Merger Agreement			85
Structure and Effective Time			85
Merger Consideration			85
Treatment of Spirit Equity-Based Awards and Warrants			86
Payment and Issuance of Merger Consideration; Surrender of Company Certificates			87
Prepayments			88
Directors and Officers			88
Representations and Warranties			88

 

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Conduct of Business Pending the Closing			92
No-Shop; Acquisition Proposals; Change in Recommendation			96
Proxy Statement; Spirit Special Meeting			99
Employee Matters			100
Indemnification and Insurance			101
Other Covenants			102
Conditions to Completion of the Merger			107
Termination of the Merger Agreement			109
Effect of Termination			110
Transaction Expenses and Termination Fee			110
Specific Performance			111
Amendment; Extension; Waiver			112
Assignment			112
Governing Law; Jurisdiction			112
ACCOUNTING TREATMENT			113
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER			114
MARKET PRICE AND DIVIDEND INFORMATION			117
DEADLINES FOR SUBMITTING STOCKHOLDER PROPOSALS			118
WHERE YOU CAN FIND MORE INFORMATION			119

ANNEX A—Agreement and Plan of Merger

ANNEX B—Opinion of Barclays Capital Inc.

ANNEX C—Opinion of Morgan Stanley & Co. LLC

ANNEX D—Section 262 of the General Corporation Law of the State of Delaware

 

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QUESTIONS AND ANSWERS

The following are some questions that you may have about the merger and the special meeting, and brief answers to those questions. We urge you to read carefully the remainder of this proxy statement because the information in this section does not provide all of the information that might be important to you with respect to the merger or the special meeting. Additional important information is also contained in the documents incorporated by reference into this proxy statement. Please see “Where You Can Find More Information.”

 

Q:	What is the merger?

 

A:

JetBlue and Spirit have entered into an Agreement and Plan of Merger dated as of July 28, 2022 (which we refer to as the “merger agreement”). Under the merger agreement, Sundown Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of JetBlue (which we refer to as “Merger Sub”), will merge with and into Spirit, with Spirit continuing as the surviving corporation and a direct, wholly owned subsidiary of JetBlue, in a transaction we refer to as the “merger.” We entered into the merger agreement following the agreement with Frontier Group Holdings, Inc. (which we refer to as “Frontier”) on July 27, 2022 to mutually terminate the Agreement and Plan of Merger we entered into with Frontier on February 5, 2022. A copy of the merger agreement is included in this proxy statement as Annex A.

 

Q:	What will Spirit stockholders receive pursuant to the merger agreement and in the merger?

 

A:

If the merger is completed, each outstanding share of common stock, $0.0001 par value per share, of Spirit (which we refer to as “Spirit common stock”) (except for shares held by a holder who is entitled to demand and has properly demanded appraisal for such shares in accordance with, and who complies in all respects with, Section 262 of the DGCL, a copy of which is attached to this proxy statement as Annex D (which we refer to as “dissenting shares”), treasury stock, and shares owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive an amount in cash per share, without interest, equal to (such amount, the “merger consideration”) (i) $33.50 minus (ii) (A) $2.50 (which we refer to as the “approval prepayment amount”), to the extent paid following the adoption by the holders of common stock of Spirit (who we refer to as “Spirit stockholders”) of the merger agreement at the special meeting (or, in the event that the closing of the merger (which we refer to as the “closing”) occurs after the record date of, but before the payment date of, such approval prepayment amount, to the extent payable after the closing), and (B) an additional per share prepayment amount calculated as the product of $0.10 (which we refer to as the “additional prepayment amount”) and the number of additional prepayments paid in accordance with the terms of the merger agreement (or, in the event the closing occurs after the record date of, but before the payment date of any such additional prepayment, to the extent payable after the closing), not to exceed $1.15 per share, by JetBlue to Spirit stockholders in accordance with the merger agreement after December 31, 2022. If the closing occurs during or later than January 2024, the total cash received by Spirit stockholders, including the approval prepayment amount and the aggregate additional prepayment amounts, will increase over time up to a maximum of $34.15 per share in the event the transaction is consummated on the outside date in July 2024.

Regardless of whether the merger is completed, in the event the Spirit stockholders adopt the merger proposal at the special meeting, JetBlue will pay or cause to be paid the approval prepayment amount to Spirit stockholders as of the record date established by Spirit for the special meeting within five business days following such Spirit stockholder approval (which payment, we refer to as the “approval prepayment”). In the event of such stockholder approval, on or prior to the last business day of each month beginning after December 31, 2022, until the earlier of the closing or termination of the merger agreement, JetBlue will also pay or cause to be paid the additional prepayment amount to Spirit stockholders as of a record date not more than five business days prior to the last business day of such month (which additional payments, we refer to as the “additional prepayments”). If the merger agreement is terminated in certain circumstances for failure to obtain U.S. antitrust regulatory clearance, JetBlue will be required to pay (i) to Spirit, $70.0 million, and (ii) to the Spirit stockholders, the excess of (A) $400.0 million minus (B) the sum of the approval prepayment and all additional prepayments previously paid by JetBlue to the Spirit stockholders.

 

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Q:	Why am I receiving this proxy statement?

 

A:

We are delivering this document to you because it is a proxy statement being used by the board of directors of Spirit (which we refer to as the “Spirit board of directors”) to solicit proxies of Spirit stockholders in connection with approval of the merger and related matters. This document serves as the proxy statement for the special meeting of Spirit stockholders to be held virtually via live webcast on the Internet at www.virtualshareholdermeeting.com/SAVE2022SM2, on                 , 2022, at                  Eastern Time (which we refer to as the “special meeting”) and describes the proposals to be presented at the special meeting.

This proxy statement contains important information about the merger and the other proposals being voted on at the special meeting. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares of Spirit common stock voted by proxy without attending the special meeting. Your vote is important and we encourage you to submit your proxy as soon as possible. The merger cannot be completed unless, among other things, Spirit stockholders approve the merger proposal (as defined below).

 

Q:	What are Spirit stockholders being asked to vote on at the special meeting?

 

A:	Spirit is soliciting proxies from the Spirit stockholders with respect to the following proposals:

 

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a proposal to adopt the merger agreement, pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation in the merger and a direct, wholly owned subsidiary of JetBlue (which we refer to as the “merger proposal”);

 

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a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to the named executive officers of Spirit that is based on or otherwise relates to the merger (which we refer to as the “compensation proposal”); and

 

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a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the merger proposal (which we refer to as the “adjournment proposal”).

 

Q:	How does the Spirit board of directors recommend that I vote at the special meeting?

 

A:	The Spirit board of directors unanimously recommends that you vote “FOR” the merger proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal.

 

Q:	How will the merger affect Spirit restricted stock unit awards and Spirit performance share awards granted in fiscal year 2022?

 

A:

Under the merger agreement, except with respect to Spirit performance share awards (each, a “Spirit PSU award”) granted pursuant to Spirit’s 2015 Incentive Award Plan (the “Spirit equity award plan”), each award of Spirit restricted stock units denominated in Spirit common stock (each, a “Spirit RSU award”) granted pursuant to the Spirit equity award plan that is outstanding as of immediately prior to the effective time of the merger (which we refer to as the “effective time”) (including Spirit performance share awards denominated in Spirit common stock granted in fiscal year 2022 pursuant to the Spirit equity award plan (each, a “2022 Spirit PSU award”) and performance market stock unit awards denominated in Spirit common stock granted pursuant to the Spirit equity award plan (each, a “Spirit MSU award”)), will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit RSU award as of immediately prior to the effective time (treating for this purpose any performance-based vesting conditions to which a 2022 Spirit PSU award or Spirit MSU award is subject as having been achieved based on target performance as of immediately prior to the effective time), the right to receive an amount in cash that is subject to the same service vesting schedule applicable to the related Spirit RSU award and is equal to the sum of:

(x) the merger consideration, plus

 

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(y) solely to the extent (1) the related Spirit RSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit RSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect the approval prepayment and (2) paid pursuant to the merger agreement, the approval prepayment amount, plus

(z) solely to the extent the related Spirit RSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit RSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect any additional prepayment, any additional prepayment amounts not yet paid to the holder of such Spirit RSU award.

Notwithstanding the foregoing, Spirit and JetBlue have agreed that each Spirit RSU award and Spirit MSU award granted in fiscal years 2023 and 2024 pursuant to the Spirit equity award plan that is outstanding as of immediately prior to the effective time will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit RSU award as of immediately prior to the effective time, a JetBlue restricted stock unit denominated in JetBlue common stock (each, a “JetBlue RSU award”) based on an adjustment ratio, subject to the same terms and conditions (including the vesting schedule) that applied to the related Spirit RSU award as of immediately prior to the effective time; provided, however, that the JetBlue RSU award may be settled in cash or stock as determined by the compensation committee of the board of directors of JetBlue (the “JetBlue compensation committee”) in its sole discretion.

 

Q:	How will the merger affect Spirit performance share awards (other than 2022 Spirit PSU awards)?

 

A:

Under the merger agreement, each Spirit PSU award granted pursuant to the Spirit equity award plan (other than a 2022 Spirit PSU award and Spirit MSU award) that is outstanding as of immediately prior to the effective time will entitle the holder to receive, immediately prior to the effective time and subject to the occurrence of the closing, the number of shares of Spirit common stock that are earned thereunder based on target performance as of immediately prior to the effective time, in each case, multiplied by a fraction, the numerator of which is equal to the number of whole months elapsed from the first day of the applicable performance period until the closing and the denominator of which is equal to the total months in the applicable performance period. Any shares of Spirit common stock so delivered in respect of a Spirit PSU award will be deemed to be issued and outstanding as of immediately prior to the effective time, and will have the right to receive an amount in cash equal to the sum of:

(x) the merger consideration, plus

(y) solely to the extent (1) the related Spirit PSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit PSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect the approval prepayment and (2) paid pursuant to the merger agreement, the approval prepayment amount, plus

(z) solely to the extent the related Spirit PSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit PSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect any additional prepayment, any additional prepayment amount not yet paid to the holder of such Spirit PSU award.

Notwithstanding the foregoing, Spirit and JetBlue have agreed that each Spirit PSU award granted in fiscal years 2023 and 2024 that is outstanding as of immediately prior to the effective time will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit PSU award as of immediately prior to the effective time, a JetBlue RSU award based on an adjustment ratio, subject to the same terms and conditions (including the vesting schedule) that applied to the related Spirit PSU award as of immediately prior to the effective time; provided, however, that the JetBlue RSU award may be settled in cash or stock as determined by the JetBlue compensation committee in its sole discretion.

 

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Q:	How will the merger affect Spirit warrants?

 

A:

Under the merger agreement, immediately prior to the effective time, (i) the Spirit warrants will be assumed by JetBlue and will be converted into warrants exercisable for the merger consideration and (ii) JetBlue will assume the due and punctual performance and observance of each and every covenant, agreement and condition of the Spirit warrant agreements, such that the JetBlue assumed warrants will continue to have, and will be subject to, the same terms and conditions as applied to the Spirit warrants immediately prior to the effective time. The exercise price of the Spirit warrants will be adjusted in accordance with the Spirit warrant agreements to take into account the approval prepayment amount and the additional prepayment amount, to the extent paid prior to closing.

 

Q:	How will the merger affect Spirit convertible notes?

 

A:

Under the indentures governing Spirit’s 4.75% Convertible Senior Notes due 2025 (which we refer to as the “2025 convertible notes”) and Spirit’s 1.00% Convertible Senior Notes due 2026 (which we refer to as the “2026 convertible notes” and, together with the 2025 convertible notes, the “Spirit convertible notes”), prior to the effective time, Spirit, JetBlue and the Spirit convertible notes trustee will execute supplemental indentures to, among other things, (i) change each Spirit convertible note holder’s right to convert Spirit convertible notes for shares of Spirit common stock into a right to convert Spirit convertible notes for the aggregate consideration paid per share pursuant to the merger agreement on and after the effective date, and (ii) provide for JetBlue’s assumption of Spirit’s obligations under the Spirit convertible notes upon consummation of the merger, in each case pursuant to the terms of the indentures governing the Spirit convertible notes. At the effective time, (i) the Spirit convertible notes will be temporarily subject to a cash repurchase option at par value plus accrued interest following the merger, (ii) holders of the Spirit convertible notes may convert their notes for thirty-five trading days after the closing of the merger (as such period may be extended pursuant to the terms of the indentures governing the Spirit convertible notes), and (iii) the conversion rates of the Spirit convertible notes may be temporarily increased following the merger. The approval prepayment amount and the additional prepayment amounts will be payable in accordance with the terms of the indentures governing the Spirit convertible notes.

Under the terms of the merger agreement, Spirit will settle any conversions of Spirit convertible notes that occur prior to the effective time (i) pursuant to “Physical Settlement” (as defined in the indenture governing the 2025 convertible notes) for any conversions of 2025 convertible notes and (ii) pursuant to “Cash Settlement” (as defined in the indenture governing the 2026 convertible notes) for any conversions of 2026 convertible notes, in each case pursuant to the terms of the indentures governing the Spirit convertible notes.

 

Q:	What are the U.S. federal income tax consequences of the merger to Spirit stockholders?

 

A:

The exchange of shares of Spirit common stock for cash in the merger will be a taxable transaction to U.S. holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes and may also be taxable under state, local and non-U.S. tax laws. A U.S. holder will generally recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of merger consideration received by the U.S. holder and (2) the U.S. holder’s adjusted tax basis in the shares of Spirit common stock surrendered in exchange therefor.

The tax treatment of the approval prepayment and the additional prepayments to the Spirit stockholders is not clear. The parties have agreed to report the approval prepayment and the additional prepayments to the Spirit stockholders as amounts paid by JetBlue to, and for the benefit of, the Spirit stockholders for U.S. federal income tax and all other applicable tax purposes. Assuming that this characterization applies, the approval prepayment and the additional prepayments could be treated as merger consideration paid before the closing of the merger (with a corresponding adjustment to the gain or loss recognized by a U.S. holder when such U.S. holder sells or exchanges its shares of Spirit common stock); as gain realized by a U.S. holder in respect of a separate right or obligation with respect to its shares of Spirit common stock (e.g., if

 

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the merger is not consummated or if a U.S. holder disposes of its shares before the closing of the merger); or potentially as ordinary income to the U.S. holder. It is also possible that the Internal Revenue Service (which we refer to as the “IRS”) could disagree with the above characterization and seek to characterize the approval prepayment and/or the additional prepayments in a different manner.

A non-U.S. holder (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of shares of Spirit common stock for cash in the merger unless the non-U.S. holder has certain connections to the United States or Spirit is, or was during the relevant period, a U.S. real property holding corporation. In light of the uncertainty as to the tax treatment of the approval prepayment and the additional prepayments to the Spirit stockholders, there is a meaningful possibility that a broker, dealer, bank or other custodian that holds shares of Spirit common stock beneficially owned by a non-U.S. holder may withhold at a rate of 30% (or a lower rate under an applicable income tax treaty) on the entire amount of the approval prepayment and the additional prepayments.

For further information, please see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 114 of this proxy statement.

All holders of Spirit common stock should consult their own tax advisors for a full understanding of the tax consequences of the merger, the approval prepayment and the additional prepayments to them in light of their particular facts and circumstances.

 

Q:	If I am a Spirit stockholder, should I send in my Spirit stock certificate(s) now?

 

A:

No. Please do not send in your Spirit stock certificate(s) with your proxy. If you are a stockholder of record with your shares held in certificated form, you will receive a letter of transmittal and instructions for how to send your share certificates to the paying agent, in connection with the merger. See “The Merger Agreement—Conversion of Shares; Exchange of Certificates.”

 

Q:	What should I do if I hold my shares of Spirit common stock in book-entry form?

 

A:

If the merger is completed and your shares of Spirit common stock are held in book-entry form through the Depositary Trust Company (which we refer to in this proxy statement as “DTC” or in “street name” by a broker or other nominee), the cash proceeds will be deposited into your bank or brokerage account without any further action on your part. If you are a stockholder of record with your shares held in certificated form or held directly in your name in book-entry form other than through DTC, you will receive a letter of transmittal with instructions for returning such letter of transmittal, and, in the case of holders of share certificates, how to send your share certificates to the paying agent, in connection with the merger. The paying agent will issue and deliver to you a check for your shares after you comply with these instructions.

 

Q:	When and where will the special meeting take place?

 

A:

The special meeting will be held virtually via live webcast on the Internet on                 , 2022, at                  Eastern Time. The special meeting will be held solely via live webcast and there will not be a physical meeting location. Spirit stockholders will be able to attend the special meeting online and vote their shares electronically during the meeting by visiting www.virtualshareholdermeeting.com/SAVE2022SM2 (which we refer to as the “special meeting website”).

 

Q:	What do l need to do now?

 

A:	After you have carefully read this proxy statement and have decided how you wish to vote your shares of Spirit common stock, please vote your shares promptly so that your shares are represented and voted at the special meeting.

 

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Q:	How do I vote?

 

A:	You may vote by mail or follow any alternative voting procedure described on the proxy card. To use an alternative voting procedure, follow the instructions on each proxy card that you receive.

The procedures for voting are as follows:

Stockholder of Record: Shares Registered in Your Name

If you are a Spirit stockholder of record, you may vote at the special meeting. Alternatively, you may vote by proxy by signing, dating and returning the proxy card, over the Internet or by telephone. Whether or not you plan to attend (via the Internet) the special meeting, we urge you to vote by proxy to ensure your vote is counted. Even if you have submitted a proxy before the special meeting, you may still attend the special meeting and vote via the Internet. In such case, your previously submitted proxy will be disregarded.

 

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To vote by proxy over the Internet, follow the instructions provided on the proxy card.

 

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To vote by telephone, you may vote by proxy by calling the toll-free number found on the proxy card.

 

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To vote by mail, complete, sign and date the proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the special meeting, we will vote your shares as you direct.

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent

If you are a beneficial owner of shares of Spirit common stock registered in the name of your broker, bank or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the voting instruction card to ensure that your vote is counted. To vote (via the Internet) at the special meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

 

Q:	How do I vote via the Internet or by telephone?

 

A:

You may vote by proxy by following the instructions provided on the proxy card. You may also vote by proxy by calling the toll-free number found on the proxy card. Please be aware that if you vote over the Internet or by telephone, you may incur costs such as telephone and Internet access charges, as applicable, for which you will be responsible. The Internet and telephone voting facilities for eligible stockholders of record will close at 11:59 p.m. Eastern Time on                 , 2022. The giving of such a telephonic or Internet proxy will not affect your right to vote should you decide to attend (via the Internet) the special meeting.

The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have been recorded properly.

 

Q:	What constitutes a quorum for the special meeting?

 

A:

The presence at the special meeting, in person (via the Internet) or by proxy, of holders of a majority in voting power of the Spirit common stock issued and outstanding and entitled to vote at the special meeting will constitute a quorum for the transaction of business. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

If you hold shares of Spirit common stock entitled to vote at the special meeting through a bank, brokerage firm or other nominee, you may instruct your bank, brokerage firm or other nominee to vote your shares by following the instructions that the bank, brokerage firm or nominee provides to you. If you do not provide

 

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voting instructions to your brokerage firm, your shares of Spirit common stock entitled to vote at the special meeting will not be voted and will not be treated as present for purposes of establishing a quorum.

 

Q:	What is the vote required to approve each proposal at the special meeting?

 

A:	Merger proposal:

 

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Standard: Approval of the merger proposal requires the affirmative vote of the holders of a majority in voting power of the outstanding shares of Spirit common stock entitled to vote on the proposal.

 

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Effect of abstentions and broker non-votes: If you attend the special meeting in person (via the Internet) and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. This will have the effect of a vote “AGAINST” the merger proposal.

Compensation proposal:

 

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Standard: Approval of the compensation proposal requires the affirmative vote of a majority in voting power of the shares of Spirit common stock which are present in person or represented by proxy at the special meeting and entitled to vote on the compensation proposal.

 

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Effect of abstentions and broker non-votes: If you attend the special meeting in person (via the Internet) and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. Assuming a quorum is present at the special meeting, this will have no effect on the compensation proposal.

Adjournment proposal:

 

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Standard: Approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spirit common stock which are present in person or represented by proxy at the special meeting and entitled to vote on the adjournment proposal.

 

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Effect of abstentions and broker non-votes: If you attend the special meeting in person (via the Internet) and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. Assuming a quorum is present at the special meeting, this will have no effect on the adjournment proposal.

 

Q:	Why is my vote important?

 

A:

If you do not vote, it will be more difficult for Spirit to obtain the necessary quorum to hold the special meeting and to receive the vote necessary to complete the merger. The merger cannot be completed unless the merger proposal is approved by the affirmative vote of a majority in voting power of all issued and

 

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outstanding shares of Spirit common stock entitled to vote on the proposal. Only Spirit stockholders as of the close of business on                 , 2022 (which we refer to as the “record date”) are entitled to vote at the special meeting. The Spirit board of directors unanimously recommends that the Spirit stockholders vote “FOR” the merger proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal. In addition, your failure to submit a proxy or vote at the special meeting, or failure to instruct your bank or broker how to vote, or abstention will have the same effect as a vote “AGAINST” the merger proposal.

 

Q:	If my shares of Spirit common stock are held in “street name” by my bank or broker, will my bank or broker automatically vote my shares for me?

 

A:

No. Your bank or broker cannot vote your shares without instructions from you. If your shares are held in “street name” through a bank, broker or other holder of record, you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank or broker. You may not vote shares held in street name by returning a proxy card directly to Spirit, or by voting over the Internet or by telephone, unless you provide a “legal proxy,” which you must obtain from your broker, bank, or other nominee. Your bank, broker or other nominee is obligated to provide you with a voting instruction form for you to use. A so called “broker non-vote” will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter. Under the current rules of the New York Stock Exchange, or the NYSE,, brokers, banks or other nominees may use their discretion to vote “uninstructed” shares (i.e., shares of record held by banks, brokers or other nominees, but with respect to which the beneficial owner of such shares has not provided instructions on how to vote on a particular proposal) with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. All of the proposals currently expected to be voted on at the special meeting are non-routine matters under applicable stock market exchange rules for which brokers do not have discretionary authority to vote, and therefore it is not expected that there will be any broker non-votes at the special meeting. Further, brokers, banks or other nominees who hold shares of Spirit common stock on behalf of their customers may not give a proxy to Spirit to vote those shares with respect to any of the proposals without specific instructions from their customers, as brokers, banks and other nominees do not have discretionary voting power on these matters. Failure to instruct your bank or broker how to vote will have (i) the same effect as a vote “AGAINST” the merger proposal, (ii) no effect on the compensation proposal and (iii) no effect on the adjournment proposal.

 

Q:	Can I attend the special meeting and vote my shares via the Internet?

 

A:

Yes. All Spirit stockholders as of the record date, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend (via the Internet) the special meeting. Whether or not you plan to attend (via the Internet) the special meeting, we urge you to vote by proxy over the Internet to ensure your vote is counted. Even if you have submitted a proxy before the special meeting, holders of record of Spirit common stock may still attend the special meeting and vote via the Internet. In such case, your previously submitted proxy will be disregarded.

 

Q:	Can I change my vote?

 

A:

Yes. If you are a holder of record of Spirit common stock as of the record date, you may change your vote at any time before your shares of Spirit common stock are voted electronically at the special meeting by: (1) submitting another properly completed proxy over the Internet, by telephone or by mail with a later date; (2) attending (via the Internet) the special meeting and voting online (simply attending (via the Internet) the special meeting will not, by itself, revoke your proxy); or (3) delivering a written revocation letter to Spirit’s Secretary at 2800 Executive Way, Miramar, Florida, 33025, which written revocation letter must be received by Spirit prior to the special meeting. If you hold your shares in “street name” through a bank, broker, or other holder of record, you should contact your record holder to change your vote.

 

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Q:	What should I do if I receive more than one set of voting materials?

 

A:

If you receive more than one set of materials, your shares are registered in more than one name or are registered in different accounts. In order to vote all the shares you own, you must follow the instructions for voting on each proxy card that you receive by mail or email, which include instructions for voting over the Internet, by telephone or by signing, dating and returning each proxy card.

 

Q:	Will Spirit be required to submit the merger proposal to its stockholders even if the Spirit board of directors has withdrawn, modified, or qualified its recommendation?

 

A:	Yes. Unless the merger agreement is terminated before the special meeting, Spirit is required to submit the merger proposal to its stockholders even if the Spirit board of directors has withdrawn, modified or qualified its recommendation that Spirit stockholders adopt the merger agreement.

 

Q:	Are Spirit stockholders entitled to appraisal rights?

 

A:

Pursuant to Section 262 of the DGCL, holders of Spirit common stock who hold their shares through the effective time and do not vote their shares in favor of adoption of the merger agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the fair value of their shares of Spirit common stock, as determined by the Delaware Court of Chancery, if the merger is completed. The “fair value” of shares of Spirit common stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the merger consideration that Spirit stockholders would otherwise be entitled to receive under the terms of the merger agreement. Spirit stockholders also should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Holders of Spirit common stock who wish to preserve any appraisal rights they may have, must so advise Spirit by submitting a written demand for appraisal prior to the vote to adopt the merger agreement and approve the transactions contemplated thereby, and must not vote in favor of the merger proposal and otherwise follow fully the procedures prescribed by Section 262 of the DGCL. For further information, see “The Merger—Appraisal Rights in the Merger.”

 

Q:	When do you expect to complete the merger?

 

A:

JetBlue and Spirit expect to complete the merger in the first half of 2024. However, neither JetBlue nor Spirit can assure you of if or when the merger will be completed. JetBlue and Spirit must obtain the approval of the merger proposal by the Spirit stockholders at the special meeting, and also must obtain necessary regulatory approvals in addition to satisfying certain other closing conditions. For further information, see “The Merger Agreement—Conditions to Completion of the Merger,” beginning on page 107 of this proxy statement.

 

Q:	What happens if the merger is not completed?

 

A:

If the merger is not completed, Spirit stockholders will not receive any consideration for their shares of Spirit common stock in connection with the merger, other than the approval prepayment amount and any additional prepayment amounts paid prior to the merger agreement being terminated (assuming the merger proposal is approved). Instead, Spirit will remain an independent, public company and Spirit common stock will continue to be listed and traded on the NYSE. In addition, if the merger agreement is terminated in certain circumstances, a termination fee may be required to be paid by Spirit to JetBlue. Further, if the merger agreement is terminated under certain circumstances, an expense reimbursement amount may be required to be paid by Spirit to JetBlue. Upon the termination of the merger agreement by JetBlue because

 

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of a material, uncured breach by Spirit of the merger agreement, Spirit will be required to pay JetBlue an amount equal to the sum of the approval prepayment and all additional prepayments paid by JetBlue directly to the Spirit stockholders. Upon the termination of the merger agreement for failure to obtain U.S. antitrust clearance, JetBlue will be required to pay (i) to Spirit, $70.0 million, and (ii) to Spirit stockholders, the excess of (A) $400.0 million minus (B) the sum of the approval prepayment and all additional prepayments paid by JetBlue directly to the Spirit stockholders. See “The Merger Agreement—Termination Fee” for a complete discussion of the circumstances under which any such termination fee or expense reimbursement amount will be required to be paid.

 

Q:	Whom should I call with questions?

 

A:

If you have any questions concerning the merger or this proxy statement, would like additional copies of this proxy statement, or need help voting your shares of Spirit common stock, please contact Spirit’s proxy solicitor, Okapi Partners LLC, toll-free at (855) 208-8903 or via email at info@okapipartners.com.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement, including statements concerning JetBlue, Spirit, the proposed transaction and other matters, should be considered forward-looking within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on JetBlue’s and Spirit’s current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to JetBlue’s and Spirit’s operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward looking statements. Words such as “expects,” “will,” “plans,” “intends,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “should,” “seeks,” “goals,” “targets” and other similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed, or assured. All forward-looking statements in this proxy statement are based upon information available to JetBlue and Spirit on the date of this proxy statement. JetBlue and Spirit undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances, or otherwise, except as required by applicable law. All written and oral forward-looking statements concerning the proposed transaction or other matters addressed in this proxy statement and attributable to JetBlue, Spirit or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement.

Actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the coronavirus pandemic, including new and existing variants, the outbreak of any other disease or similar public health threat that affects travel demand or behavior, the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement; failure to obtain applicable regulatory or Spirit stockholder approval in a timely manner or otherwise and the potential financial consequences thereof; failure to satisfy other closing conditions to the proposed transaction; failure of the parties to consummate the transaction; JetBlue’s failure to finance the transaction and obtain the indebtedness JetBlue expects to incur in connection with the transaction; the possibility that JetBlue may be unable to achieve expected synergies and operating efficiencies within the expected timeframes or at all; risks that JetBlue will not successfully integrate Spirit’s operations with those of JetBlue, and the possibility that such integration may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including disruptions in relationships with employees, customers or suppliers) may be greater than expected in connection with the transaction; failure to realize anticipated benefits of the combined operations; demand for the combined company’s services; the growth, change and competitive landscape of the markets in which the combined company participates; expected seasonality trends; diversion of managements’ attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; risks related to investor and rating agency perceptions of each of the parties and their respective business, operations, financial condition and the industry in which they operate; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction; ongoing and increase in costs related to IT network security; and other risks and uncertainties set forth from time to time under the sections captioned “Risk Factors” in JetBlue’s and Spirit’s reports and other documents filed with the SEC from time to time, including their Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.

 

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THE SPIRIT SPECIAL MEETING

Date, Time and Place of Meeting

The special meeting will be held virtually via live webcast on the Internet at www.virtualshareholdermeeting.com/SAVE2022SM2, on                 , 2022, at                  Eastern Time.

Matters to Be Considered

At the special meeting, Spirit stockholders will be asked to consider and vote upon the following matters:

 

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a proposal to adopt the Agreement and Plan of Merger, dated as of July 28, 2022, as it may be amended from time to time by and between Spirit, JetBlue and Merger Sub, pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation and a direct, wholly owned subsidiary of JetBlue;

 

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a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Spirit’s named executive officers that is based on or otherwise relates to the merger; and

 

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a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the merger proposal.

Recommendation of the Spirit Board of Directors

The Spirit board of directors has determined that the merger is advisable and in the best interests of Spirit and its stockholders and has unanimously adopted the merger agreement. The Spirit board of directors unanimously recommends that Spirit stockholders vote “FOR” the merger proposal, “FOR” the compensation proposal, and “FOR” the adjournment proposal. See “The Merger—Reasons for the Merger; Recommendation of the Spirit Board of Directors” for a more detailed discussion of the Spirit board of directors’ recommendation.

Spirit Record Date and Quorum

The Spirit board of directors has fixed the close of business on                 , 2022, as the record date for determining the holders of Spirit common stock entitled to receive notice of and to vote at the special meeting.

As of the record date, there were              shares of Spirit common stock outstanding and entitled to vote at the special meeting held by approximately              holders of record. Each share of Spirit common stock entitles the holder to one vote at the special meeting on each proposal to be considered at the special meeting.

The presence at the special meeting, in person (via the Internet) or by proxy, of holders of a majority in voting power of the Spirit common stock issued and outstanding and entitled to vote at the special meeting will constitute a quorum for the transaction of business. All shares of Spirit common stock present in person (via the Internet) or represented by proxy, including abstentions, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the special meeting.

Votes Required; Treatment of Abstentions and Failure to Vote

Merger proposal:

 

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Standard: Approval of the merger proposal requires the affirmative vote of the holders of a majority in voting power of the outstanding shares of Spirit common stock entitled to vote on the proposal.

 

•

Effect of abstentions and broker non-votes: If you attend the special meeting in person and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to

 

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vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. This will have the effect of a vote “AGAINST” the merger proposal.

Compensation proposal:

 

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Standard: Approval of the compensation proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spirit common stock which are present in person or represented by proxy at the special meeting and entitled to vote on the compensation proposal.

 

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Effect of abstentions and broker non-votes: If you attend the special meeting in person and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. Assuming a quorum is present at the special meeting, this will have no effect on the compensation proposal.

Adjournment proposal:

 

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Standard: Approval of the adjournment proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spirit common stock which are present in person or represented by proxy at the special meeting and entitled to vote on the adjournment proposal.

 

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Effect of abstentions and broker non-votes: If you attend the special meeting in person and do not vote or if you submit a proxy card on which you indicate that you abstain from voting, your abstention will count as a vote “AGAINST” the applicable proposal. If you are a holder of shares of Spirit common stock entitled to vote at the special meeting and you do not attend the special meeting in person or return a proxy, or if you hold your shares in “street name” and you do not provide voting instructions to your brokerage firm, your shares will not be voted and will not be treated as present for purposes of establishing a quorum. Assuming a quorum is present at the special meeting, this will have no effect on the adjournment proposal.

