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Item 2.01
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Completion of Acquisition or Disposition of Assets
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The disclosure set forth in the “Introductory
Note” above is incorporated into this Item 2.01 by reference.
The Business Combination was approved by Aldel’s
stockholders at a special meeting of Aldel’s stockholders held on December 1,
2021 (the “Special Meeting”). At the Special Meeting, 11,338,744 shares of Aldel Common Stock were voted in favor of
the proposal to approve the Business Combination, 300,950 shares of Aldel Common Stock were voted against the proposal and 210 shares
of Aldel Common Stock abstained from voting on the proposal. In connection with the Closing, 3,005,034 shares of Aldel Common Stock were
redeemed at a per share price of approximately $10.10. The Business Combination was completed on December 2, 2021.
In connection with the consummation of the Business
Combination:
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|
·
|
all of the existing limited liability company interests of Hagerty held by
HHC were converted into the right to receive (1) $489.7 million in cash and (2) 176,033,906 limited liability company units in the OpCo
(the “OpCo Units”) and 176,033,906 shares of Class V common stock of the Company (“Class V Common Stock”);
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|
·
|
all of the existing limited liability company interests of Hagerty held by
Markel were converted into the right to receive 75,000,000 OpCo Units and 75,000,000 shares of Class V Common Stock; and
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·
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all of the 2,875,000 outstanding shares of Aldel’s Class B Common
Stock (the “Founder Shares”), were converted into shares of Class A common stock of the Company (“Class
A Common Stock”) on a one-for-one basis.
|
As of the Closing Date and following the completion
of the Business Combination and the sale of the PIPE Securities, the Company had the following outstanding securities:
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·
82,327,466 shares of Class A Common Stock;
·
251,033,906 shares of Class V Common Stock;
·
12,669,300 PIPE Warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share;
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·
5,750,000 public warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share;
·
286,250 private warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share; and
·
1,300,000 private OTM warrants, each exercisable for one share of Class A Common Stock at a price of $15.00 per share.
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FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the registrant
was a shell company, which the Company was immediately before the Business Combination, then the registrant must disclose the information
that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company
is providing below the information that would be included in a Form 10 if it were to file a Form 10. Please note that the information
provided below relates to the combined company after the consummation of the Business Combination, unless otherwise specifically indicated
or the context otherwise requires. After the Closing, the Company became a holding company whose only assets consist of equity interests
in Hagerty.
Cautionary Note Regarding Forward-Looking Statements
The Company makes forward-looking statements in
this Current Report on Form 8-K. All statements, other than statements of present or historical fact included in or incorporated
by reference in this Current Report on Form 8-K, regarding the Company’s future financial performance, as well as the
Company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and
objectives of management are forward-looking statements. When used in this Current Report on Form 8-K, the words “could,”
“should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on
management’s current expectations and assumptions about future events and are based on currently available information as to the
outcome and timing of future events. The Company cautions you that these forward-looking statements are subject to all of the risks and
uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company, incident to its business.
These forward-looking statements are based on
information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions,
and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the
Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements
to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws.
As a result of a number of known and unknown risks
and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these
forward-looking statements. Some factors that could cause actual results to differ include:
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· the Company’s ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitability following the Closing;
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|
·
the future financial performance of the Company following the Business Combination;
·
new entrants into the market or current competitors of the Company developing preferred offerings;
·
loss of one or more of Hagerty’s distribution partners;
·
the Company’s inability to prevent, monitor, or detect fraudulent activity, including transactions with insurance policies or payments of claims;
·
the Company’s ability to attract and retain members;
·
the Company’s ability to prevent cyberattacks or breaches of data security;
·
regulatory changes affecting the Company;
·
the cyclical nature of the Company’s insurance business;
·
unexpected increases in the frequency or severity of insurance claims against the Company; and
·
other risks and uncertainties set forth in the Proxy Statement in the section titled “Risk Factors” beginning on page 40 of
the Proxy Statement, which is incorporated herein by reference.
|
Business and Properties
The business and properties of Aldel and Hagerty
prior to the Business Combination are described in the Proxy Statement in the sections entitled “Information About Aldel” beginning
on page 163 and “Information About Hagerty” beginning on page 188, which are incorporated herein by reference.
Risk Factors
The risks associated with the Company’s
business are described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 40, which is incorporated
herein by reference.
Financial Information
Selected Historical Financial Information
The selected historical financial information
of Hagerty for the years ended December 31, 2020, December 31, 2019 and December 31, 2018 is included in the Proxy Statement in the section
entitled “Selected Historical Consolidated Financial Information of Hagerty” beginning on page 38, which are incorporated herein
by reference.
