Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 31, 2022, Allegion plc (the “Company” or “Allegion”) announced that David D. Petratis, Chairman, President and Chief Executive Officer, will be retiring from his position as President and Chief Executive Officer effective July 11, 2022 (the “Effective Date”). Mr. Petratis will serve as Executive Chairman of the Board of Directors of the Company (the “Board”) as of the Effective Date and until his retirement from the Company which is planned to occur by January 2, 2023, at which point, he will also retire from his role as Executive Chairman of the Board. There are no material changes to Mr. Petratis’ compensatory arrangement as a result of his planned retirement.
The Company also announced that John H. Stone, President, Worldwide Construction, Forestry and Power Systems, Deere & Company (“Deere”), an agricultural machinery and heavy equipment company, will join Allegion on the Effective Date and succeed Mr. Petratis as President and Chief Executive Officer of the Company. Mr. Stone, age 52, who will also join the Board on the Effective Date, has served as President of Worldwide Construction, Forestry and Power Systems at Deere since 2020, and prior to that, he served as Senior Vice President, Intelligent Solutions Group at Deere from 2016 to 2020. Mr. Stone has an M.B.A. from Harvard Business School and a B.S. in Mechanical Engineering from the United States Military Academy at West Point.
Upon assuming his new position, Mr. Stone will receive, as approved by the Compensation and Human Capital Committee of the Board, a base salary with an annualized amount of $1,000,000, and he will be eligible to receive an annual cash incentive award with a target opportunity of 125% of his base salary, which, for 2022, will be no less than the annual target amount and will not be prorated. He will also be eligible to receive an annual long-term incentive award with a current target value of $4,500,000 when the Company next grants such awards to its officers and eligible employees, with 50% of the award’s value granted in the form of Performance Stock Units (“PSUs”), 25% of the award’s value granted in the form of restricted stock units (“RSUs”), and 25% of the award’s value granted in the form of stock options, in accordance with the Company’s practice for structuring such awards for executive officers. To acknowledge the loss of Mr. Stone’s unvested long term incentive awards from Deere, Mr. Stone will also receive: (i) a one-time grant of Allegion stock options with a value equal to $2,000,000 to be granted at the next grant cycle following the Effective Date and which will vest in three equal installments over the first three anniversaries of the grant date; and (ii) a one-time grant of RSUs with a value equal to $5,500,000 to be granted at the next grant cycle following the Effective Date, 25% of which will vest on the two-year anniversary of the grant date, 25% of which will vest on the three-year anniversary of the grant date, and 50% of which will vest on the four-year anniversary of the grant date. Mr. Stone will also be eligible to participate in the Company’s other regular compensation arrangements for executive officers, including an allowance for financial and tax planning services of up to $15,000 annually and participation in the executive health program in an amount not to exceed $2,000 annually. Mr. Stone will also be eligible to participate in the Allegion Change in Control Plan and to receive severance in the unlikely event of his involuntary termination from Allegion, other than for cause, in exchange for a signed severance agreement in a form acceptable to Allegion along with a release of all claims he may have or allege. The foregoing description of Mr. Stone’s offer letter is qualified in its entirety by reference to the offer letter itself, which is attached as Exhibit 10.1 and is incorporated herein by reference. Additional information about Allegion’s executive compensation program can be found in its 2022 proxy statement.
There are no arrangements or understandings between Mr. Stone and any other person pursuant to which he was appointed to serve as the Company’s President and Chief Executive Officer or as a director of the Board. Furthermore, there is no transaction between Mr. Stone (or his immediate family) and the Company that requires disclosure in accordance with Item 404(a) of Regulation S-K.
A copy of the press release regarding the above announcements are attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.