Shares Held by Officers and Directors

As of the record date, the directors and executive officers of Spirit and their affiliates beneficially owned and were entitled to vote approximately              shares of Spirit common stock representing approximately             % of the shares of Spirit common stock outstanding on that date. It is expected that Spirit’s directors and executive officers will vote their shares “FOR” the merger proposal, “FOR” the compensation proposal and “FOR” the adjournment proposal. As of the record date, JetBlue, the directors and officers of JetBlue and their affiliates beneficially owned and were entitled to vote approximately 100 shares of Spirit common stock representing approximately              % of the shares of Spirit common stock outstanding on that date.

Voting of Proxies; Incomplete Proxies

Each copy of this proxy statement mailed to Spirit stockholders is accompanied by a form of proxy card with instructions for voting. If you hold shares of Spirit common stock in your name as a stockholder of record, you should complete and return the proxy card accompanying this proxy statement, regardless of whether you plan to attend (via the Internet) the special meeting.

The procedures for voting are as follows:

Stockholder of Record: Shares Registered in Your Name

If you are a Spirit stockholder of record as of the record date, you may vote at the special meeting. Alternatively, you may vote by proxy by signing, dating and returning the proxy card, over the Internet or by telephone.

 

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Whether or not you plan to attend (via the Internet) the special meeting, we urge you to vote by proxy to ensure your vote is counted. Even if you have submitted a proxy before the special meeting, you may still attend the special meeting and vote via the Internet. In such case, your previously submitted proxy will be disregarded.

 

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To vote by proxy over the Internet, follow the instructions provided on the proxy card.

 

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To vote by telephone, you may vote by proxy by calling the toll-free number found on the proxy card.

 

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To vote by mail, complete, sign and date the proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the special meeting, we will vote your shares as you direct.

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent

If you are a beneficial owner of shares of Spirit common stock registered in the name of your broker, bank or other agent, you should have received a voting instruction card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the voting instruction card to ensure that your vote is counted. To vote (via the Internet) at the special meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

All shares of Spirit common stock represented by valid proxies that Spirit receives through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares of Spirit common stock voted before signing and returning it, your proxy will be voted “FOR” the merger proposal, “FOR” the compensation proposal, and “FOR” the adjournment proposal. No matters other than the matters described in this proxy statement are anticipated to be presented for action at the special meeting or at any adjournment or postponement of the special meeting. However, if other business properly comes before the special meeting, the proxy agents will, in their discretion, vote upon such matters in their best judgment.

Shares Held in “Street Name”; Broker Non-Votes

Under NYSE rules, banks, brokers and other nominees who hold shares of Spirit common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine,” without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker, bank or other nominee that are represented at the special meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. If your broker, bank or other nominee holds your shares of Spirit common stock in “street name,” your broker, bank, or other nominee will vote your shares of Spirit common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker, bank or other nominee with this proxy statement.

Revocability of Proxies and Changes to a Spirit Stockholder’s Vote

If you hold your shares of Spirit common stock in your name as a stockholder of record, you may revoke any proxy at any time before it is voted by (1) submitting another properly completed proxy over the Internet, by telephone or by mail with a later date, (2) delivering a written revocation letter to Spirit’s Secretary, or (3) attending (via the Internet) the special meeting and voting online.

Any Spirit stockholder entitled to vote in person at the special meeting may vote online regardless of whether a proxy has been previously given, but the mere presence (without notifying Spirit’s Secretary) of a stockholder at the special meeting will not by itself constitute revocation of a previously given proxy.

 

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Written notices of revocation and other communications about revoking your proxy card should be addressed to:

Spirit Airlines, Inc.

2800 Executive Way

Miramar, Florida 33025

Attention: Secretary

If your shares of Spirit common stock are held in “street name” by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.

Solicitation of Proxies

Spirit is soliciting your proxy in conjunction with the merger. Spirit will bear the cost of soliciting proxies from you. In addition to solicitation of proxies by mail, Spirit will request that banks, brokers and other record holders send proxies and proxy material to the beneficial owners of Spirit common stock and secure their voting instructions. Spirit has also made arrangements with Okapi Partners LLC to assist it in soliciting proxies and has agreed to pay Okapi Partners LLC approximately $             plus reasonable expenses for these services.

Householding of Proxy Materials

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials, including annual reports, with respect to two or more stockholders sharing the same address by delivering a single copy of the documents addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. In accordance with these rules, only one set of documents will be delivered to multiple stockholders sharing an address unless Spirit has received contrary instructions from one or more of the stockholders.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive separate copies of the proxy materials, including annual reports, please notify your broker, direct your written request to Thomas Canfield, Secretary, Spirit Airlines, Inc., 2800 Executive Way, Miramar, Florida 33025 or contact Thomas Canfield at (954) 447-7920. Stockholders who currently receive multiple copies of such documents and would like to request “householding” of their communications should contact their brokers.

Attending the Spirit Special Meeting (via the Internet)

All holders of Spirit common stock, including holders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting (via the Internet). Spirit stockholders of record can vote electronically at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote electronically at the special meeting.

Assistance

If you have any questions concerning the merger or this proxy statement, would like additional copies of this proxy statement, or need help voting your shares of Spirit common stock, please direct your inquiry to Secretary, Spirit Airlines, Inc., 2800 Executive Way, Miramar, Florida 33025, (954) 447-7920, or Spirit’s proxy solicitor, Okapi Partners LLC, toll-free at (855) 208-8903 or via email at info@okapipartners.com.

 

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SPIRIT PROPOSALS

Proposal No. 1 — Merger Proposal

At the special meeting, the Spirit stockholders will be asked to adopt the merger agreement. Holders of Spirit common stock should read this proxy statement, including the annexes, carefully and in its entirety for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this proxy statement as Annex A.

After careful consideration, the Spirit board of directors unanimously adopted the merger agreement, authorized and approved the merger and the transactions contemplated by the merger agreement and determined the merger agreement and the merger to be advisable and in the best interests of Spirit and its stockholders. Please see “The Merger—Reasons for the Merger; Recommendation of the Spirit Board of Directors” included elsewhere in this proxy statement for a more detailed discussion of the Spirit board of directors’ recommendation.

The Spirit board of directors unanimously recommends that Spirit stockholders vote “FOR” the merger proposal.

Proposal No. 2 — Compensation Proposal

Section 14A of the Exchange Act, and Rule 14a-21(c) under the Exchange Act require that Spirit seek a non-binding advisory vote from its stockholders to approve the “golden parachute” compensation that may be paid or become payable to Spirit’s named executive officers that is based on or otherwise relates to the merger, as disclosed in “The Merger—Interests of Spirit’s Directors and Executive Officers in the Merger” beginning on page 64, including the table titled “Merger-Related Compensation for Spirit’s Named Executive Officers” and its accompanying footnotes. As required by these provisions, Spirit is asking the Spirit stockholders to cast an advisory vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Spirit’s named executive officers that is based on or otherwise relates to the merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case, as disclosed pursuant to Item 402(t) of Regulation S-K in “The Merger—Interests of Spirit’s Directors and Executive Officers in the Merger” and “The Merger—Merger-Related Compensation for Spirit’s Named Executive Officers” beginning on pages 64 and 73, are hereby APPROVED on a non-binding, advisory basis.”

The vote with respect to this proposal is an advisory vote and will not be binding on Spirit, the Spirit board of directors, JetBlue, any of Spirit or JetBlue’s subsidiaries or the combined company. Therefore, regardless of whether Spirit stockholders approve this proposal, if the merger agreement is adopted by the Spirit stockholders and the merger is completed, the compensation that is based on or otherwise related to the merger will still be paid to Spirit’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements. Approval of this compensation proposal is not a condition to the closing of the merger.

The Spirit board of directors unanimously recommends that Spirit stockholders vote “FOR” approval of the compensation proposal.

Proposal No. 3 — Adjournment Proposal

The special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies if necessary to obtain additional votes in favor of the merger proposal.

If, at the special meeting, (i) there are insufficient shares of Spirit common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, (ii) additional time is required for the filing and mailing of any supplemental or amended disclosure which Spirit has determined is

 

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reasonably likely to be required under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by Spirit stockholders prior to the meeting of Spirit stockholders, (iii) to allow reasonable additional time to solicit additional proxies, if and to the extent Spirit reasonably believes the number of shares of Spirit common stock present or represented and voting in favor of the merger proposal is insufficient to approve such proposal or (iv) if required by law, Spirit may move to adjourn the special meeting. In accordance with the Spirit bylaws, a vote to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger proposal may be taken in the absence of a quorum, and the meeting may also be adjourned at the discretion of the secretary of the special meeting.

The Spirit board of directors unanimously recommends that Spirit stockholders vote “FOR” the adjournment proposal.

 

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INFORMATION ABOUT THE COMPANIES

Spirit

Spirit Airlines, Inc.

2800 Executive Way

Miramar, FL 33025

(954) 447-7920

Spirit was founded in 1964 as Clippert Trucking Company, a Michigan corporation. It began air charter operations in 1990 and renamed itself Spirit Airlines, Inc. in 1992. In 1994, Spirit reincorporated in Delaware, and in 1999 it relocated its headquarters to Miramar, Florida.

Spirit offers affordable travel to value-conscious customers. Its all-Airbus fleet is one of the youngest and most fuel efficient in the United States. Spirit serves 85 destinations in 16 countries throughout the United States, Latin America and the Caribbean.

Spirit’s ultra low-cost carrier, or ULCC, business model allows it to compete principally by offering customers unbundled base fares that remove components traditionally included in the price of an airline ticket. By offering customers unbundled base fares, Spirit gives customers the power to save by paying only for the Á La Smarte^TM options they choose, such as checked and carry-on bags, advance seat assignments, priority boarding and refreshments. Spirit records revenue related to these options as non-fare passenger revenue, which is recorded within passenger revenues in its consolidated statements of operations.

Spirit’s common stock trades under the symbol “SAVE” on the NYSE.

Additional information about Spirit and its subsidiaries is included in documents incorporated by reference in this proxy statement. Please see “Where You Can Find More Information.”

JetBlue

JetBlue Airways Corporation

27-01 Queens Plaza North

Long Island City, NY 11101

(718) 286-7900

JetBlue Airways Corporation is a Delaware corporation incorporated in 1998 and headquartered in Long Island City, New York.

JetBlue is New York’s Hometown Airline^®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles, Orlando, and San Juan. JetBlue is a publicly-traded airline serving over 100 destinations across the United States, the Caribbean and Latin America, and between New York and London.

JetBlue common stock is traded on the Nasdaq Stock Market under the symbol “JBLU.”

Sundown Acquisition Corp.

Sundown Acquisition Corp.

c/o JetBlue Airways Corporation

27-01 Queens Plaza North

Long Island City, NY 11101

(718) 286-7900

Sundown Acquisition Corp., a Delaware corporation, is a direct, wholly owned subsidiary of JetBlue. Merger Sub is newly formed and was organized in connection with JetBlue’s previously disclosed tender offer for all of

 

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the outstanding shares of Spirit common stock and for the purpose of entering into the merger agreement and effecting the merger. To date, Merger Sub has engaged in no activities other than those incident to its formation, the previously disclosed tender offer and the merger, and it has no material assets or liabilities of any kind other than those incident to its formation and those incurred in connection with the previously disclosed tender offer and the merger.

 

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THE MERGER

The following discussion contains certain information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement attached as Annex A to this proxy statement and incorporated herein by reference. We urge you to read carefully this proxy statement, including the merger agreement attached as Annex A, for a more complete understanding of the merger.

Terms of the Merger

The Spirit board of directors unanimously approved the merger agreement. Under the merger agreement, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving corporation and a direct wholly owned subsidiary of JetBlue, in a transaction we refer to as the merger.

Upon completion of the merger, each share of Spirit common stock (except for dissenting shares, treasury stock, and shares owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive an amount in cash per share, without interest, equal to (i) $33.50 minus (ii) (A) $2.50, to the extent paid upon the adoption by Spirit stockholders of the merger agreement at the special meeting (or, in the event that the closing occurs after the record date of, but before the payment date of, such approval prepayment amount, to the extent payable after the closing), and (B) an additional per share prepayment amount calculated as the product of $0.10 and the number of additional prepayments paid in accordance with the terms of the merger agreement (or, in the event the closing occurs after the record date of, but before the payment date of any such additional prepayment, to the extent payable after the closing), not to exceed $1.15 per share, by JetBlue to Spirit stockholders in accordance with the merger agreement after December 31, 2022. If the closing occurs during or later than January 2024, the total cash received by Spirit stockholders, including the approval prepayment amount and the aggregate additional prepayment amounts, will increase over time up to a maximum of $34.15 per share in the event the transaction is consummated on the outside date in July 2024.

Spirit stockholders are being asked to adopt the merger agreement. See “The Merger Agreement” for additional and more detailed information regarding the legal documents that govern the merger, including information about conditions to the completion of the merger and provisions for terminating or amending the merger agreement.

Background of the Merger

The Spirit board of directors and senior management regularly review and assess Spirit’s financial performance, prospects, competitive position and long-term strategic plan with the goal of maximizing stockholder value. As part of this ongoing process, the Spirit board of directors and senior management have periodically evaluated potential strategic alternatives relating to Spirit and its business and have engaged in discussions with third parties concerning potential strategic transactions, including possible acquisitions, divestitures, business combinations and mergers.

On February 5, 2022, the Spirit board of directors unanimously approved and declared advisable the Frontier merger agreement and the transactions contemplated thereby and resolved to recommend that Spirit stockholders vote their shares in favor of the adoption of the merger agreement at a special meeting of Spirit stockholders (the “Spirit-Frontier transaction special meeting”). During the same meeting, the compensation committee of the Spirit board of directors (the “Spirit compensation committee”) unanimously approved the retention bonus program for certain key employees of Spirit in connection with the Frontier merger agreement. Later on February 5, 2022, Spirit and Frontier executed the finalized merger agreement.

On March 29, 2022, Spirit received an unsolicited proposal from JetBlue to acquire all of the outstanding shares of Spirit common stock at a price of $33.00 per share (the “JetBlue proposal”), which proposal was subsequently provided to Frontier in accordance with the terms of the Frontier merger agreement.

 

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On April 7, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Spirit’s legal advisor, Debevoise & Plimpton LLP (“Debevoise”), and Spirit’s antitrust counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”), present, held a video conference to review the JetBlue proposal. At that meeting, after consultation with its financial advisors and outside counsel, the Spirit board of directors determined that the JetBlue proposal could reasonably be likely to lead to a “Superior Proposal,” as defined in the Frontier merger agreement.

The Spirit board of directors directed Spirit’s senior management and its representatives to negotiate a non-disclosure agreement (“NDA”) with JetBlue and to engage in discussions with, and provide non-public information to, JetBlue with respect to JetBlue’s proposal, in accordance with the terms of the Frontier merger agreement. Spirit and JetBlue entered into an NDA on April 8, 2022 and commenced discussions regarding the JetBlue proposal on April 9, 2022.

Between April 9, 2022 and April 20, 2022, representatives of Paul Weiss conducted seven conference calls and video conferences with representatives of JetBlue’s legal advisor, Shearman & Sterling LLP (“Shearman”), and engaged with economic consultants and economists in order to assess the regulatory risk of an acquisition of Spirit by JetBlue and to assess the validity and merits of JetBlue’s own analysis.

On April 15, 2022, Spirit provided JetBlue and its representatives with access to a virtual data room containing due diligence materials for Spirit.

On April 19, 2022, members of senior management of Spirit and JetBlue, together with their respective financial advisors, held a video conference to discuss a broad range of financial and business due diligence matters.

On April 21, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss the JetBlue proposal. The discussion focused primarily on Spirit’s regulatory concerns with the transaction and the risks to Spirit’s business during the regulatory approval period. The Spirit board of directors directed Spirit’s senior management and legal advisors to develop a proposal to convey to JetBlue in respect of the contractual protections that Spirit would need to address the regulatory concerns identified by Spirit.

On April 24, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to further discuss the JetBlue proposal. At that meeting, the Spirit board of directors instructed Spirit’s senior management to communicate to JetBlue a package of contractual protections that the Spirit board of directors considered appropriate to provide increased assurance as to the likelihood of regulatory approval of the JetBlue proposal and to protect Spirit and its stockholders against the risk that such approval would not be obtained, which included a covenant to take all actions necessary to obtain regulatory approval, including being willing to terminate JetBlue’s Northeast Alliance Agreement (the “NEA”) with American Airlines and make any divestitures necessary to obtain regulatory approval, and a significant reverse termination fee payable in the event that such regulatory approval ultimately was not obtained. The Spirit board of directors also instructed Spirit’s senior management to inform JetBlue that, in the event that Spirit ultimately concluded that the JetBlue proposal, as it might be amended, constituted a “Superior Proposal” as defined in the Frontier merger agreement, Spirit would expect JetBlue to fund the termination fee payable to Frontier upon termination of the Frontier merger agreement.

On April 25, 2022, Mr. Christie called Robin Hayes, JetBlue’s Chief Executive Officer, to convey the foregoing package of contractual protections. Following that discussion, at the direction of Spirit, representatives from Barclays and Morgan Stanley held a call with representatives of JetBlue’s financial advisor, Goldman Sachs Group Inc. (“Goldman”), to discuss the same proposal, and representatives of Debevoise delivered to representatives of Shearman a document setting forth Spirit’s proposal along with proposed language for the regulatory covenant that Spirit would expect to be included in any definitive merger agreement with JetBlue.

 

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On April 29, 2022, JetBlue sent Spirit a letter setting forth its response to Spirit’s proposed package of contractual protections to address the regulatory concerns identified by Spirit, along with a draft of the merger agreement. In that response, JetBlue offered (i) to pay a reverse termination fee of $200 million if U.S. antitrust approval was not obtained, (ii) to use its reasonable best efforts to obtain all required regulatory approvals subject to various limitations, including that JetBlue would not be required to take any action that would be reasonably likely to materially and adversely affect the anticipated benefits of JetBlue or American Airlines under the NEA or that would have a material adverse effect on Spirit or JetBlue when measured relative to a company of Spirit’s size, and (iii) to fund the termination fee payable to Frontier upon termination of the Frontier merger agreement.

On April 30, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss the JetBlue proposal, as modified by its April 29, 2022 letter. The Spirit board of directors’ discussion focused on the prospects that JetBlue would be able to obtain regulatory approval for its acquisition of Spirit, particularly in light of the ongoing litigation regarding the NEA and the requirement of the Frontier merger agreement that, in order for Spirit to change its recommendation to stockholders or to terminate such agreement to enter into a merger agreement with JetBlue, the JetBlue proposal must be “reasonably capable of being consummated in accordance with the terms of such Acquisition Proposal, taking into account all financial, regulatory, legal and other aspects of such Acquisition Proposal.” The Spirit board of directors also discussed the extended time that would be required to reach a final regulatory determination, expected to be up to two years, and the risks to Spirit if it were unable to complete the proposed transaction with JetBlue at the end of that period.

Following adjournment, the Spirit board of directors continued its meeting on May 1, 2022. The directors, other than Mr. Christie, initially met in executive session together with representatives of Debevoise, after which Mr. Christie, other members of Spirit’s senior management, and representatives of Barclays, Morgan Stanley and Paul Weiss joined the meeting. Following further discussion with its advisors, the Spirit board of directors unanimously determined that the JetBlue proposal did not constitute a “Superior Proposal” as defined in the Frontier merger agreement due to the regulatory concerns. The Spirit board of directors did not form a view as to whether the economic terms of the JetBlue proposal were more favorable to the Spirit stockholders, from a financial point of view, than the economic terms of the Frontier merger agreement.

The following morning, on May 2, 2022, Spirit sent a letter to JetBlue, which Spirit also released publicly, informing JetBlue that the Spirit board of directors had determined that the JetBlue proposal did not constitute a “Superior Proposal” as defined in the Frontier merger agreement, on the grounds that it did not adequately address regulatory concerns raised by a proposed combination with JetBlue, and stating that the Spirit board of directors continued to believe that the pending transaction with Frontier represented the best opportunity to maximize value for the Spirit stockholders.

On May 16, 2022, JetBlue issued a press release announcing that it was commencing an unsolicited offer (the “Offer”), through its direct wholly owned subsidiary Sundown Acquisition Corp., to purchase any and all of the issued and outstanding shares of Spirit common stock for $30.00 per share in cash, without interest and less any required withholding taxes (the “Offer Price”), which was $3.00 less than the earlier JetBlue proposal. Shortly thereafter, JetBlue filed with the SEC the Tender Offer Statement on Schedule TO (the “Schedule TO”) containing the Offer to Purchase, the Letter of Transmittal and related documents. The Schedule TO provided that if a consensual transaction were reached with the Spirit board of directors and satisfactory diligence information was provided to support the price increase, JetBlue would consider increasing the Offer Price to $33.00 per share.

Also on May 16, 2022, JetBlue filed a preliminary proxy statement on Schedule 14A with the SEC to be used to solicit proxies in opposition to the proposed merger with Frontier and other related proposals at the Spirit-Frontier transaction special meeting.

During the evening of May 16, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Debevoise present, held a video conference to discuss the Offer. Spirit also issued a press

 

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release that evening noting that the Spirit board of directors would review the Offer and intended to advise Spirit stockholders of its formal position regarding the Offer within 10 business days by making available to Spirit stockholders and filing with the SEC a solicitation/recommendation statement on Schedule 14D-9, and advised its stockholders to take no action at the time in response to the Offer.

Also on May 16, 2022, Spirit delivered a notice to JetBlue to return or destroy all confidential materials or information exchanged between the parties pursuant to the NDA. In addition, Spirit revoked JetBlue’s and its advisors’ access to Spirit’s virtual data room. On May 26, 2022, JetBlue confirmed in writing to Spirit that JetBlue had returned or destroyed all confidential materials or information received by JetBlue pursuant to the NDA.

On May 18, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss the Offer. Following discussion among the Spirit board of directors and its advisors, the Spirit board of directors unanimously recommended that the Spirit stockholders reject the Offer and not tender their shares of Spirit common stock pursuant to the Offer.

On May 19, 2022, Spirit filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 and issued a press release announcing that the Spirit board of directors had unanimously determined to reject the Offer.

On June 1, 2022, Institutional Shareholder Services (“ISS”), a proxy advisory firm, published a report recommending that Spirit stockholders vote against the adoption of the Frontier merger agreement, in large part on the basis that the Frontier merger agreement did not provide for Frontier to pay Spirit a “reverse termination fee” in the event that the transaction did not receive antitrust approval. ISS contrasted that with JetBlue’s offer to pay a $200 million reverse termination fee to Spirit if JetBlue’s proposed transaction was accepted by Spirit but could not be consummated as a result of the failure to obtain antitrust approval.

Later on June 1, 2022, Mr. Christie spoke with William (“Bill”) A. Franke, chairman of the board of directors of Frontier, by telephone regarding the ISS report and potential changes to the Frontier merger agreement to address the concerns raised by ISS, including the addition of a reverse termination fee and potential changes to the merger consideration provided for in the Frontier merger agreement. Later on June 1, 2022, representatives of Debevoise sent to representatives of Frontier’s legal advisor, Latham & Watkins LLP (“Latham & Watkins”), a proposed draft of an amendment to the Frontier merger agreement.

On June 2, 2022, Mr. Franke and Mr. Christie, respectively joined by other members of Frontier and Spirit management, spoke by telephone. On that call, Mr. Franke informed Mr. Christie that the Frontier board of directors had met that morning and had authorized an amendment of the Frontier merger agreement to provide for the payment by Frontier to Spirit of a reverse termination fee in the amount of $250 million if the transaction could not be consummated as a result of the failure to obtain antitrust approval, but that the Frontier board of directors had not authorized any change to the merger consideration. Shortly thereafter, representatives of Latham & Watkins sent to representatives of Debevoise a revised draft of the amendment to the Frontier merger agreement that included the $250 million reverse termination fee.

Later on June 2, 2022, the Spirit board of directors met to consider the changes to the Frontier merger agreement proposed by Frontier, including the $250 million reverse termination fee. After discussion, the Spirit board of directors unanimously approved the proposed amendment to the Frontier merger agreement.

Later on June 2, 2022, Spirit and Frontier finalized the amendment to the Frontier merger agreement and the parties executed the amendment.

On June 6, 2022, JetBlue sent the Spirit board of directors an updated proposal to acquire all of the shares of Spirit common stock containing the following terms (i) an aggregate reverse break-up fee of $350 million payable in the event the requisite antitrust approvals are not obtained, (ii) a prepayment of a portion of the

 

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reverse termination fee in the amount of $1.50 per share in cash, payable to Spirit stockholders as a cash dividend, which would be funded by JetBlue and would be payable promptly following the later of the approval by the Spirit stockholders of a negotiated transaction with JetBlue and the termination of the restrictions on the payment of dividends by Spirit imposed by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which dividend would reduce the reverse termination fee payable by JetBlue to Spirit upon termination of the transaction in the event the requisite antitrust approvals are not obtained, and (iii) in a negotiated transaction, total aggregate consideration of $31.50 per share in cash to the Spirit stockholders, comprised of the prepayment dividend of $1.50 per share and $30.00 per share in cash payable upon consummation of JetBlue’s acquisition of Spirit. JetBlue issued a press release and filed an amendment to the Schedule TO regarding JetBlue’s updated proposal. The amendment to the Schedule TO provided that if a consensual transaction were reached with the Spirit board of directors and satisfactory diligence information was provided to support the price increase, JetBlue would be willing to enter into a consensual transaction with Spirit on the terms described above.

Later on June 6, 2022, Mr. Christie spoke with Mr. Franke by telephone regarding the JetBlue’s June 6 proposal and potential changes to the Frontier merger agreement that might be made in response to JetBlue’s updated proposal, including in particular an increase to the reverse termination fee.

Later on June 6, 2022, representatives of Citi spoke by telephone with representatives of Barclays and Morgan Stanley. Representatives of Citi informed representatives of Barclays and Morgan Stanley that Frontier would not revise the Frontier merger agreement in response to JetBlue’s updated proposal.

Later on June 6, 2022, at the direction of Spirit, representatives of Barclays and Morgan Stanley spoke by telephone with representatives of Goldman Sachs regarding JetBlue’s updated proposal in order to clarify the terms of that proposal.

Later on June 6, 2022, the Spirit board of directors, joined by members of Spirit management and representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss, met to consider next steps in light of JetBlue’s updated proposal and Frontier’s declination to further revise the Frontier merger agreement in response. After discussion, the Spirit board of directors unanimously determined to postpone the Spirit-Frontier transaction special meeting from June 10, 2022. At the end of that meeting the Spirit board of directors met in executive session, joined by a representative of Debevoise, to further discuss JetBlue’s updated proposal and next steps.

Shortly thereafter, representatives of Debevoise sent to representatives of Latham & Watkins a draft of a letter requesting Frontier’s consent under the Frontier merger agreement to postpone the Spirit-Frontier transaction special meeting to June 30, 2022.

On June 7, 2022, an ad-hoc transaction committee of the Spirit board of directors, joined by members of Spirit management and representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss met to further discuss JetBlue’s updated proposal and the postponement of the Spirit-Frontier transaction special meeting.

Later on June 7, 2022, Spirit sent to Frontier a letter requesting Frontier’s consent under the Frontier merger agreement to postpone the Spirit-Frontier transaction special meeting to June 30, 2022, which consent was provided by Frontier.

Also on June 7, 2022, at the direction of Spirit, representatives of Barclays and Morgan Stanley held a videoconference with representatives from Citi to discuss existing proposals from Frontier and JetBlue and communications strategy, and requested that Frontier submit a revised offer to Spirit by June 20, 2022.

On June 8, 2022, at the direction of Spirit, representatives of Barclays and Morgan Stanley spoke by telephone with representatives of Goldman Sachs and requested a revised offer from JetBlue by June 20, 2022, outlining the following key items that Spirit would expect to be included in a potential transaction with JetBlue (i) an

 

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improved economic offer representing the best price that JetBlue is prepared to pay, (ii) regulatory covenants, including a robust divestiture package, that would provide sufficient assurance as to the ability to obtain antitrust approval, (iii) the ability of Spirit to operate its business in the normal course during what Spirit expected to be a protracted regulatory review period, and (iv) an employee retention plan that took into account the additional time period expected before the JetBlue transaction could be consummated. The representatives of Barclays and Morgan Stanley also explained that Spirit and its advisors had agreed to provide the same Spirit-related information to JetBlue as was provided to Frontier and that a clean team agreement would need to be entered into by certain representatives of JetBlue and its advisors in order to access certain highly confidential information or materials.

On June 9, 2022, representatives of Spirit, Paul Weiss, JetBlue and Shearman held a videoconference to discuss regulatory strategy, including potential divestitures.

During June and July 2022, prior to the execution of the merger agreement, representatives of Shearman and Paul Weiss communicated about the potential applicability of non-U.S. antitrust merger control filing requirements.

Also on June 9, 2022, representatives of Debevoise sent representatives of Shearman proposed language for the conduct of business covenant to be included in any definitive merger agreement with JetBlue.

On June 10, 2022, Spirit restored access to its virtual data room for JetBlue and its advisors.

On June 14, 2022, Spirit issued a press release announcing that the Spirit board of directors would engage in further discussions with JetBlue with respect to JetBlue’s updated proposal, and would also continue to work with Frontier under the terms of the Frontier merger agreement.

Between June 14, 2022 and June 16, 2022, members of the Spirit and JetBlue management teams held multiple due diligence calls focusing on written questions delivered by JetBlue to Spirit on a variety of topics, including corporate strategy, financial and tax information, legal matters, aircraft fleet, and human resources.

On June 17, 2022, Mr. Christie and Thomas Canfield, Spirit’s General Counsel, held a call with Mr. Hayes and Brandon Nelson, JetBlue’s General Counsel, to discuss certain matters relating to employment and integration planning, as well as the process for the submission by JetBlue of a revised merger proposal.

Later on June 17, 2022, Messrs. Christie and Canfield held a call with Mr. Franke, during which Mr. Franke stated that he was not inclined to increase the reverse termination fee but was considering other elements of Frontier’s existing proposal, including potentially increasing the cash portion in exchange for reducing the ownership interest of Spirit shareholders in the combined company. Also on June 17, 2022, at the direction of Spirit, representatives of Barclays and Morgan Stanley held a telephone call with representatives of Goldman Sachs to discuss the timing and process for JetBlue’s submission of its revised proposal on June 20, 2022, and the anticipated process following the submission of JetBlue’s revised proposal.

Later on June 17, 2022, Spirit provided a copy of its proposed retention plan in the virtual data room accessible by representatives of JetBlue and Shearman, and representatives of Debevoise sent representatives of Shearman a revised draft of the proposed merger agreement with JetBlue. Shortly thereafter, representatives of Debevoise provided a copy of the proposed merger agreement to Frontier, as required under the Frontier merger agreement.

On June 18, 2022, representatives from Debevoise and Shearman held a call to discuss certain provisions of the draft merger agreement. Shortly thereafter, representatives of Shearman sent representatives of Debevoise comments on the interim operating covenants of the merger agreement.

On June 19, 2022, and June 20, 2022, representatives of Debevoise sent representatives of Shearman responses to Shearman’s comments on the interim operating covenants of the merger agreement and draft disclosure schedules to the merger agreement.

 

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On June 20, 2022, JetBlue sent Spirit a revised proposal and a revised draft of the merger agreement, which included (i) a price of $33.50 per share of common stock of Spirit, (ii) a regulatory commitment to divest assets of JetBlue and Spirit up to a material adverse effect on JetBlue and its subsidiaries (including Spirit), subject to various limitations including as to divestitures that JetBlue determined would be reasonably likely to materially and adversely affect the anticipated benefits of the parties to the NEA, (iii) a reverse termination fee of $350 million, and (iv) a prepayment dividend of $1.50 per share in cash to Spirit stockholders payable upon a vote of the stockholders approving a Spirit-JetBlue combination, which dividend would be funded by JetBlue and would reduce on a dollar-for-dollar basis the price per share payable on the closing of the merger or the reverse termination fee in the event such fee became payable upon the termination of the merger agreement. Shortly thereafter, representatives of Debevoise provided a copy of the JetBlue proposal and its draft merger agreement to Frontier, as required under the Frontier merger agreement.

On June 21, 2022, Messrs. Christie and Canfield held a call with Mr. Franke to discuss the terms of the revised proposal from JetBlue compared to the terms of the then existing Frontier merger agreement.