Audited and Unaudited Financial Statements
The unaudited condensed financial statements as
of and for the nine months ended September 30, 2021 and 2020 of Hagerty have been prepared in accordance with U.S. generally accepted
accounting principles and pursuant to the regulations of the SEC are included as Exhibit 99.1 hereto and are incorporated herein by reference.
The unaudited condensed financial statements of
Hagerty should be read in conjunction with the historical audited financial statements of Hagerty as of December 31, 2020 and 2019 and
for the years ended December 31, 2020, 2019 and 2018 and the related notes included in the Proxy Statement beginning on page F-31 of the
Proxy Statement, which are incorporated herein by reference.
The unaudited financial statements for Aldel as
of and for the three and nine months ended September 30, 2021 and September 30, 2020, are included in Item 1 of Aldel’s Quarterly
Report on Form 10-Q, filed with the SEC on November 12, 2021, and are incorporated herein by reference.
The unaudited financial statements of Aldel should
be read in conjunction with the historical audited financial statements of Aldel for the period from December 23, 2020 (inception) to
December 31, 2020 and as of December 31, 2020 and the related notes included in the Proxy Statement beginning on page F-2 of the Proxy
Statement, which are incorporated herein by reference.
Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial
information of the Company as of and for the nine months ended September 30, 2021 and for the year ended December 31, 2020 are
included as Exhibit 99.2 hereto and are incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Management’s discussion and analysis of
the financial condition and results of operation prior to the Merger is included in the Proxy Statement in the sections entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations of Aldel” beginning on page 180 and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations of Hagerty” beginning on page 212, which are incorporated
herein by reference.
Management’s discussion and analysis of
the financial condition and results of operation of Aldel for the three and nine month periods ended September 30, 2021 is included in
Item 2 of Aldel’s Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2021, and is incorporated herein by reference.
Management’s discussion and analysis of
the financial condition and results of operation of Hagerty for the nine month periods ended September 30, 2021 is included as Exhibit
99.3 hereto and is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known
to the Company regarding the beneficial ownership of the Company’s common stock as of December 2, 2021, after giving effect
to the Closing, by:
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●
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each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the outstanding shares of any class of the Company’s common stock;
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●
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each current executive officer and director of the Company; and
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●
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all current executive officers and directors of the Company, as a group.
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Beneficial ownership for the purposes of the following
table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security
if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or
“investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to
acquire such powers within 60 days.
The beneficial ownership percentages set forth
in the table below are based on 333,361,372 shares of the Company’s Class A Common Stock and Class V Common Stock (together, “Common
Stock”) issued and outstanding as of December 2, 2021.
Unless otherwise noted in the footnotes to the
following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment
power with respect to their beneficially owned common stock.
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Name of Beneficial Owners(1)
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|
Number of
Shares of
Common
Stock
Beneficially
Owned
|
|
|
Percentage
of
Outstanding
Common
Stock
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|
5% Stockholders:
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Hagerty
Holding Corp.(2)(3)
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176,033,906
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|
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52.8
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%
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|
Markel
Corporation (3)(4)
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|
78,540,000
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23.5
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%
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|
State
Farm Mutual Automobile Insurance Company(3)(5)
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|
59,000,000
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17.2
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%
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|
Executive Officers and Directors:
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Michael E. Angelina
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-
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F. Michael Crowley
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-
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McKeel O Hagerty(6)
|
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|
50,978,823
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|
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|
15.3
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%
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|
Laurie L. Harris
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|
|
-
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|
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Robert I. Kauffman(7)
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|
7,507,500
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|
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2.2
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%
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|
Sabrina Kay
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|
-
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Mika Salmi
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-
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|
William H. Swanson
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-
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Michael L. Tipsord
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-
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Frederick J. Turcotte
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-
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Kelly Smith
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-
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Collette Champagne
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-
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Barbara E. Matthews
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-
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John Butcher
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-
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Paul E. Rehrig
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|
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-
|
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|
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|
All Directors and Executive Officers of Combined Entity as a group (15 individuals)
|
|
|
58,486,323
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|
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|
17.5
|
%
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|
(1)
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Unless otherwise indicated, the business address of each of
the individuals is c/o Hagerty, Inc., 121 Drivers Edge, Traverse City, MI 49684.
