Subsequent Events

3 Months Ended

Mar. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On May 6, 2022, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with Carl Icahn and the persons and entities listed therein (collectively, the “Icahn Group”). In accordance with the Cooperation Agreement, John P. Hester, the President and Chief Executive Officer of the Company and Southwest and a member of the Board and the Southwest Board (the “SWG Board” and, together with the Board, the “Southwest Boards”), retired as President and Chief Executive Officer of the Company and resigned from the Southwest Boards, effective as of May 6, 2022. Karen S. Haller, the Company’s former Executive Vice President / Chief Legal & Administrative Officer, was appointed as President and Chief Executive Officer of Southwest, effective as of May 6, 2022, and as a member of the Board, effective immediately following the completion of the Company’s 2022 annual meeting of stockholders (the “2022 Annual Meeting”).

In addition, pursuant to the Cooperation Agreement, the Company has agreed to appoint three new directors, Andrew W. Evans, H. Russell Frisby, Jr. and Henry P. Linginfelter (collectively, the “Icahn Designees”), to the Board, effective immediately following the 2022 Annual Meeting, and, unless within 90 days of the date of the Cooperation Agreement, the Board has determined to pursue a spin-off of Centuri to the exclusion of other strategic alternatives, the Icahn Group has the ability to designate a fourth director, Andrew J. Teno, unless Mr. Teno has previously replaced one of the other Icahn Designees, in which case the fourth director will be such Icahn Designee. The Icahn Group’s ability to designate directors to the Board is subject to certain ownership thresholds following the closing of the previously announced tender offer by the Icahn Group to purchase any and all shares of common stock of the Company (the “Offer”).

The Cooperation Agreement requires the Board to expand the Strategic Transactions Committee from three directors to six directors, comprised of the current members of the Strategic Transactions Committee and the three Icahn Designees. For so long as the Icahn Group has the ability to designate at least three members of the Board, three of such designees shall be included on the Strategic Transactions Committee. If the Icahn Group may only designate two members of the Board, then both of such designees shall serve on the Strategic Transactions Committee.

In addition, the Cooperation Agreement provides that the Icahn Group will amend the Offer, to (i) provide that the number of shares of common stock to be purchased in the Offer shall not exceed that number of shares of common stock which, together with the shares of Common Stock beneficially owned by the Icahn Group, would exceed 24.9% of the then outstanding shares of Common Stock, (ii) extend the expiration date of the Offer (the “Expiration Date”) to May 19, 2022 and that the Expiration Date shall not be further extended, and (iii) to waive any conditions to the Offer that have not been satisfied and consummate the Offer and pay for the tendered shares of Common Stock as promptly as practicable after the Expiration Date.

Pursuant to the Cooperation Agreement, the Icahn Group caused the parties to the action filed by Icahn Partners LP and Icahn Partners Master Fund LP in the Court of Chancery of the State of Delaware on November 29, 2021 (Civil Action No. 2021-1031-KSJM), naming as defendants the Company and certain directors and officers of the Company, to file a stipulation of dismissal with prejudice, which was entered by the court on May 9, 2022

In connection with the entry into the Cooperation Agreement, the Company entered into Amendment No. 1 to Rights Agreement (the “Rights Agreement Amendment”) by and between the Company and Equiniti Trust Company. The Rights Agreement Amendment amends the Rights Agreement, dated October 10, 2021, to increase the beneficial ownership percentage included in the definition of “Acquiring Person” from 10% to 24.9% and to delete the concept of a “Passive Institutional Investor.”