Later on June 21, 2022, representatives from Spirit, JetBlue, Shearman and Paul Weiss held a videoconference to discuss JetBlue’s regulatory strategy, including identifying sources of consumer benefits. JetBlue representatives also provided a broad overview of the NEA and answered questions posed by representatives of Spirit and Paul Weiss, but did not provide an unredacted copy of the agreement. Following such videoconference, a representative of Shearman had a further call with a representative of Paul Weiss regarding such matters.

Later on June 21, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, discussed the revised proposal from JetBlue and possible revisions to the existing Frontier merger agreement.

On June 22, 2022, representatives of Spirit, JetBlue, Debevoise and Shearman held a videoconference to discuss the conduct of business covenant of the draft merger agreement.

Also on June 22, 2022, at the direction of Spirit, representatives of Barclays and Morgan Stanley held a call with representatives from Goldman Sachs to discuss the revised proposal from JetBlue as well as the timing of the Spirit board of directors’ review of the proposal.

Also on June 22, 2022, Messrs. Christie and Canfield held a call with Mr. Bill Franke and Mr. Brian Franke, during which Mr. Bill Franke stated that Frontier was discussing internally whether to propose to revise the terms to the Frontier merger agreement to (i) increase the cash portion of the merger consideration by $2.00 per share, (ii) provide for a cash dividend to Spirit stockholders of approximately $250 million in total following a vote of the Spirit stockholders approving a Spirit-Frontier merger, which dividend would be funded by Frontier and would reduce on a dollar-for-dollar basis the price per share payable upon the closing of the merger or the reverse termination fee in the event such fee became payable upon the termination of the merger agreement, (iii) increase the reverse termination fee from $250 million to $350 million, and (iv) reduce the number of board seats of the combined company to be designated by Spirit from five to four. Mr. Bill Franke stressed that the foregoing terms were merely illustrative, did not constitute a firm proposal, and remained under discussion within Frontier. That evening, representatives of Debevoise and Latham & Watkins discussed these same terms, and representatives of Debevoise sent a proposed draft amendment to the Frontier merger agreement to representatives of Latham & Watkins for review.

On June 23, 2022, representatives of Latham & Watkins sent representatives of Debevoise a revised draft of the proposed amendment to the Frontier merger agreement.

Later on June 23, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss the revised proposals from JetBlue and Frontier and the potential amendment of the Frontier merger

 

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agreement that had been discussed by Messrs. Christie, Franke and Franke. Following discussion among the Spirit board of directors and its advisors as to the regulatory prospects of the two potential transactions and a comparison of their economic terms, the Spirit board of directors unanimously determined to authorize Spirit management to finalize the form of a potential amendment to the Frontier merger agreement on the aforementioned terms.

Later on June 23, 2022, representatives of Debevoise and Latham & Watkins held a conference call to discuss the proposed amendment to the Frontier merger agreement. Following that call, representatives of Debevoise and Latham & Watkins exchanged further drafts of the proposed amendment.

Later on June 23, 2022, representatives of Spirit and Paul Weiss held a videoconference with representatives of JetBlue and Shearman during which representatives of Spirit and Paul Weiss asked questions concerning various aspects of the NEA and discussed the scope of JetBlue’s proposed divestiture obligations and other matters relating to the prospects for antitrust approval of the JetBlue proposal.

On June 24, 2022, representatives of Debevoise held a call with representatives of Shearman to clarify certain provisions of the regulatory covenant proposed by JetBlue.

Later on June 24, 2022, representatives of Debevoise and Latham & Watkins finalized the form of the proposed amendment to the Frontier merger agreement.

Later on June 24, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss the proposals from JetBlue and Frontier, and the proposed amendment of the Frontier merger agreement. Following discussion among the Spirit board of directors and its financial and legal advisors, the Spirit board of directors unanimously approved the proposed amendment to the Frontier merger agreement in the form that had been previously negotiated by the parties’ respective counsel.

Later on June 24, 2022, Spirit and Frontier executed the amendment to the Frontier merger agreement, and Spirit filed a Form 8-K disclosing the amendment and its terms.

On June 27, 2022, JetBlue sent Spirit a revised proposal that (i) increased the reverse termination fee to $400 million, (ii) increased the prepayment dividend, payable to Spirit stockholders following a vote to approve a Spirit-JetBlue combination, to $2.50 per share in cash payable upon a vote of the stockholders approving, and (iii) added a “ticking fee” dividend of $0.10 per share in cash per month payable starting in January 2023 through the consummation of the JetBlue merger or termination of the merger agreement. The prepayment dividend and ticking fee dividends would be funded by JetBlue and would reduce the per share merger consideration on a dollar-for-dollar basis in an aggregate amount of up to $3.65 per share or the reverse termination fee by up to $400 million in the event that fee was payable, but would be repayable by Spirit upon the termination of the merger agreement for any other reason.

On June 28, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference to discuss JetBlue’s revised proposal. Following discussion among the Spirit board of directors and its financial and legal advisors, the Spirit board of directors unanimously determined that JetBlue’s revised proposal did not adequately address the regulatory concerns raised by a proposed combination with JetBlue, did not offer Spirit and its stockholders sufficient compensation in the event the proposed transaction with JetBlue was not consummated, and did not deliver greater value to the Spirit stockholders than the Frontier merger agreement. Later on June 28, 2022, Spirit issued a press release reaffirming its commitment to the proposed merger with Frontier.

On June 29, 2022, members of Spirit’s senior management met with representatives of Barclays, Morgan Stanley, Debevoise, Paul Weiss, Spirit’s proxy solicitor, Okapi Partners LLC, and its other advisors to discuss the

 

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status of proxy solicitation to approve the Frontier merger agreement. Later on June 29, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, held a video conference at which the Spirit board of directors approved the adjournment of the Spirit-Frontier transaction special meeting until July 8, 2022. Later on June 29, 2022, Spirit issued a press release announcing its intention to adjourn the Spirit-Frontier transaction special meeting until July 8, 2022, to continue discussions with Frontier and JetBlue and to continue to solicit proxies from its stockholders with respect to the Spirit-Frontier transaction special meeting.

On June 30, 2022, the Spirit-Frontier transaction special meeting was held and immediately adjourned until July 8, 2022.

Later on June 30, 2022, representatives of Shearman sent representatives of Debevoise a draft of the merger agreement which reflected JetBlue’s June 27 revised proposal.

Later on June 30, 2022, Messrs. Christie and Hayes held a call to discuss certain open items related to JetBlue’s June 27 revised proposal, including the interim operating covenants, the proposed retention bonus program for certain key Spirit employees, and the regulatory efforts covenant of the draft merger agreement. Later that day, at the direction of Spirit, representatives of Barclays, Morgan Stanley and Goldman Sachs held a call to discuss the same topics.

On July 1, 2022, representatives from Spirit and JetBlue, with representatives of Debevoise, Paul Weiss, Campbell-Hill, Spirit’s aviation consulting firm, and Shearman in attendance, held a series of calls to discuss the interim operating covenants, the proposed retention package, and the regulatory efforts covenant, and related strategy, of the draft merger agreement. Later that day, at the direction of Spirit, representatives of Barclays, Morgan Stanley and Goldman Sachs held a call to discuss the reverse termination fee and the status of the remaining open items.

Between July 2, 2022 and July 20, 2022, representatives of Debevoise and Shearman held a series of calls to discuss the transaction and the draft merger agreement and exchanged comments by email to certain provisions of the draft merger agreement, including the prepayments to Spirit stockholders, the interim operating covenant and regulatory efforts covenant. In the course of these calls and comments, on or around July 5, 2022, representatives of Debevoise and Shearman agreed that it would be feasible for JetBlue to make direct payments to Spirit stockholders (or their brokers) of the prepayment amounts referred to in JetBlue’s revised proposal. JetBlue then proposed, through representatives of Shearman, that any definitive merger agreement between JetBlue and Spirit provide for the direct prepayments by JetBlue to Spirit stockholders.

On July 5, 2022, Mr. H. McIntyre Gardner, chairman of the Spirit board of directors, Mr. Peter Boneparth, chairman of the JetBlue board of directors and Messrs. Christie and Hayes met in person in New York City to discuss certain aspects of JetBlue’s revised proposal and the strategic rationale for a transaction, as well as JetBlue’s strategy to obtain regulatory approval of the transaction.

On July 6, 2022, representatives of Spirit, Paul Weiss, JetBlue and Shearman met via videoconference and discussed aspects of the NEA.

Also on July 6, 2022, Mr. Christie and Mr. Bill Franke discussed by telephone the upcoming vote of Spirit stockholders and the competing proposals from Frontier and from JetBlue. Mr. Franke informed Mr. Christie that Frontier did not intend to change the economic terms of the Frontier merger agreement in response to the JetBlue’s revised proposal and acknowledged the low likelihood that the Frontier merger agreement would be approved by Spirit stockholders.

On July 7, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, met via teleconference and approved the further

 

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adjournment of the special meeting of Spirit stockholders until July 15, 2022, in order to continue discussions with Frontier and JetBlue and to continue to solicit proxies from Spirit stockholders. Later on July 7, 2022, Spirit announced that it would adjourn the Spirit-Frontier transaction special meeting until July 15, 2022.

Later on July 7, 2022, representatives of Debevoise spoke by telephone with representatives of Latham & Watkins and discussed the possibility of a consensual termination of the Frontier merger agreement if it appeared that the requisite approval of Spirit stockholders would not be obtained, with such termination having the same effect as if the Frontier merger agreement were to be terminated following the failure of the Spirit stockholders to approve the merger agreement. Representatives of Latham & Watkins subsequently discussed that proposal with representatives of Frontier and informed representatives of Debevoise that Frontier was not willing to terminate the Frontier merger agreement on the terms proposed by Debevoise.

On July 8, 2022, the Spirit-Frontier transaction special meeting was further adjourned until July 15, 2022.

Between July 7, 2022 and July 12, 2022, Messrs. Christie and Hayes discussed by telephone on several occasions certain aspects of the transaction.

On July 9, 2022, representatives of Debevoise sent to representatives of Shearman a draft of a covenant to be included in the draft merger agreement that provided for the direct payment by JetBlue to Spirit stockholders of amounts corresponding to the “prepayment dividend” and the “ticking fee dividends” contemplated by JetBlue’s revised proposal, as had been previously discussed by the parties’ respective counsel, as well as a $70 million increase to the reverse termination fee payable to Spirit in the event that the merger agreement could not be consummated due to failure to receive U.S. antitrust approval.

Also on July 9, 2022, representatives of Debevoise sent to representatives of Shearman a revised draft of Spirit’s disclosure schedules to the draft merger agreement, which was subsequently provided to Frontier in accordance with the terms of the Frontier merger agreement.

Between July 10, 2022, and July 20, 2022, representatives of Debevoise and Shearman had a series of calls and exchanged comments by email regarding the covenant providing for JetBlue’s proposal that direct payments be made to the Spirit stockholders, including the circumstances in which Spirit would be obligated to reimburse JetBlue for the amount of such payments, the tax treatment of such payments, and the allocation of any related tax risks. During this time, representatives of Debevoise and Shearman also continued to discuss and exchange comments by email to the interim operating covenants, the proposed retention bonus program for certain key Spirit employees, and the regulatory covenant of the draft merger agreement.

On July 10, 2022, Frontier sent Spirit a letter that was also issued as a press release and that, among other things, requested that Spirit further adjourn the Spirit-Frontier transaction special meeting until July 27, 2022, requested that the Spirit board of directors reaffirm its recommendation for the Frontier merger agreement, and stated that Frontier did not intend to propose any further modifications to the financial terms of the Frontier merger agreement and that Spirit should consider the terms set forth in the amendment to the Frontier merger agreement entered into on June 24, 2022, as representing Frontier’s best and final offer.

On July 12, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley, Debevoise and Paul Weiss present, met via teleconference to discuss Frontier’s July 10, 2022, letter. At that meeting, the Spirit board of directors determined to reaffirm its recommendation in favor of the Frontier merger agreement and to further adjourn the special meeting of Spirit stockholders until July 27, 2022.

On the morning of July 13, 2022, Spirit issued a press release announcing the reaffirmation by the Spirit board of directors of its recommendation that the Spirit stockholders approve the Frontier merger agreement and that Spirit intended to further adjourn the special meeting of Spirit stockholders until July 27, 2022.

On July 15, 2022, the Spirit-Frontier transaction special meeting was further adjourned until July 27, 2022.

 

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On July 18, 2022, representatives of Shearman sent to representatives of Debevoise a revised draft of JetBlue’s disclosure schedules to the draft merger agreement, which was subsequently provided to Frontier in accordance with the terms of the Frontier merger agreement.

On July 20, 2022, representatives of Shearman sent to representatives of Debevoise a revised commitment letter received by JetBlue from its debt financing sources.

On July 21, 2022, representatives of Debevoise sent to representatives of Shearman a revised draft of the merger agreement, which was subsequently provided to Frontier in accordance with the terms of the Frontier merger agreement.

Between July 22, 2022, and July 26, 2022, representatives of Debevoise and Shearman continued to discuss the provisions of the draft merger agreement, focusing on the allocation of tax risk relating to the proposed direct payments to Spirit stockholders, the interim operating covenants, the regulatory efforts covenant, and the retention bonus program for certain key Spirit employees.

On July 24, 2022, representatives of Shearman sent to representatives of Debevoise comments on Spirit’s disclosure schedules to the draft merger agreement, which was subsequently provided to Frontier in accordance with the terms of the Frontier merger agreement.

On July 25, 2022, representatives of Debevoise and Latham & Watkins had a call during which they discussed the possibility of a consensual termination of the Frontier merger agreement in the event there were not sufficient votes in favor of the Frontier merger agreement prior to the start of the special meeting scheduled for July 27, 2022. Following that call, representatives of Debevoise sent a draft of a termination agreement to Latham & Watkins.

Later on July 25, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley and Debevoise present, met via videoconference to discuss the status of the proxy solicitation in respect of the upcoming special meeting of Spirit stockholders, the potential termination of the Frontier merger agreement in the event that the vote of Spirit stockholders to approve the Frontier merger agreement was not obtained, and the status of the negotiations with JetBlue regarding its proposal. At that meeting, representatives of Barclays and Morgan Stanley provided their preliminary financial analyses of the terms of the JetBlue proposal. The Spirit board of directors authorized Spirit management to terminate the Frontier merger agreement if the approval of the Spirit stockholders was not obtained.

Later on July 25, 2022, representatives of Debevoise and Shearman held a call to discuss the remaining open issues on the draft merger agreement.

On July 26, 2022, representatives of Shearman sent representatives of Debevoise a revised draft of the merger agreement.

Later on July 26, 2022, representatives of Debevoise held a call with representatives of Latham & Watkins during which representatives of Latham & Watkins informed representatives of Debevoise that Frontier agreed to the form of termination agreement and wished to terminate the Frontier merger agreement on the afternoon of July 27, 2022 and to announce the termination immediately following the close of trading on that day.

During the morning of July 27, 2022, JetBlue sent to Spirit a letter offering to enter into the proposed merger agreement, in the form attached to that letter, which provided that such offer was irrevocable until 5:00 p.m. Eastern Time on Friday, July 29, 2022.

At 11:00 a.m. Eastern Time on July 27, 2022, Spirit commenced the special meeting of Spirit stockholders. After introducing the resolutions to be voted on at the meeting, Spirit announced that the voting would remain open until 4:15 p.m. Eastern Time, and that the meeting would be recessed until 4:00 p.m. Eastern Time.

 

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Later on July 27, 2022, Spirit and Frontier entered into the agreement terminating the Frontier merger agreement.

At 4:00 p.m. Eastern Time on July 27, 2022, Spirit re-opened the special meeting of Spirit stockholders and announced that the Frontier merger agreement had been terminated and that, accordingly, the voting would not proceed.

Later on July 27, 2022, the Spirit board of directors and members of Spirit’s senior management, with representatives of Barclays, Morgan Stanley and Debevoise present, met via videoconference to review and consider whether to approve the proposed transaction with JetBlue. After referencing its financial analyses provided to the Spirit board of directors in advance of the meeting (i) Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the Spirit board of directors that, as of such date and based upon and subject to the qualifications, limitations, and assumptions stated in its opinion, the merger consideration to be received by the holders of shares of Spirit common stock (other than the holders of the excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders of shares of Spirit common stock, and (ii) Morgan Stanley rendered its oral opinion (which was subsequently confirmed in writing) to the Spirit board of directors that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the merger consideration to be received by the holders of shares of Spirit common stock (other than the holders of the excluded shares) pursuant to the merger agreement is fair from a financial point of view to such holders of shares of Spirit common stock. The Spirit board of directors unanimously approved and declared advisable the merger agreement and the transactions contemplated thereby and resolved to recommend that Spirit stockholders vote their shares in favor of the adoption of the merger agreement.

During the same meeting on July 27, 2022, the Spirit compensation committee unanimously approved a key employee retention bonus program pursuant to which certain key employees of Spirit, including its executive officers, are eligible to receive a cash-based and, under certain circumstances, equity-based retention award. For participants who are executive officers of Spirit, the retention award amounts generally range from 100% of a participant’s total cash compensation (for Vice Presidents) to 150% of a participant’s total cash compensation (for Senior Vice Presidents and above). The cash-based retention awards are generally payable in two installments: (i) 25% of a retention award will be paid on July 28, 2023 (or, if sooner, at the closing of the merger), and (ii) the remaining 75% of a retention award will be paid within 30 days following the closing of the merger, in each case, subject to a participant’s continued employment through the applicable payment date and, for executive officers, no sooner than April 2, 2023. If an executive officer’s retention award exceeds 100% of the executive officer’s total cash compensation, then such excess amount will instead be payable in the form of restricted stock units of Spirit that will vest in three equal annual installments (measured from the scheduled payment date of the cash-based portion of the retention award), and be assumed by JetBlue as of the closing of the merger on the same terms and conditions. Further, Spirit may provide an additional retention award to any participant, subject, where applicable, to approval of the Spirit compensation committee and JetBlue, the value of which would be based on retention awards granted to similarly situated employees and the proportion of the expected retention period that has transpired. Any such additional retention awards would be payable in accordance with the payment schedule described above, but no earlier than twelve months following the date of grant, subject to continued employment through such payment date, and would be assumed by JetBlue as of the closing of the merger. Participants would be entitled to 50% of their respective retention awards in the event the merger is not consummated, to be paid on the 30th day following the termination of the merger agreement (or on April 2, 2023, if later).

Later on July 27, 2022, representatives of Debevoise and Shearman agreed to certain final revisions to Spirit’s disclosure schedules to the merger agreement, and representatives of Paul Weiss and Shearman held a videoconference to discuss certain regulatory aspects of the merger.

Early on the morning of July 28, 2022, Spirit and JetBlue executed the merger agreement.

 

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Later on July 28, 2022, Spirit and JetBlue issued a joint press release announcing the signing of the merger agreement and made a joint press appearance. JetBlue then filed a final amendment to the previously filed Schedule TO for the Offer, announcing the termination of the Offer.

Unaudited Prospective Financial Information

Spirit Financial Forecasts

Other than limited short-term guidance concerning certain aspects of its expected financial performance which is publicly issued each quarter, Spirit does not as a matter of course make public projections as to future performance, revenues, earnings or other financial results given, among other reasons, the uncertainty of realizing the underlying assumptions and estimates. However, Spirit prepared certain unaudited prospective financial information (which we refer to as the “Spirit Financial Forecasts”), that was provided to the Spirit board of directors in connection with their evaluation of the merger and to Barclays and Morgan Stanley, financial advisors to Spirit, for purposes of their respective financial analyses and opinions described in the sections of this proxy statement captioned “The Merger—Opinion of Barclays Capital Inc.” and “The Merger—Opinion of Morgan Stanley & Co. LLC.” The Spirit Financial Forecasts were also provided to JetBlue and to Goldman, financial advisor to JetBlue. Select material line items for certain periods from the Spirit Financial Forecasts, as well as material operating assumptions underlying such forecasts, are set forth below.

The Spirit Financial Forecasts were prepared based on the following key forecast assumptions:

 

•

Recovery. Unit revenue is assumed to stabilize at fuel-price adjusted pre-Covid-19 levels in mid-2023 with full capacity deployment delayed.

 

•

Revenue. Revenue is a reflection of current underlying demand assumptions, fuel price forecasts, and pace of Spirit’s return to full capacity deployment.

 

•

Fuel Expense. Fuel pricing is based on the forward curve available as of mid-July 2022. No hedging activity is assumed.

 

•

Non-fuel Operating Expenses. Capacity growth is the primary driver, with additional increases driven by inflationary assumptions, as well as additional labor costs estimated as of mid-July 2022.

 

•

Fleet Plan. Fleet plan is based on Spirit’s committed aircraft order book, with additional aircraft assumed in 2025-2026 to achieve stated mid-teens growth target.

The inclusion of this information should not be regarded as an indication that any of JetBlue, Spirit, their respective affiliates, officers, directors, advisors or other representatives or any other recipient of this information considered, or now considers, it necessarily to be predictive of actual future results, or that it should be construed as financial guidance, and it should not be relied on as such. This information was prepared solely for internal use and is subjective in many respects.

The following table sets forth the estimated amounts of the Revenue, Adjusted EBITDAR and Adjusted Net (Loss) Income (Non-GAAP) of Spirit (amounts may reflect rounding):

 

		Fiscal Year Ending December 31,
(Dollar amounts in millions)		2022E				2023E				2024E				2025E				2026E
Revenue		$	5,229			$	6,981			$	7,880			$	8,886			$	10,115
Adjusted EBITDAR1		$	301			$	1,152			$	1,730			$	2,035			$	2,393
Adjusted Net (Loss) Income (Non-GAAP)		$	(320	)		$	225			$	553			$	684			$	826

The following table sets forth the estimated amounts of the Unlevered Free Cash Flow of Spirit, calculated using the above prospective financial information as approved by Spirit management for use by Barclays and Morgan Stanley for purposes of their respective financial analyses and opinions described in the section of this proxy

 

1	“Adjusted EBITDAR” is a non-GAAP measure defined as operating income plus depreciation and amortization, aircraft rent and supplemental rent expense.

 

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statement captioned “The Merger—Opinion of Barclays Capital Inc.” and “The Merger—Opinion of Morgan Stanley & Co. LLC” (amounts may reflect rounding):

 

		Nine Months Ending December 31,				Fiscal Year Ending December 31,
(Dollar amounts in millions)		2022E				2023E				2024E				2025E				2026E
Unlevered Free Cash Flows2		$	(175	)		$	369			$	924			$	989			$	1,068

 

2

“Unlevered Free Cash Flows” is a non-GAAP measure defined as Adjusted EBITDAR less rent expense, less unlevered cash tax expense (taking into account net operating losses and other differences between accounting tax expense and cash taxes paid), less change in net working capital, less change in deferred heavy maintenance, less capital expenditures (including pre-delivery deposits for flight equipment, net of refunds, and proceeds from sale of property and equipment), plus certain other non-cash expenses.

Important Information About the Spirit Financial Forecasts

The Spirit Financial Forecasts provide summary unaudited prospective financial information for Spirit. The Spirit Financial Forecasts were not prepared with a view toward public disclosure and the inclusion of such Spirit Financial Forecasts should not be regarded as an indication Spirit, or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.

While presented with numeric specificity, the Spirit Financial Forecasts were not prepared for purposes of public disclosure, nor were they prepared on a basis designed to comply with GAAP published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of projections. However, in the view of Spirit management, the Spirit Financial Forecasts were prepared on a reasonable basis, and reflected the best estimates and judgments available at the time the Spirit Financial Forecasts were prepared, and present, to the best of Spirit management’s knowledge and belief, the expected course of action and the expected future financial performance of Spirit. Neither Spirit’s independent registered public accounting firm nor any other independent accountants, compiled, examined or performed any procedures with respect to the Spirit Financial Forecasts summarized above, and has not expressed any opinion or any other form of assurance on this information or its achievability, and assumes no responsibility for, and disclaims any association with, the Spirit Financial Forecasts. The reports of the independent registered public accounting firm incorporated by reference in this proxy statement relate to historical financial statements. They do not extend to any financial projections and should not be seen to do so.

Although presented with numerical specificity, the Spirit Financial Forecasts were prepared in accordance with variables, estimates, and assumptions that are inherently uncertain and may be beyond the control of Spirit, and which may prove not to have been, or to no longer be, accurate. While in the view of Spirit management the Spirit Financial Forecasts were prepared on a reasonable basis, the Spirit Financial Forecasts are subject to many risks and uncertainties. Important factors that may affect actual results and cause actual results to differ materially from the Spirit Financial Forecasts include risks and uncertainties relating to Spirit’s businesses, industry performance, the regulatory environment, general business and economic conditions, market and financial conditions, various risks set forth in Spirit’s reports filed with the SEC, and other factors described or referenced in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” of this proxy statement.

The Spirit Financial Forecasts also reflect assumptions that are subject to change and are susceptible to multiple interpretations and to conditions, transactions or events that may occur and were not anticipated at the time the Spirit Financial Forecasts were prepared. In addition, the Spirit Financial Forecasts do not take into account any circumstances, transactions or events occurring after the date the Spirit Financial Forecasts were prepared. Accordingly, actual results will likely differ, and may differ materially, from those contained in the Spirit Financial Forecasts. We do not assure you that the financial results in the Spirit Financial Forecasts set forth above will be realized or that future financial results of Spirit will not materially vary from those in the Spirit Financial Forecasts.

 

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None of Spirit, or its affiliates, officers, directors, or other representatives gives any stockholder of Spirit, or any other person, any assurance that actual results will not differ materially from the Spirit Financial Forecasts, and, except as otherwise required by law, none of them undertakes any obligation to update or otherwise revise or reconcile the Spirit Financial Forecasts to reflect circumstances after the date the Spirit Financial Forecasts were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the Spirit Financial Forecasts are shown to be in error.

No one has made or makes any representation to any stockholder of Spirit, or anyone else regarding, nor assumes any responsibility for the validity, reasonableness, accuracy, or completeness of, the Spirit Financial Forecasts set forth above. You are cautioned not to rely on the Spirit Financial Forecasts. The inclusion of this information should not be regarded as an indication that the Spirit board of directors, any of its advisors or any other person considered, or now considers, it to be material or to be a reliable prediction of actual future results.

The Spirit Financial Forecasts included above cover multiple years, and this information by its nature becomes subject to greater uncertainty with each successive year. The Spirit Financial Forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information contained in Spirit’s respective public filings with the SEC.

Due to the forward-looking nature of the Spirit Financial Forecasts, specific quantifications of the amounts that would be required to reconcile any non-GAAP measures presented to GAAP measures are not available. Spirit believes that there is a degree of volatility with respect to certain GAAP measures, and certain adjustments made to arrive at the relevant non-GAAP measures, which preclude Spirit from providing accurate forecasted non-GAAP to GAAP reconciliations.

Reasons for the Merger; Recommendation of the Spirit Board of Directors

In reaching its decision to approve the merger agreement and recommend its adoption by Spirit stockholders, the Spirit board of directors consulted with management as well as Spirit’s financial, legal and other advisers, and also considered a variety of factors that the Spirit board of directors viewed as supporting its decision, including, without limitation, the following:

 

•

that the Spirit board of directors believed that entering into the merger agreement with JetBlue was the best available strategic alternative for Spirit given the termination of the previously proposed merger agreement between Spirit and Frontier following the failure of the Spirit stockholders to approve that agreement;

 

•

that the proposed merger consideration represents a premium of 50.5% based on the 30-day volume weighted average prices of Spirit common stock ending as of the close of trading on February 4, 2022, the last trading date unaffected by rumors related to a possible transaction between Spirit and an acquirer; represents a premium of 37.9% to the closing price of Spirit’s common stock on July 27, 2022, the last trading day prior to the announcement of the Merger Agreement; and represents a premium of 39.3% to the closing price of Spirit common stock on August 24, 2022, the last practicable trading date before the filing of this proxy statement, in each case, based on an assumed merger consideration of $33.50 per share;

 

•

the expectation that the merger will create a more competitive and financially successful airline than Spirit would be able to create on a stand-alone basis, including because the combined company would constitute the fifth largest airline in the U.S.;

 

•

that the proposed merger consideration consists solely of cash, and the merger agreement contemplates the prepayment of merger consideration in certain circumstances, which provides immediate liquidity and primarily certainty of value to Spirit stockholders compared to a transaction in which Spirit stockholders would receive shares of an acquirer’s stock, thus eliminating for Spirit stockholders the uncertainty and risk of the continued execution of the Spirit business on a stand-alone basis or the combined company following the completion of the proposed merger;

 

•

the Spirit forecasts;

 

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•

the oral opinions of each of Barclays and Morgan Stanley rendered to the Spirit board of directors on July 27, 2022, subsequently confirmed in writing, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by each of Barclays and Morgan Stanley as set forth in their respective written opinions, the merger consideration to be received by the holders of shares of Spirit common stock (other than the holders of certain excluded shares) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Spirit common stock, each as further described in detail below under the sections entitled “The Merger—Opinion of Barclays Capital Inc.” beginning on page 50 and “The Merger—Opinion of Morgan Stanley & Co. LLC” beginning on page 56;

 

•

the terms and conditions of the merger agreement, including:

 

○

Spirit’s ability to engage in negotiations with third parties regarding potential alternative acquisition proposals under certain circumstances;

 

○

the Spirit board of directors’ right, after complying with the terms of the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal, subject to the terms and conditions of the merger agreement, including payment of a termination fee to JetBlue of $94.2 million (approximately 2.5% of the aggregate consideration payable to Spirit stockholders in the merger), which is within the customary range of termination fees payable in similar transactions and which, in the view of the Spirit board of directors, taking into consideration the advice of its advisors, would not preclude a third party with both the financial capability and strategic interest in Spirit from submitting a potential superior proposal;

 

○

the obligation of JetBlue to make a prepayment directly to Spirit stockholders of $2.50 per share following their approval of the merger agreement, and to make additional prepayments of $0.10 per share per month commencing in January 2023 until the earlier of closing and termination of the merger agreement, which prepayments in excess of an aggregate of $3.65 will represent additional consideration to Spirit stockholders;

 

○

that such prepayments to Spirit stockholders are not contingent on the closing of the merger and that Spirit will have no obligation to reimburse JetBlue for such prepayments if the merger is not consummated except in circumstances where the merger agreement is terminated because of an uncured breach by Spirit of the merger agreement;

 

○

the amount of $70 million payable by JetBlue to Spirit, in addition to the amounts paid or payable directly to Spirit stockholders of not less $400 million, if the merger is not consummated due to the failure to obtain U.S. antitrust approval or clearance;

 

○

the covenants contained in the merger agreement in respect of the efforts required by the parties to complete the merger;

 

○

the Spirit board of directors’ view that the merger agreement was the product of arm’s-length negotiations and contained customary terms and conditions;

 

○

the fact that the merger would be subject to the approval of Spirit stockholders, and Spirit stockholders would be free to reject the merger;

 

•

the fact that if Spirit stockholders so desire and if they comply fully with all of the required procedures under the DGCL, they will be able to exercise appraisal rights with respect to the merger, which would allow such stockholders to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery as further described in detail below under the section entitled “The Merger—Appraisal Rights in the Merger” beginning on page 77; and

 

•

the course of negotiations between Spirit and JetBlue, which resulted in an increase of at least $0.50 from the price per share of Spirit common stock initially offered by JetBlue, an increase of at least

 

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$270 million from the initial reverse termination fee offered by JetBlue, and additional flexibility for Spirit to operate its business during the period between the execution of the merger agreement and the earlier of closing or termination thereof, and the Spirit board of directors’ belief, based on these negotiations, that this was the highest price per share and the highest reverse termination fee that JetBlue was willing to pay, and that the terms of the merger agreement were the most favorable terms to Spirit to which JetBlue was then willing to agree.