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(2)
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Consists of 176,033,906 shares of Class V Common Stock and an equal number of OpCo Units issued to Hagerty Holding Corp. (“HHC”)
in the Business Combination. A share of Class V Common Stock and a unit of OpCo are exchangeable into shares of Class A Common Stock on
a one-for-one basis pursuant to that certain Exchange Agreement. HHC is owned by members of the Hagerty family, including McKeel Hagerty,
Hagerty’s Chief Executive Officer, Tammy Hagerty, the sister of McKeel Hagerty, and the Kim Hagerty Revocable Trust, a trust for
the benefit of Kim Hagerty’s estate. The shareholders of HHC have the authority over the disposition and voting of the shares of
Class V Common Stock held by HHC. Each of McKeel Hagerty, Tammy Hagerty and The Goldman Sachs Trust Company, N.A., as the trustee for
the Kim Hagerty Revocable Trust, have voting power on matters submitted to the shareholders of HHC, and except in limited circumstances,
decisions to vote or dispose of the shares of Class A Common Stock will be made by a majority vote of the three voting shareholders. In
addition, following the date that is three years after the closing of the Business Combination, any of McKeel Hagerty, Tammy Hagerty or
the Kim Hagerty Revocable Trust may require HHC to exchange Class V Common Stock and OpCo Units for Class A Common Stock in an amount
up to 2% of the fully-diluted outstanding shares of Class A Common Stock then outstanding; provided, that, in no event shall HHC be required
to exchange such interests if, prior to the 15th anniversary of the closing of the Business Combination, as a result of the exchange,
HHC would cease to hold at least 55% of the voting power of Hagerty. Also, in the event that either of McKeel Hagerty or Tammy Hagerty
dies, the estate of the deceased HHC shareholder may cause HHC to exchange Class V Common Stock and OpCo Units in an amount necessary
to cover the estate obligations of the deceased stockholder’s estate after taking into account certain other resources available
to the estate, including the amount of any life insurance proceeds received by the estate. As a result of these rights and the relative
ownership of each of the three principal shareholders of HHC, McKeel Hagerty may be deemed to be the beneficial owner of 50,978,823 shares
of Class A Common Stock, the Kim Hagerty Revocable Trust may be deemed to be the beneficial owner of 44,439,894 shares of Class A Common
Stock, and Tammy Hagerty may be deemed to be the beneficial owner of 57,889,514 shares of Class A Common Stock. HHC’s principal
business address is 121 Drivers Edge, Traverse City, MI 49684.
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(3)
|
The Company, HHC, Markel Corporation (“Markel”) and State
Farm Mutual Automobile Insurance Company (“State Farm”) are parties to an Investor Rights Agreement, dated August 17, 2021
and effective at the closing of the Business Combination. Pursuant to the Investor Rights Agreement, among other things: (a) HHC will
have the right to nominate (1) two directors for election by the stockholders of the Company for so long as HHC and its permitted transferees
hold 50% of the common stock of the Company that it owns as of the closing of the Business Combination and (2) one director for election
by the stockholders of the Company for so long as HHC and its permitted transferees hold 25% of the common stock of the Company that it
owns as of the closing of the Business Combination; (b) Markel will have the right to nominate one director for election by the stockholders
of the Company for so long as Markel and its permitted transferees hold 50% of the common stock of the Company that it owns as of the
closing of the Business Combination; and (c) State Farm will have the right to nominate one director for election by the stockholders
of the Company for so long as State Farm and its permitted transferees hold 50% of the common stock of the Company that it owns as of
the closing of the Business Combination. Each of HHC, Markel and State Farm agreed to vote its shares of common stock in the Company
in support of the director nominees submitted pursuant to the Investor Rights Agreement and against certain other actions that are contrary
to the rights in the Investor Rights Agreement. By virtue of the voting agreement under the Investor Rights Agreement, each of HHC, Markel
and State Farm may be deemed to be a member of a “group” for purposes of Section 13(d) of the Exchange Act. Each of HHC, Markel and State
Farm has expressly disclaimed beneficial ownership of any shares of Class A Common Stock or other securities of the Company held by the
other parties that are subject to the voting agreement under the Investor Rights Agreement.
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|
|
(4)
|
Consists of 75,000,000 shares of Class V Common Stock and an equal number of OpCo Units issued to Markel Corporation in the
Business Combination, 3,000,000 shares of Class A Common Stock purchased in the PIPE Financing, and 540,000 shares of Class A Common
Stock which can be acquired upon the exercise of warrants. A share of Class V Common Stock
and an OpCo Unit are exchangeable into shares of Class A Common Stock on a one-for-one basis pursuant to the Exchange Agreement.
Markel’s principal business address is 4521 Highwoods Parkway, Glen Allen, VA 23060.
