Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Carry Exchange Program
Apollo has determined to cease making new awards under its employee incentive
program collectively referred to as "global carry pool," pursuant to which
certain Apollo employees have had the opportunity to participate in the
incentive income generated by the investment funds managed by Apollo and its
affiliates.
Apollo employees who participate in the global carry pool have been given the
opportunity to elect, not later than December 10, 2021 (unless such date is
extended by Apollo), to exchange their rights to distributions of incentive
income under their outstanding limited partner interests and rights in global
carry pool for the right to receive shares of Apollo and fully vested Apollo
RSUs which, following the closing of the merger of Apollo and Athene, will be
shares of HoldCo common stock and fully-vested HoldCo RSUs. Apollo believes
that, following this exchange, these Apollo employees will be better aligned
with the business and performance of Apollo. Each of Apollo's executive officers
who hold global carry pool interests is expected to participate in the program.
If all employees who participate in the global carry pool elect to participate
in this exchange, the shares and RSUs to be issued to them (a significant
portion of which represents a value-for-value exchange for the global carry pool
limited partner interests and rights being surrendered, rather than new
remuneration), would have an anticipated value of approximately $270 million, of
which $42.5 million would be attributable to the executive officers. In
connection with this program, an accounting charge of approximately $200 million
will be recognized in the fourth quarter of 2021, due in part to the exchange of
GCP carry points, some of which were unvested, for a vested right to receive
stock on a current or delayed basis.
As part of the broader compensation reset, Apollo intends to reallocate a
portion of the incentive income rights it receives in this exchange as well as
additional incentive income rights to senior Apollo professionals (other than
the CEO and the Co-Presidents) who are primarily focused on creating incentive
income.
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Long-Term Stock Awards to Certain Senior Leaders
Apollo has also agreed to issue 6.5 million RSUs to its senior leaders
(excluding the CEO and the Co-Presidents), a group of approximately one hundred
individuals, in anticipation of its merger with Athene. These shares will be
vested but with restrictions on delivery that include not competing with Apollo.
On November 30, 2021, a committee of the Board consisting of the Board's
independent directors (the "Committee") approved a grant, on December 1, 2021,
of long-term stock awards to Apollo's Co-Chief Operating Officers, Martin Kelly
(also our Chief Financial Officer) and Anthony Civale, of RSUs covering 172,413
Apollo shares each. These RSUs were fully vested at grant and the underlying
HoldCo shares will be delivered in January 2027 if the executive honors his
restrictive covenants until that date.
The grants approved by the Committee on November 30, 2021 to all of Apollo's
executive officers other than the Co-Presidents, including Apollo's Co-Chief
Operating Officers, Martin Kelly (also Apollo's Chief Financial Officer) and
Anthony Civale, totaled 474,136 RSUs with a value of $33.6 million based on the
closing price on November 30, 2021.
Incentive Income Participation for Certain Senior Leaders
Following the closing of the merger, certain Apollo partners, including certain
of its executive officers (but excluding its CEO and Co-Presidents), will
participate in a new program that provides the opportunity to receive additional
cash compensation based on the incentive income earned by Apollo in the year
awarded. These allocations will predominantly be to investment professionals who
have the greatest ability to generate incentive income. The target 2022 award
for the executive officers as a group is $10 million. At the election of each
participant, these amounts would be paid, without interest, or invested in one
or more specified Apollo investment funds. In either case, the amounts will be
subject to vesting, and paid as cash compensation, at the end of three years.
The aggregate financial impact of these incentive allocations is consistent with
disclosures Apollo made in its Investor Day materials and with the five year
financial targets of incentive allocations of 60% to 70% of incentive income.
Renewal and Extension of CEO Employment Agreement
On November 30, 2021, the Committee also approved the renewal of Apollo's
employment, non-competition and non-solicitation agreement with its chief
executive officer, Marc Rowan. The agreement is similar to his existing
agreement, has been extended by two years, includes a voluntary extension of
non-competition and non-solicitation conditions to align with the Co-Presidents,
and includes no change to his compensation arrangements. Specifically, the term
has been extended until the end of 2023 and provides for extended restrictive
non-competition and non-solicitation covenants (to 18 and 24 months following
employment, respectively). Under the agreement, Mr. Rowan's annual base salary
under the agreement remains $100,000 per year. Mr. Rowan, a Co-Founder of
Apollo, holds substantial equity in Apollo and receives no additional
compensation and will not be awarded stock, incentive carry or bonuses.
Co-President Employment Agreements
On November 30, 2021, the Committee also approved new employment agreements for
Apollo's Co-Presidents, Scott Kleinman and James Zelter. These new agreements
govern their compensation for the next five years as they lead Apollo following
its merger with Athene. Under the new agreements, the Co-Presidents will each
give up all existing cash incentive compensation arrangements to the extent
unvested and forgo future entitlements in respect of bonus, unvested carry and
other forms of compensation. In return, they will each earn the equivalent of
one million shares per year for five years, plus the opportunity to earn an
additional one million shares for meeting the fee related earnings and spread
related earnings per share targets as set forth in the Investor Day materials.
None of the shares underlying this one-time grant of six million RSUs will be
delivered or transferable
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until five years after grant. Consistent with Apollo's compensation philosophy,
three million shares will be vested up front and the remainder eligible to vest
at the end of five years. We believe these arrangements drive complete alignment
with Apollo's stockholders.