The Spirit board of directors also considered the potential adverse impact of other factors weighing against its decision to approve the merger agreement and recommend its adoption by Spirit stockholders, including, without limitation, the following:

 

•

the risk that the merger will not be completed as a result of the inability to obtain required antitrust approval or clearance;

 

•

Spirit will no longer exist as an independent company, and accordingly, Spirit stockholders will no longer participate in any future growth it may have or any potential future increase in its value;

 

•

the risk that if the merger is not consummated, the trading price of Spirit common stock and the market’s perceptions of Spirit’s prospects could be adversely affected;

 

•

potential unknown liabilities, liabilities that are significantly larger than Spirit and JetBlue currently anticipate, and unforeseen increased expenses or delays associated with the merger;

 

•

the restrictions on the conduct of Spirit’s business during the period between the signing of the merger agreement and the completion of the merger;

 

•

the risk that the terms of the merger agreement, including provisions relating to the payment of a termination fee under specified circumstances, could have the effect of discouraging other parties that would otherwise be interested in a transaction with Spirit from proposing such a transaction;

 

•

that litigation may occur in connection with the merger and that such litigation could prevent the merger or increase costs related to the merger;

 

•

the possibility that Spirit stockholders might not approve adopt the merger and that, as a result, Spirit would be obligated to reimburse JetBlue for its expenses, up to $25 million;

 

•

the time it may take for the merger to receive the required regulatory approvals, particularly while JetBlue is in active litigation with the DOJ over the NEA;

 

•

Spirit’s management’s focus and resources may become diverted from other important business opportunities and operational matters while working to implement the merger, which could adversely affect Spirit’s business;

 

•

the effect of a public announcement of Spirit entering into the merger agreement on Spirit’s operations and employees, Spirit’s ability to retain key management, Spirit’s ability to effectively recruit replacement personnel if key personnel were to depart while the merger is pending and the potential adverse effects on the financial results of Spirit as a result of any related disruption in Spirit’s business;

 

•

that the reverse termination fee is the sole remedy payable by JetBlue in the event that the merger agreement is terminated for failure to obtain U.S. antitrust clearance, which may adversely affect Spirit’s ability to enforce, or JetBlue’s incentive to comply with, the regulatory undertakings;

 

•

that there can be no assurance that all of the conditions to the parties’ obligations to complete the merger will be satisfied, or that the merger will receive the required regulatory approvals, and as a result, the possibility that the merger may not be completed even if the merger is approved by Spirit stockholders;

 

•

that if the merger is not completed, Spirit will have incurred significant risk and transaction and opportunity costs, including the possibility of disruption to Spirit’s operations, diversion of

 

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management and employee attention, employee attrition, and a potentially negative effect on Spirit’s business and customer relationships;

 

•

the interests that certain executive officers and directors of Spirit may have with respect to the merger, as described in the section entitled “The Merger—Interests of Spirit’s Directors and Executive Officers in the Merger” beginning on page 64, which the Spirit board of directors was aware of in connection with its evaluation of the proposed merger; and

 

•

that the receipt of the proposed merger consideration in exchange for Spirit common stock will be a taxable transaction for U.S. federal income tax purposes.

In addition, the Spirit board of directors also realized that there can be no assurance regarding future results, including results expected or considered in the factors listed above. However, the Spirit board of directors concluded that the potential positive factors outweighed the risks and other potentially negative factors associated with the merger.

In reaching its conclusion, the Spirit board of directors did not find it practical to assign, and did not assign, any relative or specific weight to the different factors that were considered, and individual members of the Spirit board of directors may have given different weight to different factors. It should be noted that the explanation of the reasoning of the Spirit board of directors and certain information presented in this section are forward-looking in nature and should be read in light of the factors set forth in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Opinion of Barclays Capital Inc.

Spirit engaged Barclays to act as its financial advisor with respect to pursuing strategic alternatives for Spirit, including a possible sale of Spirit, pursuant to an engagement letter dated November 21, 2019. On July 27, 2022, Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the Spirit board of directors that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be received by the stockholders of Spirit in the merger is fair, from a financial point of view, to such stockholders.

The full text of Barclays’ written opinion, dated as of July 27, 2022, is attached as Annex B to this proxy statement. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays’ opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

Barclays’ opinion, the issuance of which was approved by Barclays’ Fairness Opinion Committee, is addressed to the Spirit board of directors, addresses only the fairness, from a financial point of view, of the consideration to be received by the stockholders of Spirit in the proposed transaction and does not constitute a recommendation to any stockholder of Spirit as to how such stockholder should vote with respect to the proposed transaction or any other matter. The terms of the proposed transaction were determined through arm’s-length negotiations between Spirit and JetBlue and were unanimously approved by the Spirit board of directors. Barclays did not recommend any specific form of consideration to Spirit or that any specific form of consideration constituted the only appropriate consideration for the proposed transaction. Barclays was not requested to address, and its opinion does not in any manner address, Spirit’s underlying business decision to proceed with or effect the proposed transaction, the likelihood of the consummation of the proposed transaction, or the relative merits of the proposed transaction as compared to any other transaction in which Spirit may engage, including the transaction set forth in the Frontier merger agreement (which we refer to as the “prior transaction”), which transaction Spirit advised Barclays had been terminated. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or

 

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employees of any parties to the proposed transaction, or any class of such persons, relative to the consideration to be offered to the stockholders of Spirit in the proposed transaction or otherwise. No limitations were imposed by the Spirit board of directors upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.

In arriving at its opinion, Barclays, among other things:

 

•

reviewed and analyzed a draft of the merger agreement, dated as of July 26, 2022, and the specific terms of the proposed transaction;

 

•

reviewed and analyzed publicly available information concerning Spirit and JetBlue that Barclays believed to be relevant to Barclays’ analysis, including Spirit’s and JetBlue’s Annual Reports on Form 10-K for the fiscal year ended December 31, 2021, and Spirit’s and JetBlue’s Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 2022;

 

•

reviewed and analyzed financial and operating information with respect to the business, operations and prospects of Spirit furnished to Barclays by Spirit, including the Spirit Financial Forecasts;

 

•

reviewed and analyzed a trading history of Spirit common stock from July 26, 2017 to July 26, 2022, and a comparison of that trading history with those of other companies that Barclays deemed relevant;

 

•

reviewed and analyzed published estimates of independent research analysts with respect to the future financial performance and price targets of Spirit;

 

•

reviewed and analyzed a comparison of the historical financial results and present financial condition of Spirit with those of other companies that Barclays deemed relevant;

 

•

had discussions with Spirit management concerning its business, operations, assets, liabilities, financial condition and prospects; and

 

•

has undertaken such other studies, analyses and investigations as Barclays deemed appropriate.

In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information (and had not assumed responsibility or liability for any independent verification of such information). Barclays also relied upon the assurances of Spirit management that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Spirit Financial Forecasts, upon the advice of Spirit, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Spirit management as to the future financial performance of Spirit and that Spirit would perform substantially in accordance with such projections. Barclays assumed no responsibility for and expressed no view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of Spirit and did not make or obtain any evaluations or appraisals of the assets or liabilities of Spirit. Barclays’ opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, July 27, 2022. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may occur after July 27, 2022.

Barclays assumed that the executed merger agreement will conform in all material respects to the last draft reviewed by Barclays. In addition, Barclays assumed the accuracy of the representations and warranties contained in the merger agreement and all agreements related thereto. Barclays also assumed, upon the advice of Spirit, that all material governmental, regulatory and third-party approvals, consents and releases for the proposed transaction will be obtained within the constraints contemplated by the merger agreement and that the proposed transaction will be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result from the proposed transaction, nor did Barclays’ opinion address any legal, tax, regulatory or accounting matters, as to which Barclays understood Spirit had obtained such advice as it deemed necessary from qualified professionals.

 

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In connection with rendering its opinion, Barclays performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the shares of Spirit common stock but rather made its determination as to fairness, from a financial point of view, of the consideration to be received by the stockholders of Spirit in the proposed transaction on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

Summary of Material Financial Analyses

The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the Spirit board of directors. The summary of Barclays’ analyses and reviews provided below is not a complete description of the analyses and reviews underlying Barclays’ opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description.

For the purposes of its analyses and reviews, Barclays made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Spirit, Barclays or any other parties to the proposed transaction. No company, business or transaction considered in Barclays’ analyses and reviews is identical to Spirit or the proposed transaction, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses or transactions considered in Barclays’ analyses and reviews. None of Spirit, Barclays or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of companies, businesses or securities do not purport to be appraisals or reflect the prices at which the companies, businesses or securities may actually be sold. Accordingly, the estimates used in, and the results derived from, Barclays’ analyses and reviews are inherently subject to substantial uncertainty.

The summary of the financial analyses and reviews provided below includes information presented in tabular format. In order to fully understand the financial analyses and reviews used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Barclays’ analyses and reviews.

Selected Comparable Company Analysis

In order to assess how the public market values shares of similar publicly traded companies and to provide a range of relative implied equity values per share of Spirit by reference to those companies, which could then be

 

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used to calculate implied ranges, Barclays reviewed and compared specific financial and operating data relating to Spirit with selected companies that Barclays, based on its experience in the airline industry, deemed comparable to Spirit. The selected comparable companies with respect to Spirit were:

 

•

Southwest Airlines Co.

 

•

Allegiant Travel Company

 

•

Sun Country Airlines Holdings, Inc.

 

•

JetBlue Airways Corporation

 

•

Frontier Group Holdings, Inc.

Barclays calculated and compared various financial multiples and ratios of Spirit and the selected comparable companies. As part of its selected comparable company analysis, Barclays calculated and analyzed each company’s ratio of its current stock price to its projected earnings per share (commonly referred to as a price earnings ratio, or P/E), and each company’s adjusted enterprise value to certain projected financial criteria (such as revenue, earnings before interest, taxes, depreciation and amortization and rent, or EBITDAR). The adjusted enterprise value of each company was obtained by adding its short and long-term debt and operating leases to the sum of the market value of its common equity, the value of any preferred stock (at liquidation value) and the book value of any minority interest, and subtracting its cash and cash equivalents. All of these calculations were performed, and based on publicly available financial data and closing prices, as of July 26, 2022, for the selected comparable companies, the last trading date prior to the delivery of Barclays’ opinion, and as of February 4, 2022, for Spirit, the last trading date prior to news reports of the prior transaction (which we refer to as the “unaffected date”). The results of this selected comparable company analysis are summarized below:

 

		Adj. EV /2023E EBITDAR				P /2023E EPS
Allegiant Travel Company			4.3x				9.1x
Frontier Group Holdings, Inc.			3.9x				7.9x
JetBlue Airways Corporation			3.3x				7.9x
Southwest Airlines Co.			4.1x				10.8x
Sun Country Airlines Holdings, Inc.			5.0x				9.6x
Spirit (as of the unaffected date)			4.8x				8.1x
Low			3.3x				7.9x
High			5.0x				10.8x
Median			4.2x				8.6x

Barclays selected the comparable companies listed above because their businesses and operating profiles are reasonably similar to that of Spirit. However, because of the inherent differences between the business, operations and prospects of Spirit and those of the selected comparable companies, Barclays believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Spirit and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Spirit and the companies included in the selected company analysis. Due to the impact of the COVID-19 pandemic on the air transportation services industry, Barclays focused its analysis of the selected financial metrics to 2023E.

Based upon the analysis described above and its professional judgment, Barclays selected a range of 2023 estimated P/E multiples of 8.0x to 10.0x for Spirit and applied such range to Spirit’s adjusted EPS, as set out in the Spirit Financial Forecasts, to calculate a range of implied prices per share of Spirit common stock of $16 to $20. Based upon its professional judgment, Barclays also selected a range of 2023 estimated EBITDAR multiples

 

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of 4.0x to 5.0x for Spirit and applied such range to Spirit’s EBITDAR, as set out in the Spirit Financial Forecasts, to calculate a range of implied prices per share of Spirit common stock of $7 to $17. Barclays noted that, on the basis of the selected comparable company analysis, the consideration to be received by the stockholders of Spirit in the merger was above the 2023 estimated P/E range and above the 2023 estimated EBITDAR range.

Discounted Cash Flow Analysis

In order to estimate the present value of Spirit common stock, Barclays performed a discounted cash flow analysis of Spirit. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

To calculate the estimated enterprise value of Spirit using the discounted cash flow method, Barclays (i) added Spirit’s projected after-tax unlevered free cash flows for the second quarter of fiscal year 2022 through the end of fiscal year 2026 based on the Spirit Financial Forecasts to the “terminal value” of Spirit as of December 31, 2026, and then (ii) discounted such amount to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the projected total EBITDAR, adjusted for one-time or non-recurring items, and subtracting rent expenses, unlevered cash taxes and capital expenditures and adjusting for the impact of depreciation and amortization, changes in working capital (including changes in deferred heavy maintenance) and certain other non-cash expenses. The residual value of Spirit at the end of the forecast period, or “terminal value,” was estimated by selecting a range of terminal value multiples based on estimated last twelve months EBITDAR (which we refer to as “LTM EBITDAR”) for the period from April 1, 2022, to December 31, 2026, of 5.5x to 7.5x, which was derived by analyzing historical average LTM EBITDAR multiples from selected comparable companies and applying such range to Spirit’s 2026 estimated LTM EBITDAR, as set out in the Spirit Financial Forecasts. The range of after-tax discount rates of 10.5% to 12.5% was selected based on an analysis of the weighted average cost of capital of Spirit and the comparable companies. Barclays then calculated a range of implied prices per share of Spirit by (A) (i) subtracting estimated total debt of $3.2 billion and (ii) adding cash of $1.4 billion, each as of March 31, 2022, from the estimated enterprise value using the discounted cash flow method and (B) dividing such amount by the fully diluted number of shares of Spirit common stock. These calculations resulted in a range of implied price per share of $26 to $55 (which we refer to as the “Spirit DCF range”). Barclays noted that the consideration to be received by the stockholders of Spirit in the merger was within the Spirit DCF range.

Other Factors

Barclays also reviewed and considered other factors, which were not considered part of its financial analyses in connection with rendering its advice, but were references for informational purposes, including, among other things, the information described below under “—Historical Share Price Analysis” and “—Research Analyst Price Targets.”

Historical Share Price Analysis

To illustrate the trend in the historical trading prices of Spirit common stock, Barclays considered historical data with regard to the trading prices of Spirit common stock for the period from July 26, 2021 to July 26, 2022, and compared such data with the relative stock price performances during the same periods of the S&P 500, the U.S. Global Jets ETF and the selected companies described above under “—Summary of Material Financial Analyses—Selected Comparable Company Analysis.” Barclays noted that the closing price of Spirit common stock ranged from $16 to $29 during the 52-week period ended July 26, 2022.

 

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Research Analyst Price Targets

Barclays reviewed, for informational purposes, as of July 26, 2022, the publicly available standalone price targets of Spirit common stock published by equity research analysts associated with various Wall Street bulge-bracket and middle market brokers. The research analysts’ price target per share of Spirit common stock ranged from $24 to $36 per share. The publicly available share price targets published by such equity research analysts do not necessarily reflect the current market trading price for Spirit common stock and these estimates are subject to uncertainties, including future financial performance of Spirit and future market conditions. Research analyst price targets for Spirit were used for informational purposes only and were not included in Barclays’ financial analyses.

General

Barclays is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The Spirit board of directors selected Barclays because of its familiarity with Spirit and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as substantial experience in transactions comparable to the proposed transaction.

Barclays is acting as financial advisor to Spirit in connection with the proposed transaction. As compensation for its services in connection with the proposed transaction, Spirit paid Barclays a fee of $3 million upon the delivery of Barclays’ opinion and a fee of $3 million upon the delivery of Barclays’ opinion in connection with the prior transaction (together, referred to as the “opinion fees”). The opinion fees were not contingent upon the conclusion of Barclays’ opinion or the consummation of the proposed transaction or the prior transaction. Additional compensation of $14 million will be payable on completion of the proposed transaction against which the opinion fees will be credited. In addition, Spirit has agreed to reimburse Barclays for a portion of its reasonable out-of-pocket expenses incurred in connection with the proposed transaction and to indemnify Barclays for certain liabilities that may arise out of its engagement by Spirit and the rendering of Barclays’ opinion. Barclays has performed various investment banking services for Spirit and JetBlue in the past, and may perform such services in the future, and has received, and would expect to receive, customary fees for such services. Specifically, in the past two years, Barclays has performed the following investment banking and financial services: (a) for Spirit (i) having acted as a financial advisor to Spirit in connection with the Coronavirus Aid, Relief, and Economic Security Act of 2020; (ii) having acted as a structuring agent and joint bookrunner on Spirit’s $850 million senior secured notes in September 2020; (iii) having acted as an underwriter on Spirit’s 2026 convertible notes in April 2021; (iv) having acted as an advisor on Spirit’s registered direct offering and repurchase in April 2021; (v) having served as a lender under Spirit’s existing revolving credit facility; and (vi) having provided advisory services to Spirit on its assessment of certain strategic alternatives, including the prior transaction and (b) for JetBlue (i) having served as an active bookrunner on JetBlue’s approximately $800 million Enhanced Equipment Trust Certificate offering in August 2020; (ii) having served as a joint-bookrunning manager on JetBlue’s offering of 41,975,000 shares in December 2020; (iii) having served as an active bookrunner on JetBlue’s 0.50% Convertible Senior Notes due 2026 in March 2021; and (iv) having served as a lender under JetBlue’s existing revolving credit facility. During the period beginning January 1, 2020, through the date of rendering its opinion, the aggregate amount of fees that Barclays received from Spirit and JetBlue for the investment banking and financial services was approximately $17.6 million and $15.3 million, respectively.

Barclays, its subsidiaries and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of Barclays’ business, Barclays and its affiliates may actively trade and effect transactions in the equity, debt and/or

 

55

other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of Spirit and JetBlue for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.

Opinion of Morgan Stanley & Co. LLC

Spirit retained Morgan Stanley to act as financial advisor to the Spirit board of directors in connection with the proposed merger, pursuant to an engagement letter dated December 17, 2019. The Spirit board of directors selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of, and involvement in, recent transactions in the industry, and its knowledge of Spirit’s business and affairs. At the meeting of the Spirit board of directors on July 27, 2022, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the merger consideration to be received by the holders of shares of Spirit common stock (other than certain excluded shares) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Spirit common stock.

The full text of the written opinion of Morgan Stanley, dated as of July 27, 2022, which sets forth, among other things, the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex C. You are encouraged to read the opinion carefully and in its entirety. Morgan Stanley’s opinion was rendered for the benefit of the Spirit board of directors, in its capacity as such, and addressed only the fairness from a financial point of view, as of the date of such opinion, of the merger consideration to the holders of shares of Spirit common stock (other than certain excluded shares). Morgan Stanley’s opinion did not address any other aspects or implications of the merger, including the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, the price at which shares of Spirit common stock would trade at any time, or the fairness of the amount or nature of the compensation to any officers, directors or employees of Spirit, or any class of such persons, relative to the merger consideration to be received by the holders of shares of Spirit common stock pursuant to the merger. Morgan Stanley did not express any opinion or recommendation as to how the Spirit stockholders should vote at the stockholders’ meeting to be held in connection with the merger. The summary of the opinion of Morgan Stanley set forth below is qualified in its entirety by reference to the full text of the opinion.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

•

reviewed certain publicly available financial statements and other business and financial information of Spirit;

 

•

reviewed certain internal financial statements and other financial and operating data concerning Spirit;

 

•

reviewed certain financial projections prepared by Spirit management;

 

•

discussed the past and current operations and financial condition and the prospects of Spirit with senior executives of Spirit;

 

•

reviewed the reported prices and trading activity for Spirit common stock;

 

•

compared the financial performance of Spirit and the prices and trading activity of Spirit common stock with that of certain other publicly traded companies comparable with Spirit, and their securities;

 

•

participated in certain discussions and negotiations among representatives of Spirit and JetBlue and certain parties and their financial and legal advisors;

 

•

reviewed the merger agreement and certain related documents; and

 

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•

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by Spirit, and formed a substantial basis for its opinion. With respect to the financial projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of Spirit management of the future financial performance of Spirit. In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the definitive merger agreement will not differ in any material respect from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger. In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to any acquisition, business combination or other extraordinary transaction involving Spirit. Morgan Stanley did not express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the transactions contemplated thereby or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection therewith. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Spirit and its legal, tax and regulatory advisors with respect to legal, tax and regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Spirit’s officers, directors or employees, or any class of such persons, relative to the merger consideration to be received by the holders of shares of Spirit common stock (other than certain excluded shares) in the transaction. Morgan Stanley expressed no opinion with respect to the treatment of the Spirit convertible notes or the Spirit warrants pursuant to the merger agreement. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Spirit, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, July 27, 2022. Events occurring after July 27, 2022 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion dated July 27, 2022. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. In connection with arriving at its opinion, Morgan Stanley considered all of its analyses as a whole and did not attribute any particular weight to any analysis described below. Considering any portion of such analyses and factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

For purposes of Morgan Stanley’s opinion and the analyses described below, and with the consent of Spirit management, Morgan Stanley has assumed that the merger consideration is $33.50 per share in cash.

 

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Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 26, 2022, the last trading day prior to the date of the meeting of the Spirit board of directors at which Morgan Stanley rendered its oral opinion, and is not necessarily indicative of current market conditions. Capitalization information for Spirit, including fully-diluted number of shares and balance sheet information, was provided on July 25, 2022 by Spirit management to Morgan Stanley, and was approved by Spirit management for Morgan Stanley’s use in its financial analyses.

In performing the financial analyses summarized below and in arriving at its opinion, Morgan Stanley used and relied upon the Spirit Financial Forecasts, as more fully described in the section entitled “—Unaudited Prospective Financial Information”, which were approved by Spirit management for Morgan Stanley’s use in connection with its financial analyses.

Public Trading Benchmark Analysis

Morgan Stanley performed a public trading benchmark analysis, which is designed to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for Spirit with comparable publicly available consensus equity analyst research estimates for selected companies that, in Morgan Stanley’s professional judgment, share certain similar business characteristics with and have certain comparable operating characteristics, including, among other things, product characteristics, similarly sized revenue and/or revenue growth rates, market capitalization, profitability, scale and/or other similar operating characteristics, to those of Spirit (which companies are referred to as the comparable companies) (which we refer to as the “Spirit Consensus Forecasted Financial Information of Spirit”). JetBlue was included in the group of comparable companies.

For purposes of this analysis, Morgan Stanley analyzed the ratio of adjusted enterprise value (which we refer to as “Adj. EV”), which Morgan Stanley defined as fully diluted market capitalization plus total debt, including capitalized operating lease liabilities, plus preferred stock, plus non-controlling interest, less cash and cash equivalents (including marketable securities and short term investments), to EBITDAR, which Morgan Stanley defined as operating income plus depreciation, amortization and rent expense plus addbacks for certain one-time costs, in each case estimated for the calendar year 2023, which ratio Morgan Stanley referred to as 2023E Adj. EV / EBITDAR. Morgan Stanley also analyzed the ratio of price per share as of July 26, 2022 to earnings per share estimated for the calendar year 2023, which ratio Morgan Stanley referred to as 2023E P / E. The Spirit (Unaffected) market data was as of February 4, 2022 (the unaffected date for Spirit’s share price, reflecting the last trading day prior to the announcement of the Frontier merger agreement). The Spirit (JETS Adjusted) market data was as of February 4, 2022 (the unaffected date for Spirit’s share price, reflecting the last trading day prior to the announcement of the Frontier merger agreement), but the Spirit share price was adjusted for the percentage change in the US Global Jets ETF between February 4, 2022 and July 26, 2022.

The below tables summarize the companies, the metrics and the multiples employed in this analysis:

 

		2023E Adj. EV / EBITDAR				2023E P / E
Allegiant Travel Company			4.3x				9.1x
Frontier Group Holdings Inc.			3.9x				7.9x
JetBlue Airways Corporation			3.3x				7.9x
Southwest Airlines Co.			4.1x				10.8x
Spirit			6.0x				16.6x
Spirit (Unaffected)			4.8x				8.1x
Spirit (JETS Adjusted)			5.4x				12.5x
Sun Country Airlines Holdings, Inc.			5.0x				9.6x

Based on its analysis and its professional judgment, Morgan Stanley selected a reference range of (i) 2023E Adj. EV / EBITDAR of 4.0x to 5.0x for Spirit and (ii) 2023E P / E of 8.0x to 10.0x for Spirit. Morgan Stanley applied

 

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the selected reference range to the corresponding financial estimates set forth in the Spirit Financial Forecasts and the Spirit Consensus Forecasted Financial Information of Spirit. Morgan Stanley’s analysis resulted in the following implied fully diluted share prices for Spirit common stock (rounded to the nearest $0.25):

 

2023E Adj. EV / EBITDAR		Reference Range				Implied Value Per Share Range
Spirit Financial Forecasts			4.0x–5.0x			$	7.00–$17.50
Spirit Consensus Forecasted Financial Information of Spirit			4.0x–5.0x			$	4.00–$13.75
2023E P / E
Spirit Financial Forecasts			8.0x–10.0x			$	16.25–$20.25
Spirit Consensus Forecasted Financial Information of Spirit			8.0x–10.0x			$	11.25–$14.00

Morgan Stanley noted that the merger consideration was $33.50 per share, based upon its assumptions made with the consent of Spirit management.

No company utilized in the public trading benchmark analysis is identical to Spirit or directly comparable in business mix, size or other metrics. Accordingly, an analysis of the results of the foregoing analysis necessarily involves complex considerations and judgments concerning differences between Spirit and the companies being compared and other factors that would affect the value of the companies to which Spirit is being compared. In selecting comparable companies, Morgan Stanley made numerous judgments and assumptions with respect to size, business mix, industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond the control of Spirit. These include, among other things, the impact of competition on Spirit’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Spirit, the industry, or in the financial markets in general, which could affect the public trading value of Spirit or the companies to which it is being compared.

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis on Spirit, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. In connection with this analysis, Morgan Stanley calculated a range of per share equity values for Spirit.

Morgan Stanley calculated the estimated present value of the stand-alone unlevered free cash flows that Spirit was forecasted to generate for the nine months ending December 31, 2022 and calendar years 2023 through 2026 on a standalone basis. Financial data used in this analysis were based on the Spirit Financial Forecasts.

Morgan Stanley performed this analysis on the estimated future cash flows contained in the Spirit Financial Forecasts as set forth in the section entitled “—Unaudited Prospective Financial Information.” For purposes of this analysis, unlevered free cash flows were calculated as Adjusted EBITDAR less rent expense, less unlevered cash tax expense (taking into account net operating losses and other differences between accounting tax expense and cash taxes paid), less change in net working capital, less change in deferred heavy maintenance, less capital expenditures (including pre-delivery deposits for flight equipment, net of refunds, and proceeds from sale of property and equipment), plus certain other non-cash expenses. These estimated unlevered free cash flows were reviewed and approved by Spirit management for Morgan Stanley’s use.

Morgan Stanley calculated terminal values for Spirit by applying a range of multiples of Adj. EV / EBITDAR of 5.5x to 7.0x, based on Morgan Stanley’s professional judgment, to the Adjusted EBITDAR of Spirit for the

 

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calendar year 2026. Morgan Stanley then adjusted the terminal value for the capitalized operating leases at December 31, 2026 (based on the Spirit Financial Forecasts) and discounted the unlevered free cash flows and terminal value to present value as of March 31, 2022 using mid-year convention (except for terminal value which was discounted using end-of-period methodology) and a range of discount rates from 10.6% to 12.2%, which were selected based on Morgan Stanley’s professional judgment to reflect an estimate of Spirit’s weighted average cost of capital (which we refer to as “WACC”). The WACC was determined utilizing the capital asset pricing model to calculate Spirit’s cost of equity and estimated blended interest rate for Spirit’s secured and unsecured debt as the basis for Spirit’s cost of debt. To calculate the implied per share equity value, Morgan Stanley then divided the implied equity value by the number of fully diluted shares of Spirit common stock outstanding as of July 25, 2022, as provided by Spirit management on July 25, 2022 using the treasury stock method.

Based on this analysis, Morgan Stanley derived the following ranges of implied equity value per share of Spirit common stock on a fully-diluted basis (rounded to the nearest $0.25):

 

Discounted Cash Flow Analysis		Implied Equity Value Per Share Range
Spirit Financial Forecasts		$	26.00–$48.25

Morgan Stanley noted that the merger consideration was $33.50 per share, based upon its assumptions made with the consent of Spirit management.

Discounted Equity Value Analysis

Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into the potential future equity value of a company as a function of the company’s estimated future earnings. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value for such company’s potential future equity value. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per share on a stand-alone basis for Spirit.

To calculate the discounted equity value for Spirit, Morgan Stanley utilized estimated calendar year 2025 EBITDAR and estimated calendar year 2025 earnings per share based on the Spirit Financial Forecasts. Based upon the application of its professional judgment and experience after reviewing and comparing certain financial estimates for Spirit, Morgan Stanley applied a range of multiples of Adj. EV / EBITDAR for the 12-month period following January 1, 2025 of 5.0x to 6.5x, and a range of multiples of P / E for the 12-month period following January 1, 2025 of 9.0x to 11.0x, respectively, to these estimates, which ranges were selected based upon Morgan Stanley’s professional judgment and experience taking into account Spirit’s historical long-term trading multiples, and discounted the resulting values to March 31, 2022 at a discount rate of 12.9% based on Morgan Stanley’s estimate of Spirit’s then-current cost of equity.

Based on this analysis, Morgan Stanley derived the following ranges of implied equity value per share of Spirit common stock on a fully-diluted basis (rounded to the nearest $0.25):

 

2025 Adj. EV / NTM EBITDAR		Implied Equity Value Per Share Range
Spirit Financial Forecasts		$	24.00–$42.75

 

2025 NTM P / E		Implied Equity Value Per Share Range
Spirit Financial Forecasts		$	38.75–$46.75

Morgan Stanley noted that the merger consideration was $33.50 per share, based upon its assumptions made with the consent of Spirit management.

 

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Other Information

Morgan Stanley observed additional factors that were not considered part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Spirit board of directors, including the following information described below under “—Historical Trading Range” and “—Discounted Analyst Price Targets.”

Historical Trading Range

Morgan Stanley reviewed the historical range of closing stock prices of Spirit common stock for the 52-week period ended on February 4, 2022 and the historical range of closing stock prices of Spirit common stock for the 52-week period ended on July 26, 2022. The ranges were as follows:

 

Historical Period		Historical Per Share Range for Spirit
52-Week Trading Range ended on February 4, 2022		$	20.04–$39.74
52-Week Trading Range ended on July 26, 2022		$	16.35–$28.51

Morgan Stanley noted that the merger consideration was $33.50 per share, based upon its assumptions made with the consent of Spirit management.

The historical trading range analysis was presented for reference purposes only, and was not relied upon for valuation purposes.

Discounted Analyst Price Targets

Morgan Stanley reviewed future public market trading price targets for Spirit common stock, prepared and published by selected equity research analysts prior to July 26, 2022, based on publicly available consensus equity analyst research estimates. These forward targets reflected each analyst’s estimate of the 12-month future public market trading price of Spirit common stock. Morgan Stanley discounted to March 31, 2022, these 12-month future market trading price estimates by the estimated cost of equity for Spirit of 12.9%, which discount rates were selected based upon Morgan Stanley’s professional judgment and experience.

The indicative discounted value range of the research analysts’ price targets was $21.25 to $32.00 per share for Spirit common stock.

Morgan Stanley noted that the merger consideration was $33.50 per share, based upon its assumptions made with the consent of Spirit management.

The public market trading price targets published by equity research analysts do not necessarily reflect the current market trading prices for shares of Spirit common stock, and these estimates are subject to uncertainties, including the future financial performance of Spirit as well as future market conditions.

The discounted analyst price targets analysis was presented for reference purposes only, and was not relied upon by Morgan Stanley for valuation purposes.

General

In connection with the review of the merger by the Spirit board of directors, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not

 

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attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Spirit. In performing its analyses, Morgan Stanley made numerous judgments and assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond the control of Spirit. These include, among other things, the impact of competition on Spirit’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Spirit, the industry, or the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view of the merger consideration to be received by the holders of shares of Spirit common stock (other than certain excluded shares) and in connection with the delivery of its written opinion, dated July 27, 2022, to the Spirit board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of Spirit common stock might actually trade.

The merger consideration was determined by Spirit and JetBlue through arm’s length negotiations between Spirit and JetBlue and was approved by the Spirit board of directors. Morgan Stanley provided financial advice to the Spirit board of directors during these negotiations but did not, however, recommend any specific merger consideration to Spirit or the Spirit board of directors or opine that any specific merger consideration constituted the only appropriate merger consideration for the merger. Morgan Stanley’s opinion did not address the relative merits of the merger as compared to any other alternative business or financial strategies or transaction or whether or not such alternatives could be achieved or are available, nor did it address the underlying business decision of Spirit to enter into the merger agreement or proceed with the merger. In addition, Morgan Stanley’s opinion did not in any manner address the price at which Spirit common stock would trade at any time, or any compensation or compensation agreements arising from (or relating to) the merger which benefit any officer, director, employee of Spirit, or any class of such persons, and was not intended to and did not express any opinion or recommendation as to how the Spirit stockholders should vote at the stockholders’ meeting to be held in connection with the merger.

