ALLEGION PLC FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Financial Statements and Exhibits
(Edgar Glimpses Via Acquire Media NewsEdge) Item 1.01 Entry into a Material Definitive Agreement.
In connection with the previously announced separation of the commercial and
residential security businesses (the "Business") of Ingersoll-Rand plc
("Ingersoll Rand") from the rest of Ingersoll Rand by means of a dividend in
specie of the Business, which was effected on December 1, 2013 by the transfer
of the Business from Ingersoll Rand to Allegion plc ("Allegion" or the
"Company") and the issuance by Allegion of ordinary shares directly to Ingersoll
Rand's shareholders (the "Distribution"), Allegion entered into several
agreements with Ingersoll Rand that govern the relationship of the parties
following the Distribution, including the following:
• Separation and Distribution Agreement, dated as of November 29, 2013;
• Tax Matters Agreement, dated as of November 30, 2013; and
• Employee Matters Agreement, dated as of November 30, 2013.
A summary of the material terms of these agreements can be found in the section
entitled "Certain Relationships and Related Party Transactions" in the
Information Statement, dated November 14, 2013, filed as Exhibit 99.1 to the
Company's Current Report on Form 8-K, filed on November 15, 2013, which is
incorporated herein by reference. The summary is qualified in its entirety by
reference to the Separation and Distribution Agreement, the Tax Matters
Agreement and the Employee Matters Agreement filed as Exhibits 2.1, 10.1 and
10.2, respectively, to this Current Report on Form 8-K, each of which is
incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On December 1, 2013, Ingersoll Rand completed the Distribution. Allegion is now
an independent public company trading under the symbol "ALLE" on the New York
Stock Exchange. In the Distribution, Allegion issued one ordinary share for
every three ordinary shares of Ingersoll Rand held as of record as of 5:00 p.m.,
New York City time on November 22, 2013. Allegion issued a total of
approximately 96 million ordinary shares in the Distribution. Allegion did not
issue fractional shares in the Distribution. Fractional shares that Ingersoll
Rand shareholders would otherwise have been entitled to receive will be
aggregated and sold in the public market by the distribution agent. The
aggregate net cash proceeds of these sales will be distributed ratably to those
shareholders who would otherwise have been entitled to receive fractional
shares, in accordance with the Separation and Distribution Agreement between
Ingersoll Rand and Allegion. Prior to the Distribution, all of Allegion's issued
shares were held beneficially by an Irish corporate services provider. In
connection with the Distribution, Allegion acquired the shares held beneficially
by the Irish corporate services provider for no consideration and cancelled
these shares. A copy of the press release issued by Allegion on December 2, 2013
announcing completion of the Distribution is filed as Exhibit 99.1 to this
Current Report on Form 8-K and is incorporated herein by reference.
Creation of a Direct Financial Obligation or an Obligation under an
Item 2.03 Off-Balance Sheet Arrangement of a Registrant.
On November 26, 2013, Allegion US Holding Company Inc. ("Allegion US Holding")
entered into a Credit Agreement (the "Credit Agreement") by and among Allegion,
Allegion US Holding, as the Borrower, the Lenders and Issuing Banks party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. The Credit
Agreement provides for $1,300.0 million in senior secured financing, consisting
of a term loan A facility (the "Term A Facility"), a term loan B facility (the
"Term B Facility" and together with the Term A Facility, the "Term Facilities")
and a revolving credit facility (the "Revolver" and, together with the Term
Facilities, the "Senior Secured Credit Facilities").
The Term Facilities consist of (i) a Term A Facility in an aggregate principal
amount of $500.0 million and (ii) a Term B Facility in an aggregate principal
amount of $500.0 million. The full amount of the Term Facilities was made in a
single drawing on November 26, 2013, and amounts borrowed under the Term
Facilities that are repaid or prepaid may not be reborrowed.
The Term A Facility will amortize in quarterly installments at the following
rates per annum: 5% in year one; 5% in year two; 10% in year three and 10% in
year four, with the balance due on the date that is five years after the closing
date. The Term B Facility will amortize in quarterly installments in an amount
equal to 1.00% per annum, with the balance due on the date that is seven years
after September 27, 2013 (the "Escrow Date").
The Revolver consists of a five-year senior secured revolving credit facility
with aggregate commitments in an amount equal to $500.0 million, of which up to
$100.0 million is available for the issuance of letters of credit, and including
a swingline facility in an amount equal to $50.0 million. The Revolver will
mature and the commitments thereunder will terminate on the date that is five
years after the Escrow Date. Amounts repaid under the Revolver may be
Guarantees and Collateral
The indebtedness, obligations and liabilities under the Senior Secured Credit
Facilities are unconditionally guaranteed jointly and severally on a senior
secured basis by Allegion and certain of its current and future U.S.
subsidiaries, and are secured, subject to permitted liens and other exceptions
and exclusions, by a first-priority lien on substantially all tangible and
intangible assets of Allegion US Holding and each guarantor (including (i) a
perfected pledge of all of the capital stock of Allegion US Holding and each
direct, wholly-owned material subsidiary held by Allegion US Holding or any
guarantor (subject to certain limitations with respect to foreign subsidiaries)
and (ii) perfected security interests in, and mortgages on, equipment, general
intangibles, investment property, intellectual property, material fee-owned real
property, intercompany notes and proceeds of the foregoing) except for certain
The following amounts are required to be applied to prepay the Term Facilities,
subject to certain thresholds, exceptions and reinvestment rights:
•100% of the net cash proceeds from the incurrence of indebtedness by Holdings
and its restricted subsidiaries (other than permitted debt);
•100% of the net cash proceeds of all non-ordinary course asset sales or other
dispositions of property by Holdings and its restricted subsidiaries (including
casualty insurance and condemnation proceeds, but with exceptions for sales of
inventory and other ordinary course dispositions, obsolete or worn-out property,
property no longer useful in the business and other exceptions); and
•50% of excess cash flow with stepdowns to 25% and 0% based on certain leverage
Mandatory prepayments will be allocated ratably between the Term A Facility and
the Term B Facility and, within each Term Facility, will be applied as directed
by the Borrower.