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|
|
(5)
|
Consists of 50,000,000 shares of Class A Common Stock purchased in the PIPE Financing and 9,000,000 shares of Class A Common
Stock which can be acquired upon the exercise of warrants. State Farm’s principal business address is
One State Farm Plaza, Bloomington, IL 61710.
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|
|
(6)
|
As a result of his ownership interest in HHC and certain governance rights at HHC, Mr. Hagerty may be deemed to be the beneficial
owner of 50,978,823 shares of Class A Common Stock. See footnote 2 above.
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|
|
(7)
|
Consists of (i) 25,000 shares of Class A Common Stock held by Robert I. Kauffman, (ii) 515,000 shares of Class A Common Stock
underlying the Private Units held directly by Aldel Investors LLC, (iii) 2,200,000 shares of Class A Common Stock held by Aldel
Investors LLC, (iv) 1,500,000 shares of Class A Common Stock underlying the public units held directly by Aldel LLC, (v) 2,000,000
shares of Class A Common Stock purchased in the PIPE Financing by Aldel LLC, (vi) 360,000 shares of Class A Common Stock which can
be acquired upon the exercise of warrants held by Aldel LLC, and (vii) 907,500 shares of Class A Common Stock which can be acquired
upon the exercise of warrants held by Aldel Investors LLC. Mr. Kauffman is the managing member of Aldel LLC and the manager of
Aldel Investors LLC and has voting and investment power over the shares of Class A Common Stock held by Aldel LLC and Aldel
Investors LLC.
|
Executive Compensation
The information related to executive and director
compensation of Hagerty is included in the Proxy Statement in the section entitled “Executive Officer and Director Compensation of
Hagerty” beginning on page 199, which is incorporated herein by reference.
Directors and Executive Officers
Information
with respect to the Company’s directors and executive officers immediately following the Closing is set forth in the Proxy Statement
in the section entitled “Management of New Hagerty After the Business Combination” beginning on page 203 of the Proxy Statement,
which is incorporated herein by reference.
Certain Relationships and Related Party Transactions
The certain relationships and related party transactions
of the Company are described in the Proxy Statement in the section entitled “Certain Relationships and Related Party Transactions”
beginning on page 273 of the Proxy Statement, which is incorporated herein by reference.
Legal Proceedings
Information about legal proceedings is set forth
in the Proxy Statement in the Section entitled “Information About Hagerty—Legal Proceedings” on page 198 of the Proxy
Statement, which is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Stock
and Related Stockholder Matters
Market Information and Holders
The Company’s Class A Common Stock and warrants
were historically quoted on the NYSE under the symbols “ADF” and “ADF.WS,” respectively. On December 3, 2021,
the Company’s Class A Common Stock and warrants are expected to begin trading on the NYSE under the new trading symbols of “HGTY”
and “HGTY.WS,” respectively. Aldel’s publicly traded units automatically separated into their component securities upon
the Closing, and as a result no longer trade as a separate security and were delisted from the NYSE.
As of the Closing Date and following the completion
of the Business Combination, the Company had approximately 82,327,466 shares of Class A Common Stock issued and outstanding held of record
by 46 holders, and approximately 20,005,550 warrants outstanding held of record by 40 holders.
Dividends
The Company has not paid any cash dividends on
the Class A Common Stock to date. The Company may retain future earnings, if any, for future operations, expansion and debt repayment
and has no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will
be made at the discretion of the Board of Directors (the “Board”) and will depend on, among other things, the Company’s
results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
In addition, the Company’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness
the Company or its subsidiaries incur. The Company does not anticipate declaring any cash dividends to holders of the Class A Common Stock
in the foreseeable future.
Recent Sales of Unregistered Securities
The disclosure set forth in the “Introductory
Note” above is incorporated herein by reference.
The PIPE Securities issued in connection with
the Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the “Securities Act”),
in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Description of Registrant’s Securities to be Registered
Common Stock
A description of the Company’s Common Stock
is included in the Proxy Statement in the section entitled “Description of New Hagerty’s Securities After the Business Combination—Common
Stock” beginning on page 250 of the Proxy Statement, which is incorporated herein by reference.
Warrants
A description of the Company’s warrants
is included in the Proxy Statement in the section titled “Description of New Hagerty’s Securities After the Business Combination—Warrants”
beginning on page 251 of the Proxy Statement, which is incorporated herein by reference.
Indemnification of Directors and Officers
The information set forth under the heading “Indemnification
Agreements” in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Reference is made to the disclosure set forth
under Item 4.01 of this Current Report on Form 8-K concerning the changes in certifying accountant.
Financial Statements and Supplementary Data
The information set forth under Item 9.01 of this
Current Report on Form 8-K is incorporated herein by reference.