Morgan Stanley’s opinion and its presentation to the Spirit board of directors was one of many factors taken into consideration by the Spirit board of directors in deciding to approve the merger agreement and the transactions contemplated thereby, including the merger. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Spirit board of directors with respect to the merger consideration or of whether the Spirit board of directors would have been willing to agree to a different merger consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of their customers, in debt or equity securities or loans of JetBlue, Spirit, or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument.

Under the terms of its engagement letter, Morgan Stanley provided the Spirit board of directors with financial advisory services and a financial opinion, described in this section and attached to this proxy statement as Annex

 

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C, in connection with the merger, and Spirit has agreed to pay Morgan Stanley a fee of approximately $20.0 million, $1.75 million of which was paid in connection with a separate engagement between Morgan Stanley and Spirit and is creditable against the fees for this transaction, $3 million of which was paid upon the delivery of Morgan Stanley’s fairness opinion to the Spirit board of directors in connection with Spirit’s merger agreement with Frontier, $3 million of which became payable upon the delivery of Morgan Stanley’s fairness opinion to the Spirit board of directors in connection with Spirit’s merger agreement with JetBlue, and the remaining portion of which is contingent upon, and will be paid upon, the consummation of the merger. Spirit also agreed to reimburse Morgan Stanley for its reasonable out-of-pocket expenses incurred from time to time in connection with its engagement. In addition, Spirit agreed to indemnify Morgan Stanley and its affiliates, its and their respective officers, directors, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates, against certain losses, claims, damages, liabilities and expenses relating to, arising out of or in connection with Morgan Stanley’s engagement.

In the two years prior to July 5, 2022, Morgan Stanley and its affiliates have provided (i) financial advisory and financing services to Spirit for which Morgan Stanley and its affiliates received aggregate fees of between $10 million and $25 million and (ii) financing services to JetBlue for which Morgan Stanley and its affiliates received aggregate fees of between $15 million and $25 million. As of the date of its opinion, Morgan Stanley or an affiliate thereof is a lender to Spirit and JetBlue. Morgan Stanley may also seek to provide financial advisory and financing services to Spirit and JetBlue and their respective affiliates in the future and would expect to receive fees for the rendering of these services.

Financing

We anticipate that the funds needed to complete the merger will be funded in part with proceeds from the debt financing (as described below). Under the merger agreement, JetBlue has agreed to deposit with a designated paying agent at or prior to the effective time of the merger the amount of cash necessary to pay the amounts due to Spirit stockholders at the closing of the merger (which we anticipate, based upon the shares of Spirit common stock outstanding as of                 , 2022, will be approximately $                ). Under the merger agreement, JetBlue has agreed to deposit with Spirit (or, solely with respect to holders of equity awards who are not current or former employees, the paying agent) the amount of cash necessary to pay the amounts due to Spirit’s holders of equity awards at the closing of the merger (which we anticipate, based upon the, Spirit RSU awards and Spirit PSU awards outstanding as of                 , 2022, will be approximately $                ). Under the merger agreement, JetBlue has also agreed to make a prepayment directly to Spirit stockholders of $2.50 per share following their approval of the merger agreement, and to make additional prepayments of $0.10 per share per month commencing in January 2023 until the earlier of closing and termination of the merger agreement. JetBlue will enter into an agreement with a disbursing agent that will contemplate, among other things, that JetBlue will deposit the funds necessary to make such payments with the disbursing agent prior to the date such payments are due.

Debt Financing

In connection with the merger, JetBlue has entered into a second amended and restated debt commitment letter, dated July 28, 2022 (the “debt commitment letter”), among JetBlue, Goldman Sachs Bank USA, BofA Securities, Inc., Bank of America, N.A., BNP Paribas, Credit Suisse AG, New York Branch, Credit Suisse Loan Funding LLC, Credit Agricole Corporate and Investment Bank, Natixis, New York Branch, Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd. (collectively referred to as the “debt commitment parties”), pursuant to which, and subject to the terms and conditions therein, the debt commitment parties have committed to provide to JetBlue, at the effective time of the merger, with a senior secured bridge facility in an aggregate principal amount of up to $3.5 billion (collectively, the “debt financing”).

Under the terms of the debt commitment letter, the debt commitment parties’ obligation to fund the debt financing is subject to customary conditions, including the consummation of the merger, in all material respects

 

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in accordance with the terms of the merger agreement and other customary conditions, including, but not limited to:

 

•

the execution and delivery of definitive documentation consistent with the debt commitment letter;

 

•

the delivery of customary closing documents;

 

•

the accuracy of certain representations and warranties in the merger agreement and specified representations and warranties in the definitive debt documents;

 

•

the absence, since January 1, 2021, of a Spirit material adverse effect (which, for purposes of the debt commitment letter, is defined as in the merger agreement), with certain exceptions;

 

•

the delivery of certain audited and unaudited financial statements of JetBlue and Spirit;

 

•

execution of customary documents required to create and perfect security interests, subject to the terms of and as required by the debt commitment letter;

 

•

the payment of all applicable fees and expenses of the debt commitment parties;

 

•

receipt by the lenders of documentation and other information required under applicable “know your customer” and anti-money laundering rules and regulations (including the PATRIOT Act); and

 

•

JetBlue having engaged one or more investment banks reasonably satisfactory to the lead arrangers to arrange, publicly sell or privately place debt to replace the bridge facility.

Commitments in respect of the debt commitment letter will terminate on the earliest to occur of (1) public abandonment by JetBlue of the merger or the termination by JetBlue, or with JetBlue’s consent, of the merger agreement prior to the consummation of the merger, (2) the consummation of the merger without the debt financing, and (3) five business days after the outside date (as such date may be extended pursuant to the merger agreement); provided that such later outside date will not be later than July 24, 2024. JetBlue may, at its option, reduce the committed amount of debt financing under the debt commitment letter, so long as (i) the aggregate amount of the debt financing (as so reduced) is sufficient, together with any other sources of funds available to JetBlue and Merger Sub, to consummate the transactions contemplated by the merger agreement and (ii) JetBlue concurrently deposits cash and cash equivalents in an amount equal to such commitment reduction into a segregated account which will be solely available to consummate the transactions contemplated by the merger agreement.

Interests of Spirit’s Directors and Executive Officers in the Merger

In considering the recommendations of the Spirit board of directors with respect to the merger, Spirit stockholders should be aware that Spirit’s directors and executive officers have interests in the merger, including financial interests, that may be different from, or in addition to, the interests of the other Spirit stockholders. The Spirit board of directors was aware of and considered these interests during its deliberations of the merits of the merger and in determining to recommend to Spirit stockholders that they vote for the merger proposal and thereby approve the transactions contemplated by the merger agreement, including the merger (to the extent such interests existed at that time). See the sections entitled “—Background of the Merger” and “—Reasons for the Merger; Recommendation of the Spirit Board of Directors” of this proxy statement, respectively. These interests are described and quantified in detail in the narrative and tables below.

Spirit’s executive officers for purposes of the discussion below include:

 

•

Edward M. Christie, President and Chief Executive Officer;

 

•

Scott M. Haralson, Senior Vice President and Chief Financial Officer;

 

•

John Bendoraitis, Executive Vice President and Chief Operating Officer;

 

•

Matthew H. Klein, Executive Vice President and Chief Commercial Officer;

 

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•

Thomas C. Canfield, Senior Vice President and General Counsel;

 

•

Rocky B. Wiggins, Senior Vice President and Chief Information Officer;

 

•

Brian J. McMenamy, Vice President and Controller;

 

•

Melinda C. Grindle, Senior Vice President and Chief Human Resources Officer; and

 

•

Kevin Blake Vanier, Vice President of Financial Planning & Analysis.

M. Laurie Villa, Spirit’s former Senior Vice President and Chief Human Resources Officer, has been omitted from the discussion below because she has no interest in the merger (except insofar as she is a holder of Spirit common stock) or any rights to compensation that will be accelerated or enhanced in connection with the merger due to her departure from Spirit in June 2021.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions, as well as those described in the footnotes to the tables in the section titled “—Merger-Related Compensation for Spirit’s Named Executive Officers” below, were used:

 

•

the relevant price per share of Spirit common stock is $33.50, which is the price per share to be received by Spirit stockholders as merger consideration in respect of their shares of Spirit common stock, assuming, solely for purposes of the disclosure in this section, that no approval prepayment amount or additional prepayment amount will be paid to Spirit stockholders in respect of their shares of Spirit common stock;

 

•

the effective time is August 24, 2022, which is the assumed date of the effective time of the merger solely for purposes of the disclosure in this section (the “assumed effective time”);

 

•

the number of unvested Spirit equity-based and cash-based awards held by each executive officer of Spirit is as of August 24, 2022, the latest practicable date to determine such amounts before the filing of this proxy statement;

 

•

the completion of the merger will constitute a change in control, change of control or term of similar meaning for purposes of all Spirit plans and agreements described below;

 

•

the employment of each executive officer of Spirit is terminated by Spirit without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the Spirit executive severance plan (as defined below)), in each case, at or immediately following the assumed effective time;

 

•

solely for purposes of the disclosure in this section and in the section titled “—Merger-Related Compensation for Spirit’s Named Executive Officers,” the assumed terminations of the executives of Spirit shall not result in the forfeiture by such executive officers of the partial retention award (as defined below) that each such executive officer is eligible to receive in connection with the termination of the Frontier merger agreement under the Frontier retention program (as defined below), the terms of which require each executive officer of Spirit to remain continuously employed through April 2, 2023, to be eligible to receive such partial retention award; and

 

•

the service of each non-employee director of Spirit is terminated at or immediately following the assumed effective time.

Treatment of Outstanding Spirit Equity-Based Awards—In General

As of the date of this proxy statement, certain of Spirit’s executive officers and non-employee directors hold Spirit RSU awards, and certain of Spirit’s executive officers also hold Spirit MSU awards and Spirit PSU awards

 

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(including 2022 Spirit PSU awards), in each case, that were granted under the Spirit equity award plan and the applicable award agreement thereunder. In connection with the completion of the merger, all outstanding Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU awards will be assumed by JetBlue (treating any performance-vesting condition as being achieved based on target performance) and converted into the right to receive (x) the merger consideration, plus (y) the approval prepayment amount, solely to the extent (i) the related award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid to the holder to reflect the approval prepayment and (ii) paid or payable after the closing of the merger, in each case, pursuant to the merger agreement, plus (z) any additional prepayment amount, solely to the extent the related award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid to the holder to reflect any additional prepayment, with each such cash payment subject to the same service-based vesting schedule applicable to the related Spirit RSU award as of immediately prior to the effective time of the merger. Each Spirit PSU award (other than 2022 Spirit PSU awards) will entitle each holder to receive the number of shares of Spirit common stock earned thereunder based on target performance as of immediately prior to the effective time, pro-rated based on the portion of the applicable performance period elapsed as of the closing date of the merger, with the resulting shares to be canceled and converted into the right to receive (x) the merger consideration, plus (y) the approval prepayment amount, solely to the extent the related award has not been otherwise equitably or discretionarily adjusted and no amount has been otherwise paid to the holder to reflect the approval prepayment, plus (z) any additional prepayment amount, solely to the extent the related award has not been otherwise equitably or discretionarily adjusted and no amount has been otherwise paid to the holder to reflect any additional prepayment. For more details on the treatment of outstanding Spirit equity-based awards in connection with the merger, see “The Merger Agreement—Treatment of Spirit Equity-Based Awards and Warrants,” beginning on page 86.

Equity-Based Awards held by Non-Employee Directors

Non-employee directors of Spirit held an aggregate of 48,529 Spirit RSU awards as of immediately prior to the assumed effective time. The amounts reported in the table below reflect the number of outstanding Spirit RSU awards held by each non-employee director as of the assumed effective time, and the value in respect of such Spirit RSU awards that will, effective as of immediately prior to the assumed effective time, be assumed by JetBlue and converted into the right to receive JetBlue cash awards, which will be subject to the same service-based vesting schedule applicable to the related Spirit RSU award as of immediately prior to the assumed effective time, as described above in “—Treatment of Outstanding Spirit Equity-Based Awards—In General.” For each non-employee director, the value of the Spirit RSU awards is equal to the product obtained by multiplying the number of such Spirit RSU awards by $33.50 (the relevant price per share of Spirit common stock, as noted above under “—Certain Assumptions”). All unit numbers and dollar values have been rounded to the nearest whole number.

 

Name		Spirit RSU Award (#)(1)				Total Value ($)(1)
Mark B. Dunkerley			5,046			$	169,041
H. McIntyre Gardner			7,033			$	235,606
Robert D. Johnson			5,046			$	169,041
Barclay G. Jones III			6,764			$	226,594
Christine P. Richards			5,046			$	169,041
Myrna M. Soto			14,548			$	487,358
Dawn M. Zier			5,046			$	169,041

 

(1)

The amounts reported in these columns include the number and value of the Spirit RSU awards deferred by Mr. Jones and Ms. Soto pursuant to Spirit’s deferral program for non-employee directors. Mr. Jones has elected to defer settlement of 100% of his vested Spirit RSU awards granted in fiscal year 2019 (i.e., 1,718 Spirit RSU awards), and Ms. Soto has elected to defer settlement of 100% of her vested Spirit RSU awards

 

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granted in respect of fiscal years 2019, 2020 and 2021 (i.e., 9,502 Spirit RSU awards, respectively). These deferred Spirit RSU awards will be settled in accordance with the terms of the applicable settlement election form on the earliest to occur of (i) December 31, 2022, December 30, 2023 or December 28, 2024, as applicable, (ii) a change in control (as defined in the Spirit equity award plan) and (iii) a termination of the non-employee director’s services.

Equity-Based Awards held by Executive Officers of Spirit

Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU awards held by Spirit’s executive officers are subject to “double-trigger” accelerated vesting upon termination of an executive officer’s employment without “cause” or resignation by the executive officer for “good reason” (as such terms are defined in the applicable award agreement) within twelve months following the completion of the merger. Spirit PSU awards (other than Spirit MSU awards and 2022 Spirit PSU awards) held by Spirit’s executive officers are subject to “single trigger” accelerated vesting solely as a result of the closing and proration based on the portion of the applicable performance period elapsed as of the closing date of the merger, as described above in “—Treatment of Outstanding Spirit Equity-Based Awards—In General.” The amounts reported in the table below reflect the number of outstanding Spirit equity-based awards held by each executive officer of Spirit as of the assumed effective time and the value in respect of:

 

•

the Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU awards held by each executive officer of Spirit that will, effective as of immediately prior to the assumed effective time, be assumed by JetBlue (based, where applicable, on target performance as of the assumed effective time) and converted into the right to receive JetBlue cash awards, which will be subject to the same service-based vesting schedule applicable to the related Spirit RSU award as of immediately prior to the assumed effective time, and

 

•

the Spirit PSU awards (other than the 2022 Spirit PSU awards) held by each executive officer of Spirit that will, effective as of immediately prior to the assumed effective time, be settled in shares of Spirit common stock (based on target performance as of immediately prior to the assumed effective time and prorated based on the portion of the applicable performance period elapsed as of the assumed effective time) and converted into the right to receive certain cash payments, as described above in “—Treatment of Outstanding Spirit Equity-Based Awards—In General.” All unit numbers and dollar values have been rounded to the nearest whole number.

 

Name		Spirit RSU Award (#)				Spirit MSU Award (#)				Spirit PSU Award (Other than Spirit MSU Award and 2022 Spirit PSU Award) (#)				2022 Spirit PSU Award (#)				Total Value ($)(1)				Single Trigger Value ($)(2)				Double Trigger Value ($)(3)
Edward M. Christie			69,462				38,901				25,385				26,912			$	5,382,110			$	850,398			$	4,531,713
Scott M. Haralson			25,415				13,128				7,846				8,724			$	1,846,286			$	262,841			$	1,583,445
John Bendoraitis			42,881				16,208				13,337				18,922			$	3,060,158			$	446,790			$	2,613,369
Matthew H. Klein			39,026				16,208				13,337				15,454			$	2,814,838			$	446,790			$	2,368,048
Thomas C. Canfield			21,459				11,993				8,050				8,388			$	1,671,315			$	269,675			$	1,401,640
Rocky B. Wiggins			18,085				10,130				7,982				6,938			$	1,445,023			$	267,397			$	1,177,626
Brian J. McMenamy			7,396				4,132				2,735				2,732			$	569,333			$	91,623			$	477,710
Melinda C. Grindle			24,934				—				—				11,924			$	1,234,743			$	—			$	1,234,743
Kevin Blake Vanier			14,249				4,456				1,518				3,678			$	800,684			$	50,853			$	749,831

 

(1)

Amounts reported in this column reflect the aggregate value of each executive officer’s outstanding Spirit equity-based awards, which (i) for Spirit RSU awards, Spirit PSU awards and 2022 Spirit PSU awards, is equal to the product obtained by multiplying the number of shares underlying each such Spirit equity-based award by $33.50 (the relevant price per share of Spirit common stock, as noted above under “—Certain

 

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Assumptions”), with (x) any performance-vesting condition in respect of the Spirit PSU awards and 2022 Spirit PSU awards treated as having been achieved based on target performance as of the assumed effective time and (y) the resulting amount in respect of the Spirit PSU awards (other than the 2022 Spirit PSU awards) prorated based on the portion of the applicable performance period elapsed as of the assumed effective time, and (ii) for the Spirit MSU awards, is equal to the product obtained by multiplying the target number of units set forth in each executive officer’s award agreement by 163.13% (which is the applicable performance multiplier designated in each award agreement based on the relevant price of $33.50 per share of Spirit common stock).

(2)	Amounts reported in this column reflect the “single trigger” value solely in respect of outstanding Spirit PSU awards (other than the 2022 Spirit PSU awards, which are subject solely to “double trigger” vesting, as described in footnote (3) below).

(3)	Amounts reported in this column reflect the “double trigger” value in respect of the Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU awards.

Treatment of Outstanding Spirit Cash-Based Awards

Executive officers of Spirit, other than Ms. Grindle and Mr. Vanier, hold (i) time-based cash awards (each, a “Spirit time-based cash award”) and (ii) cash-based awards subject to achievement of performance conditions (each, a “Spirit performance cash award”). The Spirit time-based cash awards and Spirit performance cash awards will be assumed by JetBlue (treating any performance-vesting condition as being achieved based on target performance) and continue to vest in accordance with the vesting schedule in the applicable award agreement. These awards are subject to “double-trigger” accelerated vesting upon termination of an executive officer’s employment by Spirit without “cause” or resignation by the executive officer for “good reason” (as such terms are defined in the Spirit executive severance plan) within twelve months following the completion of the merger, and will vest at (x) the date of such termination of employment, if occurring on or after April 2, 2023 or (y) the end of the “non-compete period” (as defined in the following sentence), if the termination occurs prior to April 2, 2023. The non-compete period will commence on the date of such termination of employment and end on the later to occur of April 2, 2023 and the 90th day following such termination of employment. The amounts reported in the table below reflect the value in respect of the Spirit time-based cash awards and Spirit performance cash awards that would be assumed by JetBlue at the assumed effective time:

 

Name		Spirit Performance Cash Award ($)(1)				Spirit Time-Based Cash Award ($)				Total Value ($)				Double Trigger Value ($)(2)
Edward M. Christie		$	2,406,000				—			$	2,406,000			$	2,406,000
Scott M. Haralson		$	685,400			$	600,000			$	1,285,400			$	1,285,400
John Bendoraitis		$	440,000				—			$	440,000			$	440,000
Matthew H. Klein		$	565,000				—			$	565,000			$	565,000
Thomas C. Canfield		$	637,300				—			$	637,300			$	637,300
Rocky B. Wiggins		$	627,600				—			$	627,600			$	627,600
Brian J. McMenamy		$	123,700			$	20,000			$	143,700			$	143,700
Melinda C. Grindle			—				—				—				—
Kevin Blake Vanier			—				—				—				—

 

(1)

Amounts reported in this column reflect the aggregate target value of the Spirit performance cash awards granted to each executive officer in fiscal years 2021 and 2022. As of the assumed effective time, Messrs. Christie, Bendoraitis, Klein, Canfield, Wiggins and Vanier and Ms. Grindle do not hold Spirit time-based cash awards, and Ms. Grindle and Mr. Vanier do not hold Spirit performance cash awards.

(2)	Amounts reported in this column reflect the “double trigger” value in respect of the Spirit performance cash awards granted to each executive officer, other than Ms. Grindle and Mr. Vanier, and the Spirit time-based cash awards granted to Mr. Haralson and Mr. McMenamy.

 

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Spirit 2017 Executive Severance Plan

Spirit maintains the 2017 Executive Severance Plan (the “Spirit executive severance plan”), which provides for payments and benefits upon a termination of an executive officer’s services with Spirit without “cause” or resignation by the executive officer for “good reason” (as defined in the Spirit executive severance plan) within eighteen months following a “change in control” (as defined in the Spirit executive severance plan) (a “change in control termination”), in each case, conditioned upon the executive officer’s execution and non-revocation of a release of claims, and continued compliance with any applicable restrictive covenant, as discussed in “—Restrictive Covenants” below.

In the event of a change in control termination, an executive officer will be entitled to receive:

 

(i)

a cash severance amount equal to (a) if such executive officer holds a title of “Vice President,” (1) 100% of the executive officer’s base salary in effect on the termination date or the effective date of the Spirit executive severance plan (whichever is greater), plus (2) 100% of the executive officer’s target incentive bonus for the year in which the “change in control” occurs, or (b) if such executive officer holds a title of “Senior Vice President” or above, (1) 200% of the executive officer’s base salary in effect on the termination date or the effective date of the Spirit executive severance plan (whichever is greater), plus (2) 200% of the executive officer’s target incentive bonus for the year in which the “change in control” occurs;

 

(ii)

a pro-rated bonus for actual days of service in the year in which the “change in control” occurs, based on actual performance as of the date of termination;

 

(iii)

continued coverage under COBRA for a period of six months (if the executive officer holds a title of “Vice President”) or twelve months (if the executive officer holds a title of “Senior Vice President” or above), or, in each case, until the executive officer accepts a new position with another company, whichever is shorter;

 

(iv)

a family travel pass for a period of six months (if the executive officer holds a title of “Vice President”) or twelve months (if the executive officer holds a title of “Senior Vice President” or above) or, in each case, until the executive officer receives similar flight benefits with a new employer, whichever is shorter;

 

(v)

continued use of the executive officer’s Spirit-issued cellphone for a period of thirty days following the executive officer’s last day of service; and

 

(vi)

upon request by the executive officer within thirty days following the termination date, outplacement services through an outplacement provider selected by Spirit, subject to a cap of $10,000.

Pursuant to the terms of the Spirit executive severance plan, payments or benefits provided for or otherwise payable to a Spirit executive officer pursuant to the plan that would constitute a “parachute payment” as defined in Section 280G of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), and would be subject to the excise tax imposed by Section 4999 of the Code, will be reduced to an amount that can be paid without triggering such excise tax, but only if such reduced amount would be greater than the net after tax proceeds (taking into account both the excise tax and any interest or penalties payable by the executive officer with respect thereto) of the unreduced potential “parachute payments.”

For an estimate of the value of the payments and benefits described above that would be payable to Spirit’s named executive officer in connection with a qualifying termination following the merger, see “—Merger-Related Compensation for Spirit’s Named Executive Officers” below.

Existing Spirit Executive Agreements

Spirit has an existing employment letter agreement with Mr. Edward M. Christie and existing offer letters with the following executive officers: Messrs. Scott M. Haralson, John Bendoraitis, Matthew H. Klein, Thomas C. Canfield, Rocky B. Wiggins, Brian J. McMenamy and Kevin Blake Vanier, and Ms. Melinda C. Grindle.

 

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Other than for Mr. Christie, each such employment agreement and offer letter provides for severance solely in accordance with the Spirit executive severance plan, which provides for severance benefits upon a change in control termination, as discussed in “—Spirit 2017 Executive Severance Plan” above.

Restrictive Covenants

Mr. Christie is subject to a non-competition covenant and a non-solicitation of customers and employees covenant that are each applicable during the period of employment and for twelve months following the termination of his services with Spirit pursuant to the terms of his letter agreement with Spirit. Messrs. Haralson, McMenamy and Vanier and Ms. Grindle are each subject to a non-solicitation of employees covenant applicable during the period of employment and for twelve months following the termination of their services with Spirit, and a perpetual non-disparagement covenant, pursuant to the terms of their respective offer letters.

The other executive officers of Spirit are each subject to the restrictive covenants set forth in the Spirit executive severance plan, which include (i) a non-solicitation of employees covenant that is applicable during the period of employment and the longer of (a) the period ending on the first anniversary of the termination of the executive officer’s services or (b) the period over which the executive officer is entitled to receive cash severance payments under the Spirit executive severance plan and (ii) a perpetual non-disparagement covenant. Further, the executive officers are also subject to a clawback and forfeiture provision in their equity award agreements with Spirit in the event that they engage in any activity that is in competition with, or harmful to the interests of, Spirit.

All executive officers are required to perpetually maintain the confidentiality of Spirit’s confidential information. Generally, the severance payments for Spirit’s executive officers are conditioned upon (among other things) continued compliance with these covenants.

Spirit Retention Program

In connection with entering into the merger agreement, Spirit has established a retention program (the “Spirit retention program”) to incentivize and encourage the continued employment of certain key employees through and following the consummation of the merger. Pursuant to the Spirit retention program, Spirit will provide cash-based and, under certain circumstances, equity-based retention awards to certain key employees of Spirit, including each of its executive officers (the “officer participants”), and certain non-officer employees (the “non-officer participants” and, together with the officer participants, the “participants”).

Under the terms of the Spirit retention program, the retention awards for non-officer participants are generally payable in two installments, as follows: (i) 25% of a retention award will be paid to each non-officer participant on July 28, 2023 (or, if sooner, at the closing), subject to the non-officer participant’s continued employment through such date, and (ii) the remaining 75% of a retention award will be paid within 30 days following the closing, subject to the non-officer participant’s continued employment through the closing. Retention awards for officer participants will be payable on the same payment schedule for non-officer participants, but in no event sooner than April 2, 2023, subject to the officer participant’s continued employment through the applicable payment date.

In the event that a participant’s employment is terminated without “cause” or, solely with respect to a participant with a title of Director or above, for “good reason” (in each case, as defined in the Spirit executive severance plan), then the participant’s retention award will vest and be paid in accordance with the payment schedule described above, subject to compliance with the applicable conditions and obligations. If the closing occurs prior to April 2, 2023, and an officer participant’s termination of employment occurs after the closing and prior to April 2, 2023, then the officer participant’s retention award will be paid after the lapse of the officer participant’s non-compete period (as defined above). If a participant (a) voluntarily resigns from Spirit (other than, where applicable, for “good reason”), (b) is terminated by Spirit for “cause,” or (c) is terminated by Spirit due to the participant’s failure to (x) perform satisfactorily pursuant to a documented individual performance improvement

 

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plan for the participant, or (y) provide reasonably necessary support to Spirit to effect a timely closing and to participate in pre-closing integration planning, then all unpaid portions of such terminated participant’s retention award will be forfeited.

Spirit may provide an additional retention award to any non-officer participant and, if authorized by the Spirit compensation committee and approved by JetBlue, any officer participant, provided that no non-officer participant may receive more than one additional retention award. The value of any additional retention award will be determined based on retention awards granted to similarly situated employees and the proportion of the expected retention period that has transpired and, with respect to non-officer participants, may not exceed 50% of the value of the non-officer participant’s initial retention award. Any such additional retention awards will be paid in accordance with the payment schedule described above, but no earlier than twelve months following the date of grant, subject to continued employment through such payment date. If a non-officer participant’s employment is terminated without “cause” or, solely with respect to a non-officer participant with a title of Director or above, for “good reason” (in each case, as defined in the Spirit executive severance plan), then any such additional retention award will be paid as soon as administratively practicable following such non-officer participant’s termination of employment. All additional retention awards will be assumed by JetBlue as of the closing.

In the event that an officer participant’s initial retention award or, if authorized by the Spirit compensation committee and approved by JetBlue, additional retention award, exceeds 100% of the sum of the officer participant’s (x) base salary and (y) target short-term incentive bonus, in each case, as of February 1, 2022, then such excess amount will be payable in the form of restricted stock units of Spirit (the “Spirit retention RSU awards”), provided that if an officer participant is terminated without “cause” or resigns for “good reason” (in each case, as defined in the Spirit executive severance plan), in each case, prior to the closing, then such excess amount will instead be payable in cash in accordance with the payment schedule as described above, subject to Spirit’s compliance with all applicable conditions. Any Spirit retention RSU awards will be issued (i) immediately prior to the closing, if issued with respect to an initial retention award, or (ii) on the scheduled vesting date of the cash payable portion of the retention award, if issued with respect to an additional retention award. The Spirit retention RSU awards will vest in three equal annual installments commencing from the scheduled payment date of the cash payable portion of the officer participant’s retention award. The Spirit retention RSU awards will be assumed by JetBlue as of the closing and converted into JetBlue RSU awards based on an adjustment ratio, subject to the same terms and conditions of the Spirit retention RSU awards, including the vesting schedule, provided that JetBlue may settle such converted Spirit retention RSU awards in cash or stock at the sole discretion of the JetBlue compensation committee. If an officer participant’s employment is terminated without “cause” or for “good reason” (in each case, as defined in the Spirit executive severance plan) during the period commencing on the grant date of the Spirit retention RSU awards and ending twelve months after the closing, then the Spirit retention RSU awards (or converted JetBlue RSUs) will vest in full and be settled as soon as administratively practicable thereafter.

If the merger agreement is terminated and the merger is not consummated, then (i) each non-officer participant who is still employed as of the date the merger agreement is terminated will be entitled to 50% of the non-officer participant’s retention award (less any amounts previously paid), and (ii) each officer participant who is still employed as of the date the merger agreement is terminated will be entitled to 50% of the officer participant’s retention award (less any amounts previously paid), to be paid on the 30th day following the termination of the merger agreement (or on April 2, 2023, if later).

Subject to the terms and conditions described above, (i) each executive officer who holds a title of “Vice President” will receive a retention award in an amount equal to the sum of each such executive officer’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022, and (ii) each executive officer who holds a title of “Senior Vice President” and above will receive a retention award in an amount equal to 150% of the sum of each such executive’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022.

 

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Frontier Retention Program

On February 5, 2022, the Spirit compensation committee approved a key employee retention program (the “Frontier retention program”) in connection with Spirit’s proposed transactions with Frontier pursuant to the Frontier merger agreement. Pursuant to the Frontier retention program, (i) each participant with a title of Sr. Director and below who was still employed on July 27, 2022 (the date on which the Frontier merger agreement was terminated) became entitled to a payment of 50% of the participant’s retention award (less any amounts previously paid), and (ii) each participant with a title of Vice President and above, including Spirit’s executive officers, who is still employed as of April 2, 2023 will be entitled to 50% of such participant’s retention award (less any amounts previously paid), to be paid within 30 days following such applicable date.

The table below sets forth the payment (each, a “partial retention award”) that each executive officer of Spirit is eligible to receive under the Frontier retention program in connection with the termination of the Frontier merger agreement, assuming all other terms and conditions are satisfied:

 

Name		Partial Retention Award
Edward M. Christie		$	1,181,250
Scott M. Haralson		$	540,000
John Bendoraitis		$	627,000
Matthew H. Klein		$	570,000
Thomas C. Canfield		$	478,125
Rocky B. Wiggins		$	478,125
Brian J. McMenamy		$	211,500
Melinda C. Grindle		$	446,250
Kevin Blake Vanier		$	201,000

Annual Cash Bonuses

Pursuant to the terms of the merger agreement, if the closing of the merger occurs on or before December 31, 2023, (i) annual cash bonuses in respect of the period between January 1, 2023 and the closing date will be paid to Spirit employees (including its executive officers) within three business days following the closing of the merger in amounts calculated based on the level of performance attained as of immediately prior to the closing, as determined by the Spirit board of directors in accordance with applicable performance and other customary criteria consistent with past practice, and prorated to reflect the portion of the 2023 performance period elapsed as of the closing date and (ii) JetBlue will pay Spirit continuing employees (including its executive officers) an annual bonus in respect of the 2023 fiscal year equal to the excess of (x) the annual bonus payable under the applicable Spirit bonus plan for 2023 as in effect as of the closing date, calculated based on actual performance for the entire 2023 fiscal year over (y) the bonus paid to such executive officer pursuant to clause (i).

