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Item 2.01
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Completion of Acquisition or Disposition of Assets.
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On October 4, 2021, in accordance
with the terms and conditions of the Agreement and Plan of Merger, dated as of February 15, 2021 (as amended, supplemented or modified
from time to time, the “Merger Agreement”), Regal Beloit Corporation (which, as described below, changed its name on October
4, 2021 to Regal Rexnord Corporation) (the “Company” or “Regal”) completed its previously announced combination
with the Process & Motion Control business (“PMC Business”) of Rexnord Corporation (which changed its name on October
4, 2021 to Zurn Water Solutions Corporation) (“Rexnord”) in a Reverse Morris Trust transaction (the “Transactions”).
Pursuant to the Transactions and subject to the terms and conditions of the Merger Agreement and the other definitive agreements entered
into in connection therewith, (i) Rexnord transferred to its then-subsidiary Land Newco, Inc. (“Land”) substantially all of
the assets, and Land assumed substantially all of the liabilities, of the PMC Business (the “Reorganization”), (ii) after
which all of the issued and outstanding shares of common stock, $0.01 par value per share, of Land (“Land common stock”) held
by a subsidiary of Rexnord were distributed in a series of distributions to Rexnord’s stockholders (the “Distributions”,
and the final distribution of Land common stock from Rexnord to Rexnord’s stockholders, which was made pro rata for no consideration,
the “Spin-Off”) and (iii) immediately after the Spin-Off, a subsidiary of Regal (“Merger Sub”) merged with and
into Land (the “Merger”) and all shares of Land common stock (other than those held by Rexnord, Land, the Company, Merger
Sub or their respective subsidiaries) were converted as of the effective time of the Merger (the “Effective Time”) into the
right to receive 0.22296103 shares of common stock, $0.01 par value per share, of the Company (“Company common stock”), as
calculated in the Merger Agreement. As of the Effective Time, Land, which held the PMC Business, became a wholly owned subsidiary of the
Company.
Pursuant to the Merger, the
Company issued approximately 27,055,945 shares of Company common stock to holders of Land common stock, which represents approximately
39.9% of the approximately 67,756,732 outstanding shares of Company common stock immediately following the Effective Time.
In addition, holders of record
of Company common stock as of October 1, 2021 received $6.99 per share of Company common stock pursuant to a previously announced special
dividend in connection with the Transactions (the “Special Dividend”).
At the time of the Merger, pursuant
to the terms of the Employee Matters Agreement, dated as of February 15, 2021, by and among Rexnord, Land and the Company, the outstanding
equity-based awards relating to Rexnord common stock (the “Rexnord Equity Awards”) that were held by employees of Land who
remained employed by Land or one of its subsidiaries immediately following the closing of the Merger were (except for performance share
units) converted into like-kind equity-based awards relating to Company common stock (the “Regal Equity Awards”) under the
Company’s 2018 Equity Incentive Plan (the “Regal Plan”). The terms and conditions of the Regal Equity Awards are substantially
similar to the corresponding Rexnord Equity Awards, except for certain adjustments summarized as follows:
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The
number of shares of Company common stock subject to the Regal Equity Awards was determined
by dividing the number of shares of Rexnord common stock subject to the pre-conversion Rexnord
Equity Awards by a ratio based on the price per share of Regal common stock compared to the
price per share of the Rexnord common stock (the “Equity Award Adjustment Ratio”).
In the case of stock options and phantom stock options, the exercise price per share of the
Regal Equity Awards was determined by multiplying the exercise price per share of the pre-conversion
Rexnord Equity Awards by the Equity Award Adjustment Ratio.
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The definition of a “change of control” used in the Rexnord Equity Awards was updated to the
definition set forth in the Regal Plan.
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The
Rexnord Equity Awards that were performance share units were either accelerated in full and settled in Rexnord common stock or converted
into time-vesting restricted stock units under the Regal Plan relating to a number of shares of Company common stock, determined by dividing
the number of shares of Rexnord common stock subject to the pre-conversion performance share units by the Equity Award Adjustment Ratio.
Such converted time-vesting restricted stock units also reflect the updated definition of a “change of control” set forth
in the Regal Plan.
In
connection with the Special Dividend, then-outstanding equity awards relating to Company common stock were adjusted in accordance with
the adjustment provisions of the Regal Plan to increase the number of shares subject to such awards and, in the case of stock appreciation
rights, to adjust the strike price per share, in each case to preserve the intrinsic value of such awards.
The
description of the Transactions in this Item 2.01 does not purport to be complete and is qualified in its entirety by reference to the
full text of the Merger Agreement, dated as of February 15, 2021 and the Separation and Distribution Agreement, dated as of February
15, 2021, which were filed as Exhibit 3.1 and Exhibit 10.1, respectively, to the Company’s Current Report on Form 8-K dated February
19, 2021, each of which is incorporated herein by reference. The Company’s joint proxy statement/prospectus-information statement
on Form S-4, as amended, (Registration No. 333-255982), which was declared effective by the Securities and Exchange Commission (the “SEC”)
on July 20, 2021, sets forth certain additional information regarding Regal and the Transactions.
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
of a Registrant.
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In
connection with the Transactions, on May 14, 2021, Land entered into a credit agreement (the “Land Credit Agreement”) with
JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders named therein, providing for a delayed draw term loan facility with
commitments thereunder in an aggregate principal amount of approximately $486.8 million, maturing on August 25, 2023 (the “DDTL
Facility”).
The
proceeds of the DDTL Facility were drawn by Land in a single drawing to fund a payment from Land to a subsidiary of Rexnord in connection
with the Transactions pursuant to the terms of the Separation Agreement (the “Land Cash Payment”). Upon consummation of the
Transactions, Land became an indirect wholly owned subsidiary of the Company and in connection therewith, the Land Credit Agreement was
amended and restated (the “A&R Land Credit Agreement”) to add the Company as a party to the A&R Land Credit Agreement
and as a guarantor of the obligations of Land thereunder. The subsidiaries of Regal that had provided a guaranty of the obligations under
the Existing Credit Agreement (as defined below) prior to the consummation of the Transactions have also entered into a subsidiary guaranty
agreement with respect to the obligations under the A&R Land Credit Agreement. Additionally, Land and any subsidiary of Land that
provided a guaranty under the DDTL Facility have also entered into the subsidiary guaranty agreement with respect to the Existing Credit
Agreement.
Borrowings
under the A&R Land Credit Agreement will bear interest at floating rates based upon a reserve adjusted LIBOR rate or, at the Company’s
election, an alternate base rate plus, in each case, an applicable margin determined by reference to the Company’s consolidated
funded debt (net of certain cash and cash equivalents) to EBITDA ratio.
The A&R Land Credit Agreement
contains customary events of default and financial and other covenants, including (i) a maximum leverage ratio (defined as, with certain
adjustments, the ratio of the Company’s consolidated funded debt to EBITDA) as of the last day of any fiscal quarter of 4.00
to 1.00; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of EBITDA to the Company’s
consolidated cash interest expense) of 3.00 to 1.00 as of the last day of any fiscal quarter.
The description of the A&R
Land Credit Agreement in this Item 2.03 is not intended to be complete and is qualified in its entirety by the full text of the A&R
Land Credit Agreement attached hereto as Exhibit 10.1, which is incorporated herein by reference. In the ordinary course of business,
certain of the lenders under the A&R Land Credit Agreement and their affiliates have provided, and may in the future provide, investment
banking, commercial banking, cash management, foreign exchange or other financial services to the Company and/or one or more of its subsidiaries
for which they have received, and may in the future receive, compensation.