Allegion US Holding may voluntarily prepay outstanding Term Facilities in whole
or in part at any time without premium or penalty (other than a 1.00% premium
payable during the six months following the earlier of (x) the Funding Date and
(y) the 91st day following the Escrow Date, on (i) the amount of loans prepaid
or repaid with the proceeds of, or any conversion of such loans into, any new or
replacement tranche of senior secured term loans having a lower effective yield
or (ii) the amount of loans the terms of which are amended to the same effect),
subject to the payment of customary breakage costs in the case of LIBOR rate
loans. Optional prepayments of the Term Facilities will be applied to the
remaining installments thereof at the direction of the Borrower.
Commitments under the Revolver may be reduced in whole or in part at any time
without premium or penalty.
The Senior Credit Facilities contain certain covenants that, among other things,
limit or restrict the ability of Allegion, Allegion US Holding and certain of
its subsidiaries to (subject to certain qualifications and exceptions):
•create liens and encumbrances;
•incur additional indebtedness;
•merge, dissolve, liquidate or consolidate;
•make acquisitions, investments, advances or loans;
•dispose of or transfer assets;
•pay dividends or make other payments in respect of their capital stock;
•amend certain material documents;
•redeem or repurchase certain debt;
•engage in certain transactions with affiliates;
•enter into certain speculative hedging arrangements; and
•enter into certain restrictive agreements.
In addition, Allegion US Holding is required to comply with (a) a maximum ratio
of total consolidated indebtedness to consolidated EBITDA (net of unrestricted
cash up to a cap) and (b) a minimum ratio of consolidated EBITDA to consolidated
interest expense (net of interest income).
Interest Rates and Fees
Outstanding borrowings under the Senior Credit Facilities will accrue interest,
at the option of the Borrower, at a per annum rate of (i) a LIBOR rate plus the
applicable spread or (ii) a base rate plus the applicable spread. The applicable
margin for borrowings under the Term B Facility is 1.25% with respect to base
rate borrowings and 2.25% with respect to LIBOR rate borrowings (with a
reduction to 1.00% and 2.00%, subject to the achievement of certain financial
ratios), with the LIBOR rate for the Term B Facility subject to a floor of 0.75%
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Appointment and Resignation of Directors
On November 14, 2013, when the Company's Registration Statement on Form 10,
initially filed with the SEC on June 17, 2013, as amended, was declared
effective, the members of the Board consisted of Patrick S. Shannon, Barbara A.
Santoro and Christopher Donohoe. Kirk S. Hachigian was appointed to the Board
effective November 17, 2013.
In connection with the Distribution, on December 1, 2013, Patrick S. Shannon,
Barbara A. Santoro and Christopher Donohoe resigned from the Board, and Michael
J. Chesser, Carla Cico, David D. Petratis and Martin E. Welch III were appointed
to the Board.
Mr. Chesser, Ms. Cico and Mr. Welch, each of whom has been determined by the
Board to be independent under Securities and Exchange Commission ("SEC") rules
and New York Stock Exchange ("NYSE") listing standards applicable to audit
committee members, were appointed to the Audit and Finance Committee effective
December 1, 2013. The Audit and Finance Committee is now comprised of Mr. Welch
III (who serves as the Chair), Mr. Chesser, Ms. Cico and Mr. Hachigian.
Mr. Chesser, Ms. Cico, Mr. Welch and Mr. Hachigian, each of whom has been
determined by the Board to be independent under SEC rules and NYSE listing
standards applicable to compensation committee members, were appointed to the
Compensation Committee effective December 1, 2013. Mr. Chesser was appointed the
Chair of the Compensation Committee.
Lastly, Mr. Chesser, Ms. Cico, Mr. Welch and Mr. Hachigian, each of whom has
been determined by the Board to be independent under NYSE listing standards,
were appointed as members of the Corporate Governance and Nominating Committee
effective December 1, 2013. Mr. Hachigian was appointed the Chair of the
Corporate Governance and Nominating Committee.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
2.1 Separation and Distribution Agreement between Ingersoll-Rand plc
and Allegion plc, dated November 29, 2013.
10.1 Tax Matters Agreement between Ingersoll-Rand plc and Allegion plc,
dated November 30, 2013.
10.2 Employee Matters Agreement between Ingersoll-Rand plc and Allegion
plc, dated November 30, 2013.
10.3 Credit Agreement by and among Allegion plc, Allegion US Holding
Company Inc., as the Borrower, the Lenders and Issuing Banks party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent,
dated November 26, 2013.
10.4 Guarantee and Collateral Agreement by and among Allegion plc,
Allegion US Holding Company Inc., the Restricted Subsidiaries from
time to time party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent, dated November 26, 2013.
99.1 Press Release, dated December 2, 2013.
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: December 2, 2013 /s/ Barbara A. Santoro
Barbara A. Santoro
Senior Vice President, General Counsel and Secretary
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