Spirit and JetBlue have further agreed that, if the closing of the merger occurs in 2024 but prior to the date on which annual cash bonuses in respect of 2023 are determined and paid to Spirit employees (including its executive officers), such bonus payments in respect of 2023, if any, will be calculated on the basis of actual performance for the 2023 performance period under the terms of the applicable Spirit bonus plan as will be determined by JetBlue’s board of directors in good faith using a methodology reasonably consistent with the past practices of the Spirit board of directors. In addition, if the closing does not occur prior to March 1, 2024, then Spirit will, following prior consultation with JetBlue, be permitted to adopt performance goals with respect to an annual cash bonus program for Spirit’s 2024 fiscal year in the ordinary course of business, and in such case JetBlue will honor such bonus program for Spirit continuing employees (including its executive officers) in accordance with its terms (subject to commercially reasonable adjustments after the closing date as required for integration purposes). Except as otherwise provided in an applicable employment agreement or in an applicable severance plan adopted by Spirit, in each case, prior to the date of the merger agreement or in accordance with the merger agreement, in order to be eligible to receive any bonus payment, a continuing employee must be

 

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employed by either Spirit or JetBlue or any subsidiary of JetBlue on the date the bonus is paid (or, with respect to any bonus period in 2023 ending on or prior to the closing, the closing date) and, if not so employed on such date, any bonus payment otherwise due to such individual will be forfeited.

Future Long-Term Incentive Awards

Spirit and JetBlue have agreed that Spirit may grant equity- and cash-based long-term incentive awards to employees, including executive officers, in respect of the remainder of fiscal year 2022, and in respect of fiscal years 2023 and 2024, in each case, in the ordinary course consistent with Spirit’s 2022 practices and subject to certain limitations. Any equity-based long-term incentive awards granted in fiscal years 2023 and 2024 that are outstanding as of immediately prior to the effective time will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related equity-based long-term incentive award as of immediately prior to the effective time, a JetBlue RSU award based on an adjustment ratio, subject to the same terms and conditions (including the vesting schedule) that applied to the related equity-based long-term incentive award as of immediately prior to the effective time; provided, however, that the JetBlue RSU award may be settled in cash or stock as determined by the JetBlue compensation committee in its sole discretion. Any cash-based long-term incentive awards granted in fiscal years 2023 and 2024 will be assumed by JetBlue as of the effective time upon the terms and conditions set forth in the applicable award agreements.

Merger-Related Compensation for Spirit’s Named Executive Officers

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the estimated amounts of compensation for each of Spirit’s named executive officers that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to Spirit’s named executive officers. The merger-related compensation payable to these individuals is subject to a non-binding advisory vote of Spirit stockholders, as described above in “Spirit’s Proposals—Proposal No. 2 — Compensation Proposal.”

The table below sets forth estimates of the amounts of payments and benefits that each of Spirit’s named executive officers would receive in connection with the merger using the assumptions described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Certain Assumptions.” These estimates are based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table. The amounts below do not reflect compensation actions that may occur after the date of this proxy statement but before the effective time. As a result, the actual amounts, if any, to be received by a Spirit named executive officer may materially differ from the amounts set forth below. All dollar amounts set forth below have been rounded to the nearest whole number.

 

Name		Cash ($)(1)				Equity ($)(2)				Perquisites/ Benefits ($)(3)				Total ($)
Edward M. Christie		$	8,779,899			$	6,169,610			$	66,872			$	15,016,381
Scott M. Haralson		$	4,156,426			$	2,206,286			$	27,591			$	6,390,303
John Bendoraitis		$	3,786,645			$	3,478,158			$	16,030			$	7,280,833
Matthew H. Klein		$	3,607,404			$	3,194,838			$	27,568			$	6,829,810
Thomas C. Canfield		$	3,168,220			$	1,990,065			$	22,491			$	5,180,776

 

(1)

Cash. The amounts reported in this column reflect the aggregate value of the cash severance payments to which the named executive officers are entitled pursuant to (A) the Spirit executive severance plan, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit 2017 Executive Severance Plan,” in connection with a qualifying termination following the assumed effective time, (B) the cash portion of each named executive officer’s retention award under the Spirit retention program, which is equal to the sum of 100% of the named executive officer’s base salary and target short-

 

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term incentive bonus, in each case, as of February 1, 2022, with the remaining portion of the retention award, which is equal to the sum of 50% of the named executive officer’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022, payable in the form of Spirit retention RSU awards, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit Retention Program,” (C) the partial retention award that each named executive officer is eligible to receive under the Frontier retention program in connection with the termination of the Frontier merger agreement, which is equal to 50% of the named executive officer’s retention award under the Frontier retention program, assuming, solely for purposes of the disclosure in this section, that the termination of the named executive officer by Spirit without “cause” or due to the named executive officer’s resignation for “good reason,” in each case, at or immediately following the assumed effective time, will not result in the forfeiture by the named executive officer of such partial retention award pursuant to the terms of the Frontier retention program, which requires each named executive officer of Spirit to remain continuously employed through April 2, 2023 to be eligible to receive such partial retention award, as described above under ““—Interests of Spirit’s Directors and Executive Officers in the Merger—Frontier Retention Program,” and (D) each named executive officer’s unvested Spirit performance cash award and, for Mr. Haralson only, Spirit time-based cash award, that will be assumed by JetBlue (treating any performance-vesting condition as being achieved based on target performance) as of the assumed effective time and subject to accelerated vesting upon a qualifying termination of the named executive officer’s employment within twelve months after the assumed effective time, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Treatment of Outstanding Spirit Cash-Based Awards.” The payments of cash severance are each equal to (i) 200% of the named executive officer’s base salary (as in effect at the assumed effective time, assuming that the termination of employment occurs on such date) and (ii) 200% of the named executive officer’s target bonus for fiscal year 2022 (as in effect at the assumed effective time, assuming that the termination of employment occurs on such date), plus (iii) the sum of (x) the actual bonus earned by the named executive officer in respect of the first half of fiscal year 2022 (i.e., the period commencing January 1, 2022 and ending June 30, 2022), and (y) a pro-rated bonus in respect of the second half of fiscal year 2022 (i.e., the period commencing July 1, 2022 and ending December 31, 2022) based on the named executive officer’s actual days of service in such period (assuming target performance solely for purposes of this compensation-related disclosure). The following table quantifies each separate form of cash compensation included in the aggregate amounts reported in this column:

 

Name		Salary Severance ($)(a)				Bonus Severance ($)(a)				Pro-Rated Bonus ($)(a)(b)				Spirit Cash Retention Award ($)(c)				Frontier Partial Retention Award ($)(d)				Cash-Based Award ($)(d)
Edward M. Christie		$	1,400,000			$	1,750,000			$	467,649			$	1,575,000			$	1,181,250			$	2,406,000
Scott M. Haralson		$	800,000			$	640,000			$	171,026			$	720,000			$	540,000			$	1,285,400
John Bendoraitis		$	880,000			$	792,000			$	211,645			$	836,000			$	627,000			$	440,000
Matthew H. Klein		$	800,000			$	720,000			$	192,404			$	760,000			$	570,000			$	565,000
Thomas C. Canfield		$	750,000			$	525,000			$	140,295			$	637,500			$	478,125			$	637,300

(a) The cash severance payments are “double-trigger” payments, as they are each conditioned upon both the consummation of the merger and termination of a named executive officer’s employment by Spirit without “cause” or resignation by the named executive officer for “good reason” (in each case, as defined in the Spirit executive severance plan) within eighteen months following the effective time of the merger. In addition, the receipt of such payments is conditioned upon the named executive officer’s execution and non-revocation of a release of claims, and continued compliance with any applicable restrictive covenants.

(b) The amounts reported in this column represent the actual bonus earned by the named executive officer in respect of the first half of fiscal year 2022 (i.e., the period commencing January 1, 2022 and ending June 30, 2022), and a pro-rated bonus in respect of the second half of fiscal year 2022 (i.e., the period commencing July 1, 2022 and ending December 31, 2022) based on the named executive officer’s actual days of service from July 1, 2022, through the assumed effective time.

 

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(c) The amounts reported in this column reflect the portion of the named executive officer’s retention award under the Spirit retention program that is payable in cash, which is equal to the sum of 100% of the named executive officer’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit Retention Program.” The remaining portion of the named executive officer’s retention award, which is equal to the sum of 50% of the named executive officer’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022, is payable in the form of Spirit retention RSU awards, as further discussed in footnote (2) below. The cash portion of the retention awards are “single-trigger” payments, as they are conditioned solely upon the consummation of the merger.

(d) The amounts reported in this column reflect the partial retention award that each named executive officer is eligible to receive under the Frontier retention program in connection with the termination of the Frontier merger agreement, which is equal to 50% of the named executive officer’s retention award under the Frontier retention program, assuming, solely for purposes of the disclosure in this section, that the termination of the named executive officer by Spirit without “cause” or due to the named executive officer’s resignation for “good reason,” in each case, at or immediately following the assumed effective time, will not result in the forfeiture by the named executive officer of such partial retention award pursuant to the terms of the Frontier retention program, which requires each named executive officer of Spirit to remain continuously employed through April 2, 2023 to be eligible to receive such partial retention award, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Frontier Retention Program.”

(e) The Spirit time-based cash awards and Spirit performance cash awards are considered “double trigger” benefits, as they are each conditioned upon both the consummation of the merger and termination of a named executive officer’s employment by Spirit without “cause” or resignation by the named executive officer for “good reason” (in each case, as defined in the applicable award agreement) within twelve months following the effective time of the merger. The following table quantifies the Spirit performance cash awards and, for Mr. Haralson only, the Spirit time-based cash awards included in the aggregate values reported in this column:

 

Name		Spirit Performance Cash Award ($)				Spirit Time-Based Cash Award ($)
Edward M. Christie		$	2,406,000				—
Scott M. Haralson		$	685,400			$	600,000
John Bendoraitis		$	440,000				—
Matthew H. Klein		$	565,000				—
Thomas C. Canfield		$	637,300				—

 

(2)

Equity. The amounts reported in this column represent the aggregate value of the unvested (i) Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU awards held by each named executive officer of Spirit that will, effective as of immediately prior to the assumed effective time, be assumed by JetBlue (treating, where applicable, any performance-vesting condition as being achieved based on target performance) and converted into the right to receive JetBlue cash awards, which will be subject to the same service-based vesting schedule applicable to the related Spirit RSU award as of immediately prior to the assumed effective time, including accelerated vesting upon a qualifying termination of employment within twelve months following the consummation of the merger, as described above in “—Interests of Spirit’s Directors and Executive Officers in the Merger—Equity-Based Awards held by Executive Officers of Spirit,” (ii) Spirit PSU awards (other than 2022 Spirit PSU awards) held by each named executive officer that will, effective as of immediately prior to the assumed effective time, be settled in shares of Spirit common stock (treating any performance-vesting condition as being achieved based on target performance), prorated based on the portion of the applicable performance period elapsed as of the assumed effective time and converted into the right to receive certain cash payments, as described above in “—Interests of Spirit’s Directors and

 

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Executive Officers in the Merger—Equity-Based Awards held by Executive Officers of Spirit,” and (iii) the portion of the named executive officer’s retention award that is payable in the form of Spirit retention RSU awards that will be assumed by JetBlue as of the assumed effective time and converted into JetBlue RSU awards based on an adjustment ratio, and continue to vest on the same terms and conditions as applied to the Spirit retention RSU awards as of immediately prior to the assumed effective time, including accelerated vesting upon a qualifying termination of employment within twelve months following the consummation of the merger, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit Retention Program.” The accelerated vesting of the Spirit RSU awards, Spirit MSU awards and 2022 Spirit PSU Awards are considered “double trigger” benefits, as it is conditioned upon both the consummation of the merger and the named executive officer’s termination without “cause” or resignation for “good reason” (in each case, as defined in the applicable award agreement) within twelve months following the consummation of the merger. The accelerated vesting of the Spirit PSU awards (other than the 2022 Spirit PSU awards) are considered “single trigger” benefits, as it is conditioned upon solely the consummation of the merger. Depending on the actual effective time of the merger, it is possible that the equity values set forth in the table above will be higher or lower depending on actual performance. The following table quantifies the Spirit RSU awards, Spirit MSU awards, Spirit PSU Awards (other than 2022 Spirit PSU awards), 2022 Spirit PSU awards and Spirit retention RSU awards included in the aggregate values reported in this column:

 

Name		Spirit RSU Award ($)(a)				Spirit MSU Award ($)(b)				Spirit PSU Award (Other than Spirit MSU Award and 2022 Spirit PSU Award) ($)(a)				2022 Spirit PSU Award ($)(a)				Spirit Retention RSU Award ($)(c)
Edward M. Christie		$	2,326,977			$	1,303,184			$	850,398			$	901,552			$	787,500
Scott M. Haralson		$	851,403			$	439,788			$	262,841			$	292,254			$	360,000
John Bendoraitis		$	1,436,514			$	542,968			$	446,790			$	633,887			$	418,000
Matthew H. Klein		$	1,307,371			$	542,968			$	446,790			$	517,709			$	380,000
Thomas C. Canfield		$	718,877			$	401,766			$	269,675			$	280,998			$	318,750

(a) The amounts reported in this column were calculated by multiplying the number of shares underlying each Spirit RSU award, Spirit PSU award and 2022 Spirit PSU award, as applicable, by $33.50 (the relevant price per share of Spirit common stock, as noted above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Certain Assumptions”), with (x) any performance-vesting condition in respect of the Spirit PSU awards and 2022 Spirit PSU awards treated as having been achieved based on target performance as of the assumed effective time and (y) the resulting amount in respect of the Spirit PSU awards (other than the 2022 Spirit PSU awards) prorated based on the portion of the applicable performance period elapsed as of the assumed effective time.

(b) The amounts reported in this column were calculated by multiplying the target number of units underlying the Spirit MSU award as set forth in the named executive officer’s award agreement by 163.13% (which is the applicable performance multiplier designated in each award agreement based on the relevant price of $33.50 per share of Spirit common stock).

(c) The amounts reported in this column represent the equity-based portion of each named executive officer’s retention award under the Spirit retention program that is payable in the form of Spirit retention RSU awards, which is equal to the sum of 50% of the named executive officer’s base salary and target short-term incentive bonus, in each case, as of February 1, 2022, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit Retention Program.”

 

(3)

Perquisites/Benefits. The amounts reported in this column represent the aggregate value of the following perquisites and benefits to which the named executive officers are entitled pursuant to the Spirit executive severance plan, as described above under “—Interests of Spirit’s Directors and Executive Officers in the Merger—Spirit 2017 Executive Severance Plan,” in connection with a qualifying termination following the

 

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assumed effective time: (i) continued health coverage under COBRA for a period of twelve months for each named executive officer, at the same rate as in effect immediately prior to the assumed effective time (assuming that the termination of employment occurs on such date), (ii) outplacement services for each named executive officer, (iii) use of a Spirit-owned mobile phone by each named executive officer for a period of thirty days following the assumed effective time (assuming that the termination of employment occurs on such date), and (iv) for each of Messrs. Haralson, Bendoraitis, Klein and Canfield, a family travel pass for a period of twelve months following the assumed effective time (assuming that the termination of employment occurs on such date) and, for Mr. Christie, a lifetime travel pass (as provided for under his employment letter agreement with Spirit). These perquisites and benefits are considered “double-trigger” payments, as they are each conditioned upon both the consummation of the merger and termination of the named executive officer’s employment by Spirit without “cause” or resignation by the named executive officer for “good reason” (in each case, as defined in the Spirit executive severance plan) within eighteen months following the effective time of the merger. In addition, the receipt of such payments is conditioned upon the named executive officer’s execution and non-revocation of a release of claims, and continued compliance with any applicable restrictive covenants. The following table quantifies each separate perquisite and benefit included in the aggregate values reported in this column:

 

Name		COBRA ($)(a)				Outplacement Services($)(b)				Mobile Phone($)(c)				Travel Passes ($)(d)
Edward M. Christie		$	11,977			$	10,000			$	75			$	44,820
Scott M. Haralson		$	11,977			$	10,000			$	75			$	5,539
John Bendoraitis		$	5,032			$	10,000			$	75			$	923
Matthew H. Klein		$	11,954			$	10,000			$	75			$	5,539
Thomas C. Canfield		$	8,724			$	10,000			$	75			$	3,693

(a) Amounts reported in this column are based on the incremental cost to Spirit of providing such continued coverage to each named executive officer. These benefits are also contingent upon each named executive officer timely and properly electing continuation coverage under COBRA.

(b) Amounts reported in this column reflect the maximum of $10,000 that may be incurred by Spirit for such outplacement services in respect of each such named executive officer.

(c) Amounts reported in this column are based on the incremental cost to Spirit of providing each named executive officer with continued use of a mobile phone for a period of thirty days following the assumed effective time.

(d) Amounts reported in this column are based on the incremental cost to Spirit of providing travel passes to each named executive officer, including reasonable estimates of the cost of incremental fuel, insurance, security, station cleaning, facility rent and station baggage rent, but excluding fees and taxes paid by each named executive officer for the transportation. For Messrs. Haralson, Bendoraitis, Klein and Canfield, we have assumed that such named executive officers and their eligible family members would each take ten round-trip flights during the applicable twelve-month post-employment period. For Mr. Christie, the present value of his lifetime travel pass was calculated using a discount rate of 7.00% and mortality assumptions based on the United States Statistics Life Expectancy Tables, and we have assumed that Mr. Christie and his eligible family members would each take ten round-trip flights each year.

Delisting and Deregistration of Spirit Common Stock

If the merger is completed, Spirit common stock will no longer be traded on the NYSE and will be deregistered under the Exchange Act.

Appraisal Rights in the Merger

Under the DGCL, Spirit stockholders have the right to dissent from the merger and to receive payment in cash for the fair value of your shares of Spirit common stock as determined by the Court of Chancery, together with

 

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interest, if any, as determined by the Court, in lieu of the consideration that you would otherwise be entitled to pursuant to the merger agreement. These rights are known as appraisal rights. Spirit stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. Strict compliance with the statutory procedures is required to perfect appraisal rights under Delaware law.

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to perfect appraisal rights in connection with the merger. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which is attached as Annex D to this proxy statement and is incorporated by reference herein in its entirety. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL may result in the loss of your appraisal rights. All references in this summary to a “stockholder” are to the record holder of shares of Spirit common stock unless otherwise indicated.

Section 262 of the DGCL requires that, where a merger agreement is to be submitted for adoption at a meeting of stockholders, stockholders for whom appraisal rights are available be notified not less than twenty days before the stockholders meeting to vote on the merger in connection with which appraisal rights will be available. A copy of Section 262 of the DGCL must be included with such notice. This proxy statement constitutes our notice to Spirit stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262 of the DGCL and a copy of the full text of Section 262 of the DGCL is attached hereto as Annex D. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex D to this proxy statement, since failure to timely and properly comply with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights under the DGCL.

Any stockholder wishing to exercise appraisal rights should consider consulting legal counsel before attempting to exercise such rights.

If you wish to exercise appraisal rights with respect to your shares of Spirit common stock, you must satisfy each of the following conditions:

 

•

You must deliver to us a written demand for appraisal of your shares before the vote with respect to the merger is taken. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption and approval of the merger agreement and the merger. Voting against or failing to vote for the merger proposal by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL. The demand must reasonably inform us of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares. A stockholder’s failure to make a written demand before the vote with respect to the merger is taken will constitute a waiver of appraisal rights.

 

•

You must not vote in favor of, or consent in writing to, the merger proposal. A vote in favor of the merger proposal, by proxy submitted by mail, over the Internet, by telephone or virtually during the special meeting, will cause you to lose your appraisal rights in respect of the shares so voted and will nullify any written demands for appraisal you previously submitted. A proxy which does not contain voting instructions will, unless revoked, be voted in favor of the merger proposal. Therefore, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the merger proposal or abstain from voting on the merger proposal.

 

•

You must continue to hold your shares of Spirit common stock from the date of making the demand through the effective date of the merger. Therefore, a stockholder who is the record holder of shares of Spirit common stock on the date the written demand for appraisal is made but who thereafter transfers the shares before the effective date of the merger will lose any right to appraisal with respect to such shares.

 

•

You must otherwise comply with the procedures set forth in Section 262 of the DGCL.

 

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If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive the merger consideration (without interest and subject to any required tax withholding), but you will have no appraisal rights with respect to your shares of Spirit common stock.

Only a holder of record of shares of Spirit common stock is entitled to demand an appraisal of the shares registered in that holder’s name. A demand for appraisal in respect of shares of Spirit common stock should be executed by or on behalf of the holder of record, fully and correctly, as his, her or its name appears on his, her or its stock certificates, and must state that such person intends thereby to demand appraisal of his, her or its shares of Spirit common stock in connection with the merger. If shares of Spirit common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made in that capacity, and if the shares of Spirit common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal on behalf of a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner or owners. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the rights with respect to the shares held for other beneficial owners; in such case, however, the written demand should set forth the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, we will presume that the demand covers all shares held in the name of the record owner. If you hold your shares of Spirit common stock in a brokerage account or in other nominee form and you wish to exercise appraisal rights, you should consult with your broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

Beneficial owners of shares of Spirit common stock held in “street name” who desires appraisal should take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of such shares. Shares held through brokerage firms, banks and other financial institutions are frequently deposited with and held of record in the name of a nominee of a central security depository, such as Cede & Co. Any beneficial holder desiring appraisal who holds shares through a brokerage firm, bank or other financial institution is responsible for ensuring that the demand for appraisal is made by the record holder. The beneficial holder of such shares should instruct such firm, bank or institution that the demand for appraisal be made by the record holder of the shares, which may be the nominee of a central security depository if the shares have been so deposited. As required by Section 262, a demand for appraisal must reasonably inform Spirit of the identity of the holder(s) of record (which may be a nominee as described above) and of such holder’s intention to seek appraisal of such shares.

All written demands for appraisal pursuant to Section 262 of the DGCL should be addressed to Spirit at Spirit Airlines, Inc., 2800 Executive Way, Miramar, Florida 33025, and must be delivered before the vote on the merger agreement is taken at the special meeting.

Within ten days after the effective date of the merger, Spirit, as the surviving corporation, must give written notice that the merger has become effective to each stockholder who has complied with Section 262 of the DGCL, has properly delivered a written demand for appraisal and who did not vote in favor of the merger agreement and the merger. At any time within sixty days after the effective date of the merger, any stockholder who has demanded an appraisal, and who has not commenced an appraisal proceeding or joined that proceeding as a named party, has the right to withdraw such stockholder’s demand for appraisal and to accept the merger consideration (without interest and subject to any required tax withholding) specified by the merger agreement for his, her or its shares of Spirit common stock by delivering to Spirit, as the surviving corporation, a written withdrawal of the demand for appraisal. After this period, the stockholder may withdraw such demand for appraisal only with the written consent of Spirit, as the surviving corporation. Within 120 days after the effective date of the merger, any stockholder who has complied with the requirements of Section 262 of the DGCL will, upon written request to Spirit, as the surviving corporation, be entitled to receive a written statement setting forth

 

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the aggregate number of shares not voted in favor of the merger agreement and the merger and with respect to which demands for appraisal rights have been received and the aggregate number of holders of such shares. A person who is the beneficial owner of shares of Spirit common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, request from the corporation the statement described in the previous sentence. Such written statement will be mailed to the requesting stockholder within ten days after such written request is received by the surviving corporation or within ten days after expiration of the period for delivery of demands for appraisal, whichever is later. Within 120 days after the effective time of the merger, but not thereafter, either Spirit, as the surviving corporation, or any stockholder who has complied with the requirements of Section 262 of the DGCL and who is otherwise entitled to appraisal rights may file a petition in the Court of Chancery demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. A person who is the beneficial owner of shares of Spirit common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file the petition described in the previous sentence. Upon the filing of the petition by a stockholder, service of a copy of such petition will be made upon Spirit, as the surviving corporation. If no such petition is filed within that 120-day period, appraisal rights will be lost for all holders of shares who had previously demanded appraisal of their shares. Spirit, as the surviving corporation, has no obligation to file such a petition in the event there are dissenting stockholders. There is no present intent on the part of Spirit to file an appraisal petition, and stockholders seeking to exercise appraisal rights should not assume that Spirit will file such a petition or that Spirit will initiate any negotiations with respect to the fair value of such shares. Accordingly, stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to Spirit, as the surviving corporation, Spirit will then be obligated, within twenty days after receiving service of a copy of the petition, to file in the office of the Register in Chancery in which the petition was filed, a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. The Register in Chancery, if so ordered by the Court of Chancery, must give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving corporation and to the stockholders shown on the list at the addresses therein stated. Such notice must also be given by one or more publications at least one week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court of Chancery deems advisable. The forms of the notices by mail and by publication must be approved by the Court of Chancery, and the costs thereof will be borne by the surviving corporation. At the hearing on such petition, the Court of Chancery will determine the stockholders who have complied with the requirements of Section 262 of the DGCL and who have become entitled to appraisal rights. The Court of Chancery may require the stockholders who have demanded appraisal for their shares and who hold stock represented by certificates to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; if any stockholder fails to comply with that direction, the Court of Chancery may dismiss the proceedings as to that stockholder. In addition, the Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal or (ii) the value of the consideration provided in the merger for such total number of shares exceeds $1 million.

After determination of the stockholders entitled to appraisal of their shares of Spirit common stock, the Court of Chancery will appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, and except as otherwise provided in Section 262 of the DGCL, interest from the effective date of the merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, Spirit, as the surviving corporation,

 

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may pay to each stockholder entitled to appraisal an amount in cash, in which case interest will accrue thereafter only upon the sum of (i) the difference, if any, between the amount paid and the fair value of the shares as determined by the Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time. Upon application by Spirit, as the surviving corporation, or by any stockholder entitled to participate in the appraisal proceeding, the Court of Chancery may, in its discretion, proceed to trial upon the appraisal before the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by Spirit, as the surviving corporation, and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under Section 262 of the DGCL. When the fair value is determined, the Court of Chancery will direct the payment of such value, with interest thereon, if any, by Spirit, as the surviving corporation, to the stockholders entitled to receive the same, in the case of holders of uncertificated stock forthwith, and in the case of holders of shares represented by certificates upon the surrender to Spirit of the certificates representing such stock.

In determining the fair value of the shares of Spirit common stock and, if applicable, interest, the Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.”

The Delaware Supreme Court has stated that in making this determination of fair value, the court may consider market value, asset value, the negotiated transaction price, the unaffected stock price, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. The Delaware Supreme Court has recently indicated that absent deficiencies in the sale process the negotiated transaction price should be given “considerable weight” by the Court of Chancery in determining fair value. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

You should be aware that the fair value of your shares of Spirit common stock as determined under Section 262 of the DGCL could be more than, the same as, or less than the value that you are entitled to receive under the terms of the merger agreement and that an opinion of an investment banking firm as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, fair value under Section 262 of the DGCL.

Moreover, we do not anticipate offering more than the per share merger consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of Spirit common stock is less than the per share merger consideration.

Costs of the appraisal proceeding may be imposed upon Spirit, as the surviving corporation, and the stockholders participating in the appraisal proceeding by the Court of Chancery as the Court deems equitable in the circumstances. Upon the application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all shares entitled to appraisal. In the absence of an order, each party bears its own expenses. Any stockholder who has duly demanded and perfected appraisal rights in compliance with

 

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Section 262 of the DGCL will not, after the effective time of the merger, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date before the effective time of the merger. If no petition for appraisal is filed within 120 days after the effective date of the merger, or if the stockholder delivers a written withdrawal of his or her demand for appraisal and an acceptance of the terms of the merger within sixty days after the effective date of the merger or thereafter with the written approval of Spirit, then the right of that stockholder to appraisal will cease. Once a petition for appraisal is filed, the appraisal proceeding in the Court of Chancery will not be dismissed as to any stockholder without the prior approval of the Court, and such approval may be conditioned upon such terms as the Court of Chancery deems just; provided, however, that the foregoing will not affect the rights of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the merger consideration that such holder would have received (without interest and subject to any required tax withholding) pursuant to the merger agreement within sixty days after the effective date of the merger.

In view of the complexity of Section 262 of the DGCL, stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.

Regulatory Approvals Required for the Merger

U.S. Antitrust Laws

Under the HSR Act, and the rules promulgated thereunder, certain transactions may not be consummated unless Notification and Report Forms (which we refer to as “HSR Notifications”) have been filed with the Antitrust Division of the DOJ (which we refer to as the “Antitrust Division”) and the FTC, and certain waiting period requirements have been satisfied. JetBlue and Spirit filed a Premerger Notification and Report Form under the HSR Act with the Antitrust Division and the FTC in connection with the merger contemplated by the merger agreement on August 12, 2022. The initial waiting period is thirty days, but (i) this period may be shortened if the reviewing agency grants “early termination,” (ii) it may be restarted if the acquiring person voluntarily withdraws and re-files its Notification and Report Form, and/or (iii) it may be extended if the reviewing agency issues a request for additional information and documentary material (which we refer to as a “Second Request”), in which case, the waiting period expires thirty days after the date when both parties have substantially complied with such request though it is customary to reach a timing agreement with the Antitrust Division to not consummate the proposed merger for a further period of time after substantial compliance. The merger is subject to such requirements, and JetBlue and Spirit expect that the Antitrust Division will issue a Second Request. The Antitrust Division will assess the legality under the antitrust laws of the proposed merger. At any time before or after the consummation of the proposed merger, the Antitrust Division could take such action under the antitrust laws of the United States as it deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of the assets of JetBlue and/or Spirit or their respective subsidiaries. Private parties and individual state attorneys general may also bring legal actions under the antitrust laws. There can be no assurance that a challenge to the merger on antitrust grounds will not be made, or, if such a challenge is made, what the result would be.

Competition Laws of Other Jurisdictions

The antitrust, competition or merger control laws of certain other countries in which Spirit and/or JetBlue operate may require the submission of a merger control notification with, and the obtaining of the pre-merger approval of, antitrust or competition authorities therein. There can be no assurance that a challenge to the merger on foreign antitrust or competition grounds will not be made, or if such a challenge is made, what the result will be.

Other Regulatory Approvals

In addition to the antitrust related filings, clearances and approvals discussed above, JetBlue and Spirit must file notices with, and obtain any approvals and authorizations required to be obtained from, the DOT, the FAA and

 

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the FCC, as well as all other approvals and authorizations required to be obtained in connection with the consummation of the merger and the transactions contemplated by the merger agreement from any other governmental authority.

Litigation Related to the Merger

As of August 24, 2022, 11 lawsuits have been filed by alleged Spirit stockholders against Spirit and the Spirit board of directors related to the prior transaction with Frontier. A complaint captioned Stein v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-02069 (the “Stein complaint”), was filed in the United States District Court for the Southern District of New York on March 14, 2022. A complaint captioned Shuler v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-02141 (the “Shuler complaint”), was filed in the United States District Court for the Southern District of New York on March 15, 2022. A complaint captioned Hiebert v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-01494 (the “Hiebert complaint”), was filed in the United States District Court for the Eastern District of New York on March 17, 2022. A complaint captioned Lo v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-01524 (the “Lo complaint”), was filed in the United States District Court for the Eastern District of New York on March 20, 2022. A complaint captioned Crenshaw v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-00358 (the “Crenshaw complaint”), was filed in the United States District Court for the District of Delaware on March 21, 2022. A complaint captioned Justice v. Spirit Airlines, Inc. et al., Case No. 2:22-cv-01079 (the “Justice complaint”), was filed in the United States District Court for the Eastern District of Pennsylvania on March 21, 2022. A complaint captioned Daroczi v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-02327, was filed in the United States District Court for the Southern District of New York on March 22, 2022. A complaint captioned Votto v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-02563 (the “Votto complaint”), was filed in the United States District Court for the Southern District of New York on March 29, 2022. A complaint captioned Marcus v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-03911, was filed in the United States District Court for the Southern District of New York on May 13, 2022. A complaint captioned Nathan v. Spirit Airlines, Inc. et al., Case No. 1:22-cv-04152, was filed in the United States District Court for the Southern District of New York on May 20, 2022. A complaint captioned Playford v. Spirit Airlines, et al., Case No. 2022-0488 (the “Playford complaint”), was filed in the Delaware Chancery Court on June 6, 2022. Spirit also received a draft complaint, captioned Arthur v. Spirit Airlines, Inc. et al., on March 30, 2022. The complaints name as defendants Spirit and members of the Spirit board of directors. The Stein complaint also names as defendants Frontier and Top Gun Acquisition Corp.

Except for the Playford complaint, which was brought pursuant to Section 220 of the DGCL demanding the right to inspect, among other things, certain books and records relating to the prior transaction with Frontier, each of the complaints alleges violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The complaints generally allege that the defendants filed a materially incomplete and misleading registration statement or proxy statement with the SEC. Each of the complaints seeks injunctive relief preventing the consummation of the prior transaction with Frontier, damages and other relief.

The Lo complaint was voluntarily dismissed without prejudice on June 10, 2022, the Crenshaw complaint was voluntarily dismissed without prejudice on June 16, 2022, the Votto complaint was voluntarily dismissed without prejudice on July 18, 2022, the Stein complaint was voluntarily dismissed with prejudice on July 27, 2022, the Shuler complaint was voluntarily dismissed without prejudice on July 29, 2022, the Playford complaint was voluntarily dismissed with prejudice on August 8, 2022, the Hiebert complaint was voluntarily dismissed without prejudice on August 24, 2022 and the Justice complaint was voluntarily dismissed without prejudice on August 24, 2022.

As of August 24, 2022, seven stockholder demand letters have been sent to Spirit by alleged Spirit stockholders in connection with the prior transaction with Frontier. A stockholder demand letter was sent on behalf of Wade Alford on March 29, 2022. A stockholder demand letter was sent on behalf of Catherine Coffman on April 6, 2022. A stockholder demand letter was sent on behalf of Jordan Wilson on April 25, 2022. A stockholder demand letter was sent on behalf of Steven Evans on May 2, 2022. A stockholder demand letter was sent on

 

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behalf of Edward Smith on May 3, 2022. A stockholder demand letter was sent on behalf of Teamsters Local 237 Additional Security Benefit Fund and Teamsters Local 237 Supplemental Fund for Housing Authority Employees on May 23, 2022 (the “Teamsters demand letter”). A stockholder demand letter was sent on behalf of Ian Rachelefsky on July 11, 2022 (the “Rachelefsky demand letter”). Except for the Rachelefsky and Teamsters demand letters, which were sent pursuant to Section 220 of the DGCL demanding the right to inspect, among other things, certain books and records relating to the prior transaction with Frontier, each of the letters alleged disclosure deficiencies in the proxy statement soliciting stockholder approval of the Frontier merger agreement and demanded that additional disclosures be made before Spirit stockholders vote on the prior transaction with Frontier.

Spirit believes that the claims asserted in the complaints and demand letters are without merit and have been mooted by (i) subsequent disclosures made by Spirit and (ii) the agreement between Spirit and Frontier on July 27, 2022 to mutually terminate the Frontier merger agreement. Spirit may receive additional stockholder demand letters, and additional lawsuits related to the merger or the prior transaction with Frontier may be filed in the future.

 

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THE MERGER AGREEMENT

The following describes certain aspects of the merger, including certain material provisions of the merger agreement. The following description of the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.

Explanatory Note Regarding the Merger Agreement

The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about JetBlue or Spirit contained in this proxy statement or in JetBlue’s or Spirit’s public reports filed with the SEC may supplement, update or modify the factual disclosures about JetBlue and Spirit contained in the merger agreement and described in this summary. The representations, warranties and covenants made in the merger agreement by Spirit, JetBlue and Merger Sub were qualified and subject to important limitations agreed to by Spirit, JetBlue and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of the other party prove to be untrue, due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. In addition, you should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of Spirit, JetBlue or Merger Sub, because the parties may take certain actions that are consented to by the appropriate party, which consent may be given without prior notice to the public.

Structure and Effective Time

The merger agreement provides that, subject to the terms and conditions of the merger agreement, Merger Sub, a Delaware corporation and a direct, wholly owned subsidiary of JetBlue, will merge with and into Spirit. As a result, the separate corporate existence of Merger Sub will cease and Spirit will survive the merger and continue to exist after the merger as a direct, wholly owned subsidiary of JetBlue.

The merger will take place no later than the third business day after satisfaction or waiver of all conditions described under “—Conditions to Completion of the Merger” beginning on page 107 of this proxy statement.

The merger will become effective at the time when Spirit, JetBlue and Merger Sub cause to be executed and filed a certificate of merger with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL, or such other date and time as is agreed upon by the parties and specified in the certificate of merger.

Merger Consideration

The merger agreement provides that each share of Spirit common stock outstanding immediately prior to the effective time of the merger (other than dissenting shares, treasury shares and shares held by JetBlue, Merger Sub

 

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or any of their respective wholly owned subsidiaries) will be converted into the right to receive the merger consideration.

 

Dissenting Shares will be treated as described under “The Merger—Appraisal Rights in the Merger” beginning on page 77 of this proxy statement. All shares of Spirit common stock that are held in the treasury of Spirit, or owned of record by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries, will be cancelled and will cease to exist, with no payment being made with respect thereto.

Treatment of Spirit Equity-Based Awards and Warrants

Spirit RSU Awards and 2022 Spirit PSU Awards. The merger agreement provides that, except with respect to Spirit PSU awards, each Spirit RSU award granted pursuant to the Spirit equity award plan that is outstanding as of immediately prior to the effective time (including 2022 Spirit PSU awards and Spirit MSU awards), will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit RSU award as of immediately prior to the effective time (treating for this purpose any performance-based vesting conditions to which a 2022 Spirit PSU award or Spirit MSU award is subject as having been achieved based on target performance as of immediately prior to the effective time), the right to receive an amount in cash that is subject to the same service vesting schedule applicable to the related Spirit RSU award and is equal to the sum of:

(x) the merger consideration, plus

(y) solely to the extent (1) the related Spirit RSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit RSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect the approval prepayment and (2) paid pursuant to the merger agreement, the approval prepayment amount, plus

(z) solely to the extent the related Spirit RSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit RSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect any additional prepayment, any additional prepayment amounts not yet paid to the holder of such Spirit RSU award.

Notwithstanding the foregoing, Spirit and JetBlue have agreed that each Spirit RSU award and Spirit MSU award granted in fiscal years 2023 and 2024 pursuant to the Spirit equity award plan that is outstanding as of immediately prior to the effective time will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit RSU award as of immediately prior to the effective time, a JetBlue RSU award based on an adjustment ratio, subject to the same terms and conditions (including the vesting schedule) that applied to the related Spirit RSU award as of immediately prior to the effective time; provided, however, that the JetBlue RSU award may be settled in cash or stock as determined by the JetBlue compensation committee in its sole discretion.

Spirit PSU Awards (Other than 2022 Spirit PSU Awards). Each Spirit PSU award granted pursuant to the Spirit equity award plan (other than a 2022 Spirit PSU award and Spirit MSU award) that is outstanding as of immediately prior to the effective time will entitle the holder to receive, immediately prior to the effective time and subject to the occurrence of the closing, the number of shares of Spirit common stock that are earned thereunder based on target performance as of immediately prior to the effective time, in each case, multiplied by a fraction, the numerator of which is equal to the number of whole months elapsed from the first day of the applicable performance period until the closing and the denominator of which is equal to the total months in the applicable performance period. Any shares of Spirit common stock so delivered in respect of a Spirit PSU award will be deemed to be issued and outstanding as of immediately prior to the effective time, and will have the right to receive an amount in cash equal to the sum of:

(x) the merger consideration, plus

 

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(y) solely to the extent (1) the related Spirit PSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit PSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect the approval prepayment and (2) paid pursuant to the merger agreement, the approval prepayment amount, plus

(z) solely to the extent the related Spirit PSU award has not been otherwise equitably or discretionarily adjusted under the Spirit equity award plan and no amount has been otherwise paid in respect of the related Spirit PSU award to the holder thereof under the Spirit equity award plan, in each case, to reflect any additional prepayment, any additional prepayment amount not yet paid to the holder of such Spirit PSU award.

Notwithstanding the foregoing, Spirit and JetBlue have agreed that each Spirit PSU award granted in fiscal years 2023 and 2024 that is outstanding as of immediately prior to the effective time will be assumed by JetBlue and converted into, for each share of Spirit common stock underlying the related Spirit PSU award as of immediately prior to the effective time, a JetBlue RSU award based on an adjustment ratio, subject to the same terms and conditions (including the vesting schedule) that applied to the related Spirit PSU award as of immediately prior to the effective time; provided, however, that the JetBlue RSU award may be settled in cash or stock as determined by the JetBlue compensation committee in its sole discretion.

Warrants. Immediately prior to the effective time, each outstanding warrant to purchase shares of Spirit common stock will be assumed by JetBlue and converted into a warrant exercisable for the merger consideration, and JetBlue will assume the punctual performance and observance of each and every covenant, agreement, and condition of the warrants such that each such warrant will continue to have, and be subject to, the same terms and conditions as applied to the warrants prior to the effective time. The approval prepayment amount and the additional prepayment amount will be payable upon exercise of a Spirit warrant if exercised following consummation of the merger.

Payment and Issuance of Merger Consideration; Surrender of Company Certificates

Prior to the effective time of the merger, JetBlue will enter into an agreement with a paying agent designated by JetBlue and reasonably acceptable to Spirit to act as paying agent for purposes of effecting the payment and issuance of the merger consideration. At or immediately following the effective time of the merger, JetBlue will deposit, or cause to be deposited, with the paying agent an amount in cash sufficient to pay the aggregate merger consideration to which holders of shares of Spirit common stock will be entitled at the effective time of the merger (which we refer to as the “payment fund”).

As promptly as practicable after the effective time of the merger, and in any event within three business days thereafter, JetBlue will cause the paying agent to mail to each holder of record of shares of Spirit common stock (i) in the case of such shares represented by certificates, (A) a letter of transmittal, which will specify that delivery will be effected, and risk of loss and title to the certificates (if any) will pass, only upon delivery of such certificates to the paying agent, and will otherwise be in such form and have such other provisions as JetBlue or the paying agent may reasonably specify and (B) instructions for use in effecting the surrender of the certificates, and (ii) in the case of book-entry shares, each share will automatically upon the effective time of the merger be entitled to receive, and the surviving corporation will cause the paying agent to pay and deliver as soon as reasonably practicable after the effective time of the merger (and in any event, within three business days thereafter), the merger consideration payable for each such share.

In case of certificates, upon delivery and surrender of certificates for cancellation to the paying agent and a duly executed letter of transmittal in proper form, the holders thereof will be entitled to receive from the payment fund in exchange therefor an amount in cash equal to the merger consideration with respect to each share evidenced by such certificates.

 

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Prepayments

If holders of a majority in voting power of Spirit common stock vote to approve the merger proposal at the special meeting, within five business days of such vote, JetBlue will pay or cause to be paid the approval prepayment amount to Spirit stockholders as of the record date established by Spirit for the special meeting to approve the merger proposal. After such Spirit stockholder approval and approval prepayment, on or prior to the last business day of each month beginning after December 31, 2022, until the earlier of the closing or termination of the merger agreement in accordance with its terms, JetBlue will also pay or cause to be paid the additional prepayment amount to Spirit stockholders as of a record date not more than five business days prior to the last business day of such month. On the earlier of two business days prior to the closing or, if applicable, the day JetBlue would be obligated to pay the reverse termination fee, JetBlue will pay to Spirit the approval prepayment amount and additional prepayment amounts payable to each holder of Spirit restricted stock unit awards and performance share awards, and upon the effective time of the merger, Spirit will deliver such amounts to such holders.

Directors and Officers

The merger agreement provides that, unless otherwise determined by JetBlue prior to the effective time, the directors and officers of Merger Sub at the effective time of the merger will be the directors and officers of the surviving corporation until successors are duly elected, designated or qualified or until their earlier death, resignation or removal in accordance with the surviving corporation’s governing documents.

Representations and Warranties

The merger agreement contains representations and warranties that Spirit, on the one hand, and JetBlue and Merger Sub, on the other hand, have made to one another as of specific dates. These representations and warranties have been made for the benefit of the other parties to the merger agreement and may be intended not as statements of fact but rather as a way of allocating the risk to one of the parties if those statements prove to be incorrect. In addition, the assertions embodied in the representations and warranties are qualified by information in a confidential disclosure letter provided by Spirit to JetBlue and Merger Sub in connection with the signing of the merger agreement and a confidential disclosure letter provided by JetBlue and Merger Sub to Spirit in connection with the signing of the merger agreement. While Spirit, JetBlue and Merger Sub do not believe that the disclosure letters contain information required to be publicly disclosed under the applicable securities laws other than information that has already been so disclosed, the disclosure letters do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties as current characterizations of factual information about Spirit, JetBlue or Merger Sub since they were made as of specific dates, may be intended merely as a risk allocation mechanism between us, JetBlue and Merger Sub and are modified in important ways by the confidential disclosure letters.

Spirit has made a number of representations and warranties to JetBlue and Merger Sub in the merger agreement regarding aspects of Spirit’s business and other matters pertinent to the merger. The topics covered by these representations and warranties include the following:

 

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Spirit’s organization, valid existence, good standing, qualification to do business and similar corporate matters;

 

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Spirit’s capital structure, the reservation of certain shares for issuance for the exercise of Spirit restricted stock units, Spirit performance share awards and Spirit warrants, and the absence of encumbrances on Spirit’s equity interests;

 

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Spirit’s corporate power and authority to enter into and perform its obligations under the merger agreement and complete the merger, the enforceability of the merger agreement against Spirit, and the due execution and delivery of the merger agreement;

 

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•

the approval of the merger agreement, the merger and the transactions contemplated thereby by the Spirit board of directors and the recommendation by the Spirit board of directors that the Spirit stockholders adopt the merger agreement;

 

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the absence of violations and breaches of, or conflicts with, Spirit’s governing documents, certain material contracts, or any order or law resulting from Spirit’s entry into the merger agreement or the completion of the merger;

 

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the absence of defaults or accelerations of any obligations under certain material contracts or creation of any liens on Spirit’s properties or other assets resulting from Spirit’s entry into the merger agreement or the completion of the merger;

 

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the absence of consents, approvals, authorizations, permits and filings required from governmental entities or pursuant to certain material contracts resulting from Spirit’s entry into the merger agreement or the completion of the merger;

 

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Spirit’s possession of required authorizations and permits necessary to conduct Spirit’s current business;

 

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the absence of conflict with, default under or violation of any law, operating certificates, certificates of public convenience, and necessity, air carrier obligations, airworthiness directives, Federal Aviation Regulations, and any other rules, regulations, directives, orders and policies of the FAA, the DOT, the DHS, the FCC, the TSA and any other governmental entity applicable to Spirit or by which any property or asset of Spirit is or was bound and since January 1, 2020, the absence of any violation by Spirit or its directors, officers or employees of any provision under the U.S. Foreign Corrupt Practices Act of 1977, as amended, and/or any other anticorruption or anti bribery law applicable to Spirit;

 

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Spirit’s filings with the FAA, the DOT, the FCC, the DHS and the TSA since January 1, 2020;

 

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Spirit’s filings with the SEC and compliance with federal securities laws, rules and regulations since January 1, 2020;

 

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Spirit’s financial reports and the preparation of Spirit’s financial reports in compliance with GAAP and the applicable requirements of the SEC;

 

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the absence of any material changes in the accounting practices or policies applied by Spirit in the preparation of Spirit’s financial reports, other than as required by GAAP, SEC rules or applicable law;

 

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the absence of the resignation or dismissal of Spirit’s independent public accountant due to any disagreement with Spirit on matters of accounting principles or practices;

 

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the inapplicability of state anti-takeover laws to the merger agreement and the consummation of the proposed transactions;

 

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Spirit’s lack of a stockholder rights plan, “poison pill” or similar anti-takeover plan;

 

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the absence of certain undisclosed liabilities;

 

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the ordinary course operation of Spirit’s business in all material respects since January 1, 2021;

 

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the absence of any events that would have a material adverse effect on Spirit since January 1, 2021;

 

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Spirit’s material benefit plans and their compliance with applicable laws;

 

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Spirit’s compliance in all material respects with all applicable laws respecting labor, employment, immigration, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety, plant closings, compensation and benefits, and wages and hours;

 

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the validity of, and Spirit’s compliance with, Spirit’s material contracts;

 

•

the absence of any suits, claims, actions, hearings, arbitrations, investigations or other proceedings pending or, to Spirit’s knowledge, threatened against Spirit or any of Spirit’s officers, directors or

 

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employees, (i) involving an amount in controversy in excess of $3,000,000 or (ii) seeking material non-monetary or injunctive relief;

 

•

the absence of certain material orders against Spirit by any governmental entity;

 

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Spirit’s compliance with applicable environmental laws;

 

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Spirit’s ownership and maintenance of its intellectual property;

 

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Spirit’s compliance with applicable data privacy and security laws and policies;

 

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Spirit’s material compliance with applicable tax laws;

 

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Spirit’s maintenance of, and compliance with, material insurance policies;

 

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Spirit’s ownership of, and the condition of, Spirit’s personal property;

 

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Spirit’s real estate;

 

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the absence of certain transactions between Spirit and its related parties;

 

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Spirit’s owned, leased and/or operated aircraft, including the registration of such aircraft with the applicable governmental entities, the maintenance of such aircraft in compliance with applicable law, contracts related to the purchase or lease of the aircraft, engines or simulators and contracts pursuant to which Spirit has financing commitments with respect to the aircraft;

 

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Spirit’s take-off and landing slots, operating authorizations from applicable governmental entities and other similar designated take-off and landing rights used or held by Spirit at any U.S. or international airport, and Spirit’s compliance in all material respects with all regulations and laws applicable to Spirit with respect to the foregoing;

 

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the absence of any action or, to Spirit’s knowledge, threatened action by any airport or airport authority that would reasonably be expected to materially interfere with Spirit’s ability to conduct its operations at any airport in substantially the manner currently conducted;

 

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Spirit’s status as a “citizen of the United States” within the meaning of the Federal Aviation Act and as an authorized and qualified “air carrier” within the meaning of such act;

 

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Spirit’s receipt of an opinion from Barclays regarding the fairness, from a financial point of view, of the merger consideration and, to the extent paid, the approval prepayment amount, taken together (and not separately), to be received by Spirit stockholders and an opinion from Morgan Stanley regarding the fairness, from a financial point of view, of the merger consideration to be received by Spirit stockholders;

 

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the Spirit stockholder vote required in order to adopt the merger agreement;

 

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the absence of undisclosed brokers’ fees or finders’ fees relating to the transaction;

 

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the accuracy of the information supplied by Spirit in connection with this proxy statement;

 

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Spirit’s compliance in all material respects with the restrictions and limitations Spirit is subject to as a result of Spirit’s participation in the Payroll Support Program under the CARES Act; and

 

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the outstanding principal amounts and conversion rates of Spirit’s convertible notes.

Some of Spirit’s representations and warranties are qualified by a material adverse effect standard. Subject to certain exclusions, a “Spirit material adverse effect” means any change, event, circumstance, development, condition, occurrence, or effect that (i) has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Spirit or (ii) prevents, or materially delays, the ability of Spirit to consummate the transactions contemplated by the merger agreement, except that, none of the following will be deemed in themselves, either alone or in

 

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combination, to constitute, and none of the following will be taken into account in determining whether there has been or will be a material adverse effect:

 

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any development in general economic conditions, or in securities, credit or financial markets, including changes in interest rates and changes in exchange rates, in the United States or any other country or region in the world in which Spirit conducts business or any industry-wide development generally affecting airline companies;

 

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any change in GAAP or any change in applicable laws applicable to the operation of the business of Spirit;

 

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any change resulting from the announcement or pendency of the transactions contemplated by the merger agreement, including the merger;

 

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acts of war, outbreak or escalation of hostilities, terrorism or sabotage, or other changes in geopolitical conditions, earthquakes, hurricanes, tsunamis, tornados, floods, mudslides, wild fires or other natural disasters, any epidemic, pandemic, outbreak of illness or other public health event (including, for the avoidance of doubt, COVID-19 and impact of COVID-19 on Spirit) and other similar events in the United States or any other country or region in the world in which Spirit conducts business;

 

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any failure by Spirit to meet any internal or published (including analyst) projections, expectations, forecasts or predictions in respect of Spirit’s revenue, earnings or other financial performance or results of operations;

 

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the taking of any action expressly contemplated by the merger agreement or at JetBlue’s or Merger Sub’s request; or

 

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any change in the market price or trading volume, or the downgrade in rating, of Spirit’s securities.

JetBlue and Merger Sub have made a number of representations and warranties to Spirit in the merger agreement regarding aspects of JetBlue’s business and other matters pertinent to the merger. The topics covered by these representations and warranties include the following:

 

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JetBlue’s organization, valid existence, good standing, qualification to do business and similar corporate matters;

 

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JetBlue and Merger Sub’s corporate power and authority to enter into and perform their obligations under the merger agreement and complete the merger, the enforceability of the merger agreement against JetBlue and Merger Sub, and the due execution and delivery of the merger agreement;

 

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the approval of the merger agreement, the merger and the transactions contemplated thereby by the Merger Sub board of directors and the recommendation by the Merger Sub board of directors that the sole stockholder of Merger Sub approve the merger agreement;

 

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the absence of violations and breaches of, or conflicts with, JetBlue’s governing documents, material contracts, or any order or law resulting from JetBlue’s entry into the merger agreement or the completion of the merger;

 

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the absence of defaults or accelerations of any obligations under certain material contracts or creation of any liens on JetBlue’s properties or other assets resulting from JetBlue’s entry into the merger agreement or the completion of the merger;

 

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the absence of consents, approvals, authorizations, permits and filings required from governmental entities or pursuant to certain material contracts resulting from JetBlue’s entry into the merger agreement or completion of the merger;

 

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the absence of any suits, claims, actions, hearings, arbitrations, investigations or other proceedings pending or, to JetBlue’s knowledge, threatened against JetBlue or Merger Sub that would have a JetBlue material adverse effect;

 

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the absence of orders against JetBlue by any governmental entity that would have a JetBlue material adverse effect;

 

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the absence of JetBlue’s ownership of any of Spirit’s shares or other equity interests in Spirit;

 

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JetBlue’s sufficient cash and cash equivalents, available lines of credit or other sources of immediately available funds to consummate the merger and other transactions on the closing date, and the enforceability of the debt commitment letter and availability of the debt financing thereunder;

 

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JetBlue and Merger Sub’s solvency as of immediately after the consummation of the merger and the other transactions contemplated by the merger agreement;

 

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Merger Sub’s formation solely for the purpose of engaging in the transactions contemplated by the merger agreement;

 

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the absence of undisclosed management arrangements;

 

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the absence of undisclosed brokers’ fees or finders’ fees relating to the transaction; and

 

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the accuracy of the information supplied by JetBlue in connection with this proxy statement;

A few of JetBlue’s representations and warranties are qualified by a material adverse effect standard. Subject to certain exclusions, a “JetBlue material adverse effect” means any change, event, development, condition, occurrence, or effect that prevents, or materially delays, the ability of JetBlue to consummate the transactions contemplated by the merger agreement.

None of the representations and warranties of the parties to the merger agreement will survive the effective time of the merger or the termination of the merger agreement.

Conduct of Business Pending the Closing

Under the merger agreement, Spirit has agreed that, subject to certain exceptions in the merger agreement or in the disclosure schedule delivered by Spirit in connection with the merger agreement (which we refer to as the “Spirit disclosure schedules”) or as required by applicable law, between the date of the merger agreement and the effective time of the merger, unless JetBlue gives its prior written consent (which consent cannot be unreasonably withheld, delayed or conditioned), Spirit will conduct its operations in the ordinary course of business and use commercially reasonable efforts to: (i) preserve substantially intact its business organization; (ii) keep available the services of its executive officers and key employees; (iii) maintain in effect all of Spirit’s permits; (iv) remain in compliance in all material respects with the Payroll Protection Program under the CARES Act; and (v) maintain satisfactory relationships of Spirit with any persons with which Spirit has material business relations and the governmental entities that have jurisdiction over its business and operations.

Subject to certain exceptions set forth in the merger agreement or in the Spirit disclosure schedules and/or as required under applicable law, unless JetBlue consents in writing (which consent cannot be unreasonably withheld, delayed or conditioned, and must be provided within seventy-two hours of any request by Spirit), Spirit will not, directly or indirectly:

 

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amend its certificate of incorporation or bylaws;

 

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issue, sell, pledge, dispose of, grant, transfer or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of, any shares of capital stock of, or other equity interests in, Spirit of any class, or securities convertible into, or exchangeable or exercisable for, any shares of such capital stock or other equity interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other equity interests or such convertible or exchangeable securities, or any other ownership interest (including any such interest represented by contract right), of Spirit, other than: (i) in the ordinary course of business and in connection with regular grants of Spirit

 

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restricted stock unit awards to non-employee directors in accordance with Spirit’s non-employee director compensation policy; (ii) in connection with regular annual and off-cycle new hire and promotion long-term incentive grants under Spirit’s equity award plans made in the ordinary course of business in amounts consistent with past practices, subject to certain limitations; (iii) the issuance of shares of Spirit common stock upon the vesting of Spirit restricted stock unit awards and Spirit performance share awards that are outstanding as of the date of the merger agreement in accordance with their terms or granted after the date of the merger agreement in accordance with (i) and (ii); (iv) the issuance of shares of Spirit common stock upon any conversions of the 2025 Convertible Notes in accordance with the terms of the merger agreement and applicable indenture; (v) the issuance of shares of Spirit common stock upon the exercise of Spirit warrants outstanding as of the date of the merger agreement; or (vi) as set forth in the Spirit disclosure schedules;

 

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sell, pledge, abandon, dispose of, transfer, lease, license or encumber any material trademarks, material property or assets of Spirit (other than non-exclusive grants of licenses in intellectual property rights of Spirit in the ordinary course of business), except pursuant to contracts in effect as of the date of the merger agreement;

 

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declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock or enter into any agreement with respect to the voting or registration of its capital stock;

 

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reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, or other equity interests;

 

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authorize or propose the issuance of capital stock or any other equity interests in respect of, in lieu of or in substitution for shares of its capital stock or other equity interests, except for the vesting or settlement of any outstanding Spirit equity awards or to fund any tax obligations in connection therewith;

 

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merge or consolidate Spirit with any person or entity or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or similar reorganization of Spirit;

 

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other than with respect to the acquisition of aircraft and associated equipment (including engines), acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any person or entity or any division thereof or any assets thereof, other than: (i) the purchase of inventory, raw materials, equipment, goods, or other supplies in the ordinary course of business; (ii) acquisitions permitted under the restrictions on capital expenditures under the merger agreement; or (iii) any other acquisition for consideration that is not individually in excess of $5,000,000 or in the aggregate in excess of $25,000,000;

 

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enter into any new line of business;

 

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(i)(1) repurchase, prepay or incur any indebtedness for borrowed money or issue any debt securities, or (2) issue or sell options, warrants, calls or other rights to acquire any debt securities of Spirit, in each case of (1) and (2), other than (A) as permitted with respect to restrictions on aircraft and associated equipment under the merger agreement, (B) under any credit card contract, or (C) together with any indebtedness outstanding and undrawn capacity under any revolving credit facility of Spirit or any of its subsidiaries, the incurrence of indebtedness for borrowed money from time to time in amounts sufficient to achieve a cash balance ratio of cash plus short-term investments plus marketable securities to trailing twelve months’ total revenue of thirty-five percent; provided that any such indebtedness incurred pursuant to (C) will: (x) not contain any terms and conditions that would prevent or impair the consummation of the transactions contemplated by the merger agreement (other than customary change of control terms that will allow for the prepayment of such indebtedness on the closing date consistent with market terms) and (y) only contain prepayment penalties that are consistent with market terms for the type of indebtedness incurred by Spirit pursuant to (C), or (D) in connection with any drawdown,

 

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repayment on or refinancing of Spirit’s revolving credit facility in place as of the date of the merger agreement; or (ii) assume, guarantee or endorse, or otherwise become liable or responsible for similar obligations;

 

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make any loans, advances or capital contributions to, or investments in, any other person or entity in excess of $5,000,000 in the aggregate or assume, guarantee or endorse, or otherwise become liable or responsible for similar obligations;

 

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enter into any “keep well” or other contract to maintain any financial statement or similar condition of another person other than Spirit or its subsidiaries or enter into any arrangement having the economic effect of the foregoing;

 

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terminate, cancel, or amend any material contract of Spirit, or cancel, modify or waive any material rights thereunder, or enter into or amend any contract that, if existing on the date of the merger agreement, would be a material contract of Spirit, in each case, other than in the ordinary course of business;

 

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make or authorize any capital expenditure, except for such capital expenditures: (i) in amounts not greater than 105% of the aggregate amount set forth in Spirit’s annual non-aircraft or engine capital expenditure budget (excluding expenditures made in connection with Spirit’s new headquarters and training center project); provided, however, that the aggregate amount set forth in Spirit’s annual non-aircraft or engine capital expenditure budget in respect of each of 2023 and 2024 will not exceed 105% of the aggregate amount set forth in Spirit’s annual non-aircraft or engine capital expenditure budget for the immediately preceding year, in each case, excluding capital expenditures in connection with Spirit’s headquarters and training center project; (ii) in connection with Spirit’s new headquarters and training center project up to a certain amount for the 2022, 2023 and 2024 calendar years; (iii) required for compliance with FAA regulations applicable to Spirit, including airworthiness directives; (iv) in connection with any restoration, repair, maintenance or other necessary work for the proper functioning of Spirit aircraft; (v) with respect to the 2023 and 2024 calendar years, amounts authorized pursuant to the 2022 or 2023 capital expenditure budget, but not yet made in 2022 or 2023, respectively; or (vi) as otherwise permitted by other sections of the conduct of business covenant in the merger agreement;

 

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except to the extent required by: (i) applicable law; (ii) the terms of any Spirit benefit plan; (iii) contractual commitments or corporate policies with respect to severance or termination pay in existence on the date of the merger agreement and that have been specifically noted in the Spirit disclosure schedules as providing for severance or termination pay; or (iv) expressly permitted by other sections of the conduct of business covenant in the merger agreement or the Spirit disclosure schedules: (A) increase the compensation or benefits payable or to become payable to directors, officers or employees of Spirit (except for increases to non-executive officer employees in the ordinary course of business, consistent with past practice), (B) other than with respect to newly hired employees on terms that are consistent with past practice for similarly situated employees of Spirit, grant any additional rights to severance or termination pay to, or enter into or amend any severance agreement with, any director, officer or employee of Spirit, (C) other than (1) with respect to newly hired employees on terms that are consistent with past practice for similarly situated employees of Spirit and (2) routine amendments or renewals to health and welfare plans that would not result in a material increase in benefits, establish, adopt, enter into or materially amend any bonus, profit sharing, thrift, pension, retirement, deferred compensation, retention, termination or severance plan, agreement, trust, fund, policy or arrangement as to any director, officer, consultant, independent contractor or employee of Spirit, (D) loan or advance any money or property to any director, officer, consultant, independent contractor or employee of Spirit (other than in connection with ordinary course business expense reimbursements and advances) or (E) hire or terminate the employment (other than terminations for cause, death or disability) of any employee with the title of “Senior Vice President” or above;

 

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(i) terminate, discontinue, close or dispose of any facility or business operation, or lay off any employees (other than layoffs of less than fifty employees in any six month period consistent with past practice); or (ii) implement any early retirement or separation program, or any program providing early retirement window benefits or announce or plan any such action or program for the future, except in the ordinary business or as otherwise permitted under the merger agreement;

 

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enter into or amend any collective bargaining agreement; provided, that: (i) Spirit or its affiliates are entitled to negotiate in good faith with a labor union in the ordinary course of business or as required in connection with Spirit’s or its affiliates’ contractual or legal obligation to enter into such negotiations and (ii) Spirit will use commercially reasonable efforts to keep JetBlue reasonably informed of material communications between Spirit and a labor union in connection with any such negotiation or collective bargaining agreement;

 

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forgive any loans to any director, officer, consultant, independent contractor or employee of Spirit or any of their respective affiliates;

 

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make any material change in accounting policies, practices, principles, methods or procedures, other than as required by GAAP or by a governmental entity;

 

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enter into, terminate or materially amend any transaction with any stockholder, director, officer or employee of Spirit that would require disclosure by Spirit under Item 404 of Regulation S-K, other than as permitted under other sections of conduct of business covenant in the merger agreement;

 

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implement any material new policies or practices (or make any material changes to existing policies or practices) with respect to equity, interest rate, currency or commodity derivatives or hedging transactions;

 

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other than as set forth on the Spirit disclosure schedules, compromise, settle or agree to settle any suits, claims, actions, hearings, arbitrations, investigations or other proceedings other than compromises, settlements or agreements in the ordinary course of business consistent with past practice for the payment of monetary damages (and compliance with confidentiality and other similar customary provisions) of $2,500,000 or less individually or $7,500,000 or less in the aggregate, in each case, in each twelve-month period following the date of the merger agreement and as its sole remedy;

 

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other than as set forth on the Spirit disclosure schedules, make, change or revoke any material tax election, settle or compromise any claim, assessment, audit, proceeding or other controversy, or enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law) in respect of material taxes, adopt or change any material tax accounting method or period, file or amend any material tax return or take any position on any material tax return filed on or after the date of the merger agreement that is inconsistent with elections made or positions taken in preparing or filing similar tax returns in prior periods, surrender any right to claim a material tax refund or consent to any extension or waiver of the statute of limitations applicable to any material tax claim or assessment;

 

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other than as set forth on the Spirit disclosure schedules, write up, write down or write off the book value of any tangible assets, in the aggregate, in excess of $7,500,000, except for depreciation, amortization or impairment in accordance with GAAP consistently applied;

 

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change the seat count, main cabin configuration or on-board amenities (including in-flight entertainment and wireless internet) of any aircraft subject to future delivery to Spirit under any of Spirit’s aircraft purchase contract from that presently in service with Spirit;

 

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acquire, lease or exercise any option to acquire or lease, any aircraft (including any corresponding engines and spare engines required to maintain appropriate ratio under Spirit’s fleet hour agreement), or incur or arrange for any financing or pre-delivery deposits related thereto other than as set forth on the Spirit disclosure schedules, provided that any such lease will not have a term greater than twelve years and any such financing will be on terms and conditions consistent with past practices of Spirit and will only contain prepayment penalties that are consistent with market terms for debt of this type;

 

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take any action, or fail to take any action, which action or failure would be reasonably expected to result in the loss of any Spirit slots (excluding temporary returns to the FAA);

 

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fail to continue, in respect of all Spirit aircraft, all material maintenance programs applicable to such aircraft in the ordinary course (except as required by applicable law), including using commercially reasonable best efforts to keep all such Spirit aircraft in such condition as may be necessary to enable the airworthiness certification of such Spirit aircraft under the FAA to be maintained in good standing at all times; or

 

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agree, resolve, authorize or enter into any contract or otherwise make any commitment, in each case to do any of the foregoing.

No-Shop; Acquisition Proposals; Change in Recommendation

Upon entry into the merger agreement, Spirit agreed that it will, and will cause its officers, directors and employees to, and instruct its other representatives to, immediately cease and cause to be terminated any solicitation, discussions or negotiations with any persons or entities that may be ongoing with respect to any acquisition proposal, or any inquiry, expression of interest, proposal, discussions, negotiations or offer that would reasonably be expected to lead to an acquisition proposal. Spirit also agreed that it will promptly inform each such person or entity of the obligations in the merger agreement and promptly instruct each person or entity that has previously executed a confidentiality agreement in connection with such person or entity’s consideration of an acquisition proposal to return to Spirit, or destroy any non-public information previously furnished to such person or entity to any person or entity’s representatives by or on behalf of Spirit, and promptly terminate all physical and electronic data room access previously granted to any such person or entity and its representatives.

Spirit also agreed that it will not, and will cause its officers, directors and employees to not, and instruct its other representatives to not, directly or indirectly: (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, expression of interest, proposal or offer that constitutes or would reasonably be expected to lead to an acquisition proposal; (ii) participate in any discussions or negotiations relating to any acquisition proposal with any person or entity other than JetBlue or Merger Sub; (iii) furnish to any person or entity other than JetBlue or Merger Sub, any non-public information in connection with an acquisition proposal or that would reasonably be expected to lead to an acquisition proposal; (iv) enter into any agreement, letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option or other similar contract providing for or otherwise relating to any acquisition proposal (other than an acceptable confidentiality agreement in accordance with the terms of the merger agreement) or that is intended to result in, or would reasonably be expected to lead to, any acquisition proposal (each of which we refer to as an “alternative acquisition agreement”); or (v) submit any acquisition proposal or any matter related thereto to the vote of the Spirit stockholders.

Spirit will not terminate, waive, amend or modify any provision of any existing standstill or confidentiality agreement to which it is a party; however, Spirit may grant a waiver of any such provision to the extent required to permit a party to submit an acquisition proposal if the Spirit board of directors determines that the failure to grant such waiver would reasonably be expected to be inconsistent with the fiduciary duties of the Spirit directors and Spirit promptly notifies JetBlue.

Spirit must promptly (and in any event, within twenty-four hours): (i) notify JetBlue of (A) any inquiry, proposal or offer (written or oral) relating to an acquisition proposal (including any material modification thereto) that is received by Spirit or any of its respective representatives or (B) any inquiries, requests, proposals or offers received by, or any discussions or negotiations sought to be initiated or continued with Spirit or any of its respective representatives concerning an acquisition proposal; and (ii) disclose to JetBlue the identity of such person making, and provide an unredacted copy of, any such written acquisition proposal or any such inquiry, expression of interest, request, proposal or offer made in writing (or, if made orally, a reasonably detailed description of such acquisition proposal, inquiry, request, proposal or offer). Spirit will, promptly upon receipt or

 

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delivery thereof (and in any event, within twenty-four hours), provide JetBlue and its outside counsel with copies of all drafts and final versions of definitive or other agreements including schedules and exhibits relating to such acquisition proposal, in each case exchanged between Spirit or any of its representatives, on the one hand, and the person making such acquisition proposal or any of its representatives, on the other hand. Spirit will keep JetBlue reasonably informed of the status and terms (including with respect to any change in price or other material amendments) of any such acquisition proposal or other inquiry, request, offer or proposal concerning an acquisition proposal. Spirit will promptly, and in any event, within twenty-four hours following a determination by the Spirit board of directors that an acquisition proposal is a superior proposal, notify JetBlue of such determination.

However, if at any time on or after the date of the merger agreement until the earlier of (1) receipt of Spirit stockholder approval to adopt the merger and (2) the termination of the merger agreement in accordance with its terms: (i) Spirit has received a bona fide written acquisition proposal from a third party; (ii) such acquisition proposal did not result from a breach of the provisions of the merger agreement related to acquisition proposals; (iii) the Spirit board of directors determines in good faith, after consultation with its financial advisors and outside counsel that such acquisition proposal constitutes or could reasonably be likely to lead to a superior proposal; (iv) after consultation with its outside counsel, the Spirit board of directors determines in good faith that the failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties to the Spirit stockholders under applicable law; and (v) Spirit receives from such person an executed acceptable confidentiality agreement; then Spirit may take the following actions: (A) furnish information with respect to Spirit to the person or entity making such acquisition proposal pursuant to one or more acceptable confidentiality agreements; and/or (B) participate in discussions or negotiations with the person or entity making such acquisition proposal regarding such acquisition proposal. In such event, Spirit must provide written notice to JetBlue of the determination referenced in clause (iii) and (iv) in the foregoing sentence promptly (and in any event, within twenty-four hours), and Spirit must provide to JetBlue in writing any information concerning Spirit provided to such other person or entity that was not previously provided to JetBlue or its representatives prior to or substantially concurrently with the time it is provided to such other person or entity. Spirit will also deliver to JetBlue a copy of any executed acceptable confidentiality agreement promptly following its execution.

Subject to the terms and conditions of the merger agreement related to acquisition proposals, from the date of the merger agreement until the earlier of the effective time of the merger and the termination of the merger agreement in accordance with its terms, none of Spirit, the Spirit board of directors nor any committee thereof will, or will publicly propose to: (i) withhold, withdraw, qualify, or modify in a manner adverse to JetBlue (or publicly propose to withhold, withdraw, qualify or so modify), the approval, recommendation or declaration of advisability by the Spirit board of directors or any such committee of the merger proposal; (ii) fail to include the Spirit board of directors’ recommendation in favor of the approval of the merger proposal in this proxy statement; (iii) approve, recommend, or otherwise declare advisable (or publicly propose to approve, recommend or otherwise declare advisable) any acquisition proposal; (iv) submit any acquisition proposal or any matter related thereto to the vote of the Spirit stockholders; or (v) authorize, commit, resolve or agree to take any such actions (each such action we refer to as a “change of company board recommendation”).

However, if: (i) Spirit has received a bona fide written acquisition proposal from a third party that did not result from a breach of the merger agreement and that the Spirit board of directors determines in good faith, after consultation with outside counsel and its financial advisors, constitutes a superior proposal, after giving effect to all of the adjustments to the terms and conditions of the merger agreement that have been delivered to Spirit by JetBlue in writing during the notice period provided pursuant thereto; and (ii) the Spirit board of directors determines in good faith, after consultation with its outside counsel, that a failure to make a change of company board recommendation and/or cause Spirit to enter into an alternative acquisition agreement with respect to such superior proposal would reasonably be expected to be inconsistent with the fiduciary duties owed by the directors of Spirit to the Spirit stockholders under applicable law, then, prior to (but not after) the time the required stockholder vote for the merger proposal is obtained, the Spirit board of directors may take the following actions: (y) effect a change of company board recommendation with respect to such superior proposal; or (z) terminate

 

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the merger agreement pursuant to its terms and enter into an alternative acquisition agreement with respect to such superior proposal. In connection with such termination of the merger agreement, Spirit would be required to pay JetBlue a termination fee of $94.2 million. In addition, prior to effecting such change of company board recommendation or terminating the merger agreement, Spirit is required to: (A) provide prior written notice to JetBlue, at least four business days in advance, of Spirit’s intention to take such action with respect to such superior proposal, which notice will specify the material terms and conditions of such superior proposal (including all of the information that is specified in the merger agreement with respect to such superior proposal), together with a copy of all relevant proposed transaction agreements with the party making such superior proposal; and (B) during such notice period, negotiate with JetBlue in good faith (to the extent JetBlue desires to negotiate) to make such adjustments in the terms and conditions of the merger agreement so that such acquisition proposal ceases to constitute a superior proposal, provided that in the event of any material revisions to the superior proposal, Spirit will be required to deliver a new written notice to JetBlue and to comply with the requirements of the merger agreement with respect to such new written notice; however, the notice period for any subsequent notice will be shortened from four business days to two business days. The notice period (and any extension thereof) must have expired before Spirit effects any such change of company board recommendation or terminates the merger agreement.

In the event that prior to (but not after) the time the required stockholder vote for the merger proposal is obtained, the Spirit board of directors may make a change of company board recommendation in response to any material event, circumstance, change, effect, development or condition (other than resulting from a breach of the merger agreement by Spirit) that was not known or reasonably foreseeable by the Spirit board of directors as of the date of the merger agreement and becomes known to the Spirit board of directors after such date (which we refer to as an “intervening event”), if the Spirit board of directors has determined in good faith, after consultation with its outside counsel that, in light of such intervening event and taking into account the results of any negotiations with JetBlue as provided by the terms and conditions of the merger agreement and any offer from JetBlue as provided by the terms and conditions of the merger agreement, that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties to the Spirit stockholders under applicable law. However, the Spirit board of directors may not withdraw, modify or amend the Spirit board of directors recommendation in a manner adverse to JetBlue unless: (i) Spirit has provided prior written notice to JetBlue, at least four business days in advance of Spirit’s intention to make a change of company board recommendation, which notice specifies the Spirit board of directors’ reason for proposing to effect such change of company board recommendation and will describe in reasonable detail the intervening event; (ii) prior to effecting such change of company board recommendation, Spirit has negotiated with JetBlue in good faith (to the extent JetBlue desires to negotiate) to make such adjustments in the terms and conditions of the merger agreement in such a manner that would obviate the need for the Spirit board of directors to effect such change of company board recommendation; (iii) JetBlue has not, during the applicable notice period, made an offer to modify the terms and conditions of the merger agreement, which is set forth in a definitive written amendment to the merger agreement delivered to Spirit and executed on behalf of JetBlue and Merger Sub, that the Spirit board of directors has in good faith determined (after consultation with its outside legal counsel and its financial advisor) would obviate the need for the Spirit board of directors to effect such change of company board recommendation; and (iv) the intervening event notice period has expired. For purposes of this proxy statement, acquisition proposal means, with respect to JetBlue or Spirit, any offer or proposal from any person or group (other than JetBlue, Merger Sub or Spirit) concerning any, in a single transaction or series of related transactions, direct or indirect: (i) merger, consolidation, business combination, share exchange, recapitalization, liquidation, dissolution or similar transaction involving JetBlue or Spirit, as applicable, which would result in any person or group (or the shareholders of any person or group) beneficially owning, directly or indirectly, more than 20% or more of the voting power of JetBlue or Spirit, as applicable, or 20% of the voting power of the surviving entity in a merger involving JetBlue or Spirit, as applicable, or the resulting direct or indirect parent of JetBlue or Spirit, as applicable, or such surviving entity (or any securities convertible into, or exchangeable for, securities representing such voting power); (ii) sale, lease, exchange, transfer, license or other disposition of assets of JetBlue or Spirit, as applicable, representing 20% or more of the consolidated assets of JetBlue or Spirit (whether based on fair market value, revenue generation or net income); (iii) issuance or sale by JetBlue or Spirit, as

 

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applicable, of equity interests representing, convertible into or exchangeable for 20% or more of the voting power of JetBlue or Spirit, as applicable; (iv) transaction in which any person or entity will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, equity interests representing 20% or more of the voting power of JetBlue or Spirit, as applicable; (v) any tender offer of exchange offer, as defined pursuant to the Exchange Act, that if consummated would result, directly or indirectly, in any person or group (or the shareholders of any person or group) beneficially owning 20% or more of the voting power of JetBlue or Spirit, as applicable; or (vi) any combination of the foregoing (in each case, other than the merger).

For purposes of this proxy statement, superior proposal means a bona fide written acquisition proposal (except the references therein to “20%” will be replaced by “50%”) made by any person or group (other than JetBlue or any of its subsidiaries) after the date of the merger agreement, which acquisition proposal did not result from a breach of the provisions of the merger agreement that relate to acquisition proposal, that the Spirit board of directors has determined in its good faith judgment, after consultation with its outside legal counsel and with its financial advisors: (i) would, if consummated, result in a transaction that is more favorable to Spirit stockholders, from a financial point of view, than the merger (after giving effect to all adjustments to the terms that may be offered by JetBlue as provided by the terms and conditions of the merger agreement); and (ii) is reasonably capable of being consummated in accordance with the terms of such acquisition proposal, taking into account all financial, regulatory, legal and other aspects of such acquisition proposal.

Proxy Statement; Spirit Special Meeting

Spirit agreed to prepare and file with the SEC a preliminary proxy statement as promptly as reasonably practicable following the date of the merger agreement (and in any event, within twenty business days after the date of the merger agreement). Spirit further agreed to use its reasonable best efforts to: (i) cause the preliminary proxy statement, when filed, to comply in all material respects with applicable law; and (ii) respond as promptly as reasonably practicable to and resolve all comments received from the SEC or its staff concerning the preliminary proxy statement. No filing of, or amendment or supplement to, the preliminary proxy statement, or response to related SEC comments, will be made by Spirit without JetBlue’s prior consent and without providing JetBlue and its counsel a reasonable opportunity to review and comment. Spirit agreed to consider in good faith all comments reasonably proposed by JetBlue. Spirit agreed to mail the proxy statement to its stockholders as promptly as reasonably practicable after Spirit learns that the preliminary proxy statement will not be reviewed by the SEC or that the SEC has no further comments to the preliminary proxy statement (the “proxy statement clearance date”). Spirit will promptly notify JetBlue upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the preliminary proxy statement, and will, as promptly as practicable after receipt, provide JetBlue with copies of all material correspondence between it and its representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the proxy statement received from the SEC and advise JetBlue on any oral comments with respect to the proxy statement received from the SEC.

Spirit agreed to duly establish a record date for and duly call, give notice of and hold a meeting of its stockholders as soon as reasonably practicable after the proxy statement clearance date, for the purpose of voting on the adoption of the merger agreement, provided that the special meeting will not be initially scheduled to occur later than forty-five days following the proxy statement clearance date. Spirit will not, without the consent of JetBlue, adjourn or postpone, cancel, recess or reschedule, the special meeting; provided, however, that Spirit may postpone or adjourn the special meeting: (i) with the prior written consent of JetBlue; (ii) if a quorum has not been established; (iii) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which Spirit determines in good faith is reasonably likely to be required under applicable law; (iv) to allow reasonable additional time to solicit additional proxies; or (v) if required by law, provided that such postponement or adjournment are subject to certain limitations as set forth in the merger agreement, including a maximum length of postponement and adjournments of twenty business days from the originally scheduled meeting date.

 

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Spirit also agreed to use its reasonable best efforts to solicit from its stockholders proxies in favor of the adoption of the merger agreement, and to take all other actions necessary or advisable to secure approval from the Spirit stockholders. If at the time of the originally scheduled date of the special meeting, a quorum has not been established or Spirit has not received proxies representing a sufficient number of shares of Spirit common stock for approval of the merger agreement and transactions contemplated therein, then Spirit will, at the request of JetBlue (to the extent permitted by law), adjourn the special meeting to a date specified by JetBlue. Without the prior written consent of JetBlue, the adoption of the merger agreement and the transactions contemplated by the merger agreement will be the only matters (other than matters of procedure and matters required by law to be voted on by the Spirit stockholders in connection with the adoption of the merger agreement and the transactions contemplated therein) that Spirit will propose to be acted on by the Spirit stockholders at the special meeting. Spirit also has agreed to submit the merger agreement for adoption by the Spirit stockholders at the special meeting whether or not a change of company board recommendation has occurred.

Employee Matters

Through the first anniversary of the closing date of the merger, JetBlue has agreed to provide each continuing employee of Spirit (each, a “continuing employee”) who is not covered by a Spirit collective bargaining agreement with: (i) a base salary or wage rate that is no less favorable than that provided by Spirit to such continuing employee as of immediately prior to the effective time; (ii) a target cash bonus opportunity and commissions opportunity that are no less favorable in the aggregate that that provided by Spirit to such continuing employee as of immediately prior to the effective time; and (iii) employee benefits (excluding equity and equity-based incentives and, subject to the merger agreement, severance benefits) that are no less favorable in the aggregate than that provided by Spirit to such continuing employee as of immediately prior to the effective time. The employment terms and conditions of each continuing employee whose employment is covered by a Spirit collective bargaining agreement will be governed by such applicable collective bargaining agreement.

As of and following the effective time, JetBlue may elect to satisfy its obligations in respect of employee compensation and benefits by: (i) continuing Spirit benefit plans with respect to continuing employees; (ii) permitting continuing employees and, as applicable, their eligible dependent to participate in the employee benefit plans, programs or policies (including any plan intended to qualify within the meaning of Section 401(a) of the Code and any vacation, sick or personal times off plans or programs) of JetBlue; or (iii) a combination of clauses (i) and (ii). If JetBlue elects to have continuing employees and their eligible dependents participate in JetBlue’s benefit plans, programs or policies following the effective time, then JetBlue will use commercially reasonable efforts to: (i) subject to certain customary exclusions, recognize the service of continuing employees with Spirit or any of its predecessors for purposes of eligibility to participate, vesting and for other appropriate benefits to the same extent that such service was previously recognized by Spirit as of the date of the merger agreement attributable to any period before the effective time; (ii) waive any pre-existing conditions (to the extent waived under any corresponding Spirit benefit plan in which the continuing employee participated as of immediately prior to the effective time) or actively at work or similar limitations, eligibility waiting periods, evidence of insurability requirements or required physical examinations with respect to continuing employees and their eligible dependents under any health or similar plan of JetBlue; and (iii) cause any deductibles paid by continuing employees under any Spirit health, dental, vision or similar plans in the plan year in which the continuing employee and their eligible dependents are transferred to JetBlue’s health, dental, vision or similar plans to be credited towards deductibles under such plans of JetBlue or any of its subsidiaries.

Following the effective time, JetBlue will be bound by, honor and comply with the terms of certain employment, severance and change in control plans, policies and agreements and other Spirit benefit plans (each, an “honored Spirit plan”).

Spirit and JetBlue have agreed that, if the closing of the merger occurs on or before December 31, 2023: (i) annual cash bonuses in respect of the period between January 1, 2023, and the closing date will be paid to employees of Spirit within three business days following the closing of the merger in amounts calculated based

 

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on the level of performance attained as of immediately prior to the closing, as determined by the Spirit board of directors in accordance with applicable performance and other customary criteria consistent with past practice, and prorated to reflect the portion of the 2023 performance period elapsed as of the closing date; and (ii) JetBlue will pay continuing employees an annual bonus in respect of the 2023 fiscal year equal to the excess of (x) the annual bonus payable under the applicable Spirit bonus plan for 2023 as in effect as of the closing date, calculated based on actual performance for the entire 2023 fiscal year, over (y) the bonus paid to such continuing employee pursuant to clause (i).

Spirit and JetBlue have further agreed that, if the closing of the merger occurs in 2024 but prior to the date on which annual cash bonuses in respect of 2023 are determined and paid, such bonus payments in respect of 2023, if any, will be calculated on the basis of actual performance for the 2023 performance period under the terms of the applicable Spirit bonus plan as will be determined by JetBlue’s board of directors in good faith using a methodology reasonably consistent with the past practices of the Spirit board of directors. In addition, if the closing does not occur prior to March 1, 2024, then Spirit will, following prior consultation with JetBlue, be permitted to adopt performance goals with respect to an annual cash bonus program for Spirit’s 2024 fiscal year in the ordinary course of business, and in such case JetBlue will honor such bonus program for continuing employees in accordance with its terms (subject to commercially reasonable adjustments after the closing date as required for integration purposes). Except as otherwise provided in an applicable employment agreement or in an applicable severance plan adopted by Spirit, in each case, prior to the date of the merger agreement or in accordance with the merger agreement, in order to be eligible to receive any bonus payment, a continuing employee must be employed by either Spirit or JetBlue or any of JetBlue’s subsidiaries on the date the bonus is paid (or, with respect to any bonus period in 2023 ending on or prior to the closing, the closing date), and if not so employed on such date, any bonus payment otherwise due to such individual will be forfeited.

Following the effective time, JetBlue will, or will cause one of its affiliates to, be bound by and comply with the terms of the Spirit collective bargaining agreements as in effect as of the closing date until JetBlue or its affiliates negotiate a new collective agreement. JetBlue has also agreed to honor all applicable seniority integration or similar rights contained in any Spirit collective bargaining agreement in accordance with the terms thereof.

The merger agreement does not require the continued employment of any Spirit employee and the provisions of the merger agreement related to service providers do not create any rights for Spirit employees, and no provision of the merger agreement prevents JetBlue (or, following the effective time, Spirit) from amending or terminating any employee benefit plans, programs, agreements, or arrangements.

From and after the date of the merger agreement until the effective time, Spirit has agreed that any material written or formal oral communications to employees of Spirit regarding the terms and conditions of their employment (including compensation and benefits) following the merger will include the applicable disclaimer set forth in the merger agreement and will be subject to prior review and (to the extent such communications are not limited to a description or summary of the terms expressly set forth in the merger agreement or in an honored Spirit plan) approval by JetBlue and its outside counsel (any such approval not to be unreasonably withheld, conditioned or delayed).

Indemnification and Insurance

For a period of six years from and after the effective time of the merger, the surviving corporation will, and JetBlue will cause the surviving corporation to, indemnify and hold harmless all past and present directors, officers and employees of Spirit to the same extent such persons are indemnified as of the date of the merger agreement by Spirit pursuant to applicable law, Spirit’s Amended and Restated Certificate of Incorporation, Spirit’s Amended and Restated Bylaws, and the indemnification agreements in existence on the date of the merger agreement with any directors, officers and employees of Spirit arising out of acts or omissions in their capacity as directors, officers or employees of Spirit occurring at or prior to the effective time of the merger. The surviving corporation will, and JetBlue will cause the surviving corporation to, advance expenses (including

 

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reasonable legal fees and expenses) incurred in the defense of any suit, claim, action, hearing, arbitration, investigation or other proceeding with respect to the matters, subject to indemnification pursuant to the merger agreement in accordance with the procedures set forth in the governing documents of Spirit and the indemnification agreements in existence on the date of the merger agreement.

For a period of six years from and after the effective time of the merger, JetBlue will cause the certificate of incorporation and bylaws of the surviving corporation to contain provisions no less favorable with respect to exculpation and indemnification of directors and officers of Spirit for periods at or prior to the effective time of the merger than are currently set forth in Spirit’s governing documents. The surviving corporation will cause the indemnification agreements in existence as of the date of the merger agreement with any of the directors, officers or employees of Spirit to continue in full force and effect in accordance with their terms following the effective time.

The surviving corporation will either: (i) obtain a tail insurance policy with a claims period of at least six years from the effective time with respect to directors’ and officers’ liability insurance in amount and scope at least as favorable as Spirit’s existing policies for claims arising from facts or events that occurred on or prior to the effective time; or (ii) maintain in effect for six years from the effective time, if available, the current directors’ and officers’ liability insurance policies maintained by Spirit, provided that the surviving corporation may substitute therefor policies of at least the same coverage containing terms and conditions that are substantially equivalent and in any event not less favorable in the aggregate than Spirit’s existing policy with respect to matters occurring prior to the effective time.

However, the surviving corporation will not be required to pay an annual premium for the directors’ and officers’ liability insurance policies in excess of 300% of the last annual premium paid prior to the date of the merger agreement. The provisions of the immediately preceding sentence will be deemed to be satisfied if prepaid policies have been obtained prior to the effective time, which policies provide such directors and officers with coverage for an aggregate period of six years with respect to claims arising from facts or events occurring on or before the effective time. If such prepaid policies have been obtained prior to the effective time of the merger, JetBlue will cause the surviving corporation to maintain such policies in full force and effect and continue to honor the obligations thereunder.

In the event JetBlue or the surviving corporation: (i) consolidates with or merges into any other entity and will not be the continuing or surviving corporation or entity of such consolidation or merger; or (ii) transfers all or substantially all of its properties and assets to any person or entity, then proper provision will be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, will assume the obligations set forth in the merger agreement with respect to indemnification and insurance.

The obligations described in this section will: (i) continue, notwithstanding any six-year limitation referred to above, until the final disposition of any suit, action, proceeding or investigation brought or commenced during such six-year period; and (ii) not be terminated or modified in such a manner as to adversely affect any indemnitee to whom the provisions of the merger agreement relating to insurance and indemnification applies without the consent of such affected indemnitee. The parties expressly agreed that the indemnitees to whom the provisions of the merger agreement relating to insurance and indemnification apply will be third-party beneficiaries of such provisions of the merger agreement.

Other Covenants

Access to Information; Confidentiality

Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which Spirit is a party, and except as would reasonably be expected to result in the loss or waiver of any attorney-client, work product or other applicable privilege (provided, that to the extent Spirit or any Spirit representative withholds

 

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information or access due to the risk of loss or waiver of such privilege, Spirit or such Spirit representative will notify JetBlue of such withholding and use commercially reasonable efforts to communicate such information in a manner that does not risk such loss or waiver), from entry into the merger agreement to the effective time,

Spirit agreed to: (i) provide to JetBlue and Merger Sub and their respective representatives reasonable access at reasonable times during normal operating hours to the books and records of Spirit upon prior written notice; and (ii) furnish promptly such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of Spirit as JetBlue or its representatives may reasonably request. However, any investigation of JetBlue or its representatives will be conducted in such manner as not to interfere unreasonably with the conduct of Spirit.

Appropriate Action; Consents; Filings

Each of JetBlue and Spirit agreed to use their respective reasonable best efforts to: (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to consummate and make effective the transactions contemplated by the merger agreement as promptly as practicable; and (ii) obtain from any governmental entities any consents, licenses, permits, waivers, approvals, authorizations, confirmations, clearances, certificates, exemptions, registrations or orders required to be obtained by JetBlue or Spirit or any of their respective subsidiaries, or to avoid any action or proceeding by any governmental entity (including those in connection with the HSR Act), in connection with the authorization, execution and delivery of the merger agreement and the consummation of the transactions contemplated herein.

Neither JetBlue nor Spirit, in connection with the receipt of any necessary license, permit, waiver, approval, authorization or order of a governmental entity (including under the HSR Act), will be required to sell, hold separate or otherwise dispose of or conduct their business (or, following the closing, the combined business) in a specified manner, or agree to sell, hold separate or otherwise dispose of or conduct their business (or, following the closing, the combined business) in a specified manner, or enter into or agree to enter into a voting trust arrangement, proxy arrangement, “hold separate” agreement or arrangement or similar agreement or arrangement with respect to the assets, operations or conduct of their business (or, following the closing, the combined business) in a specified manner, or permit the sale, holding separate or other disposition of, any assets of JetBlue, Spirit or their respective subsidiaries or affiliates (we refer to each such action as a “divestiture action”), if such divestiture action would or would reasonably be expected to result in a material adverse effect on JetBlue and its subsidiaries (including Spirit and its subsidiaries) after giving effect to the transactions contemplated by the merger agreement, taken as a whole. However: (i) JetBlue agreed to take the divestiture actions with respect to any of Spirit’s holdings at Boston Logan International Airport, Newark Liberty International Airport, John F. Kennedy International Airport, and LaGuardia Airport and five gates and related ground facilities at Fort Lauderdale-Hollywood International Airport; (ii) subject to the other provisions of the merger agreement, the identity of any additional divestiture actions will be determined by JetBlue in its sole and absolute discretion; and (iii) in no event will JetBlue be required to agree to or effect any divestiture action that in JetBlue’s discretion would be reasonably likely to materially and adversely affect the anticipated benefits of the parties to the NEA and the agreements contemplated thereby. At JetBlue’s request, Spirit will reasonably assist JetBlue with any sales process with respect to any business or assets proposed to be subject to a divestiture action.

JetBlue will control and lead all communications and strategy relating to obtaining all approvals, consents, waivers, registrations, permits, authorizations and other confirmations from any governmental entity or third party necessary, proper or advisable to consummate the merger and other transactions contemplated by the merger agreement and in connection with any investigation or other inquiry or litigation by or before, or any negotiations with, a governmental entity; provided, however, that JetBlue will consult in advance with Spirit and in good faith take Spirit’s views into account regarding the overall strategic direction of any such litigation or approval process, as applicable, and consult with Spirit prior to taking any material substantive positions, making dispositive motions or other material substantive filings or submissions or entering into any negotiations concerning such litigation or approvals, as applicable.

 

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Spirit Special Meeting

Spirit has agreed to hold a meeting of its stockholders for the purpose of voting upon the adoption of the merger agreement as soon as reasonably practicable and upon other related matters. Except to the extent that the Spirit board of directors has made a recommendation change with respect to a Superior Proposal (as defined in the merger agreement), the Spirit board of directors is required to use its reasonable best efforts to obtain from its stockholders the vote required to adopt the merger agreement, including by communicating to its stockholders its recommendation (and including such recommendation in this proxy statement) that they adopt the merger agreement and the transactions contemplated thereby.

Notwithstanding any Spirit change in recommendation, unless the merger agreement has been terminated in accordance with its terms, Spirit is required to convene a meeting of its stockholders and to submit the merger agreement to a vote of such stockholders. Spirit must, at the request of JetBlue (to the extent permitted by Law), adjourn or postpone such meeting if there are insufficient shares of Spirit common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting Spirit has not received proxies representing a sufficient number of shares necessary for approval of the merger agreement.

Certain Notices

From and after the date of the merger agreement until the effective time of the merger, each party thereto will promptly notify the other party thereto of: (i) the occurrence, or non-occurrence, of any event that would or would be reasonably likely to (a) cause any condition to the obligations of any party to effect the merger or any other transaction contemplated by the merger agreement not to be satisfied or (b) prevent or materially delay the consummation of the transaction contemplated by the merger agreement; (ii) the failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it pursuant to the merger agreement which would reasonably be expected to result in any condition to the obligations of any party to effect the merger or any other transaction contemplated by the merger agreement not to be satisfied; (iii) receipt of any written notice to the receiving party from any person alleging that the consent or approval of such person is or may be required in connection with the transactions contemplated by the merger agreement and the pursuit of such consent would (in the good faith determination of such party) reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by the merger agreement; or (iv) receipt of any notice or other communication from any governmental entity, the NYSE or the Nasdaq Stock Market LLC (or any other securities market) in connection with the merger; provided, however, that the delivery of any such notice will not limit, cure any breach of or otherwise affect any representation, warranty, covenant or agreement contained in the merger agreement or otherwise limit or affect the remedies available under the merger agreement to the party receiving such notice. Spirit will promptly notify JetBlue of any action (or threats of action) by the FAA or the DOT that materially amends, modifies, suspends, revokes, terminates, cancels or withdraws any Spirit permit or slots.

Public Announcements

Each of Spirit, JetBlue and Merger Sub agreed that no public release or announcement concerning the transactions contemplated by the merger agreement will be issued by any party without the prior written consent of Spirit and JetBlue (which consent will not be unreasonably withheld, delayed or conditioned), subject to certain exceptions set forth in the merger agreement, including as such release or announcement may be required by applicable law or the rules or regulations of any applicable United States securities exchange or governmental entity to which the relevant party is subject, in which case the party required to make the release or announcement will use its reasonable best efforts to allow each other party reasonable time to comment on such release or announcement in advance of such issuance.

 

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