Under the agreements, effective January 1, 2022, each of Messrs. Kleinman and
Zelter will receive an annual base salary of $100,000 per year and will receive
no further bonuses, allocations of carried interest or other forms of new
compensation. The agreements also provide for an increase in the duration of
Mr. Kleinman's and Mr. Zelter's existing non-competition and non-solicitation
covenants, from 12 months following termination of employment to the longer of
December 31, 2026, and, in the case of the non-compete, 18 months following
termination of employment, and in the case of the non-solicit, 24 months
following termination of employment.
As described above, the one-time grant of RSUs to Messrs. Kleinman and Zelter
will provide the right to receive up to six million Apollo Class A shares, less
a number of RSUs equal to the value of existing unvested carried interest awards
that will be relinquished for vested transfer-restricted HoldCo shares as part
of the exchange by them described below. These grants are intended to fully
align the Co-Presidents with the public stockholders and incentivize them to
drive stock price performance over the next five years. Such grants were made on
December 1, 2021 under Apollo's omnibus equity incentive plan, which will be
assumed by HoldCo following the merger and will convert to RSUs with the right
to receive HoldCo shares following the merger.
Three million of these RSUs (less a number of RSUs equal to the value of
existing unvested carried interest awards that will be relinquished for vested
transfer-restricted HoldCo shares as part of the exchange by Messrs. Kleinman
and Zelter described below) will be vested at grant, but will not be delivered
until January 2027, and delivery on such date is subject to the continued
employment, or a good leaver departure (including a termination without cause,
resignation with good reason or death or disability, each as defined in the
applicable employment agreement) through such date. If Mr. Kleinman or
Mr. Zelter voluntarily resigns or retires (not with good reason) before
December 31, 2026, delivery of the shares underlying the vested RSUs will be
delayed until January 2032. The remaining three million RSUs for each executive
will be subject to five years of continuous service, with the vesting of one
million of such RSUs, to be delivered in April 2027, also based upon attaining
the per share fee related earnings and spread related earnings targets for 2026
set forth in the Investor Day materials. Such awards have certain accelerated
vesting provisions for good leaver terminations as described in the applicable
award agreements.
No shares under the RSUs will be delivered if the applicable executive breaches
. . .
Item 8.01 Other Items.
Pro Forma Financial Statements
Apollo is supplementally providing, as Exhibit 99.1 hereto, unaudited pro forma
condensed combined financial data of HoldCo, consisting of (a) the unaudited pro
forma condensed combined statements of operations for the nine months ended
September 30, 2021 and the year ended December 31, 2020, (b) the unaudited pro
forma condensed combined statement of financial condition as of September 30,
2021, and (c) the summary unaudited combined non-GAAP adjusted operating
earnings and related reconciliations to GAAP measures for the nine months ended
September 30, 2021 and the year ended December 31, 2020 (collectively, the
"Supplemental Pro Forma Financial Statements"). The Supplemental Pro Forma
Financial Statements combine the historical consolidated statement of operations
of Apollo and consolidated statement of income of Athene, after giving effect to
the mergers and the Apollo corporate governance updates disclosed in the joint
proxy statement/prospectus of HoldCo, Apollo and Athene, dated as of November 5,
2021, as well as the applicable items described under Item 5.02 to this Current
Report on Form 8-K.
Merger Agreement
On March 8, 2021, Apollo entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Athene, HoldCo, Blue Merger Sub, Ltd. and Green Merger
Sub, Inc. On November 30, 2021, in accordance with Section 5.01(b)(i) of the
Merger Agreement, Athene consented to (i) Apollo authorizing and effecting the
issuance of RSUs to Apollo's Co-Presidents as described under Item 5.02 to this
Current Report on Form 8-K and (ii) Apollo agreeing to the issuance by Holdco,
following the consummation of the merger of Apollo and Athene, of common shares
of Holdco in connection with a potential acquisition.
* * *
The information in this Current Report on Form 8-K, including Exhibit 99.1,
contains forward-looking statements that are within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include, but are not limited
to, discussions related to Apollo's expectations regarding the performance of
its business, its liquidity and capital resources and the other non-historical
statements in the discussion and analysis. These forward-looking statements are
based on management's beliefs, as well as assumptions made by, and information
currently available to, management. When used in this Current Report on Form
8-K, the words "believe," "anticipate," "estimate," "expect," "intend" and
similar expressions are intended to identify forward-looking statements.
Although management believes that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurance that these
expectations will prove to have been correct. It is possible that actual results
will differ, possibly materially, from the anticipated results indicated in
these statements. These statements are subject to certain risks, uncertainties
and assumptions, including risks relating to Apollo's dependence on certain key
personnel, Apollo's ability to raise new private equity, credit or real assets
funds, the impact of COVID-19, the impact of energy market dislocation, market
conditions, generally, Apollo's ability to manage its growth, fund performance,
changes in Apollo's regulatory environment and tax status, the variability of
Apollo's revenues, net income and cash flow, Apollo's use of leverage to finance
its businesses and investments by funds managed by subsidiaries of Apollo (the
"Apollo funds"), litigation risks and consummation of the merger of Apollo with
Athene, potential governance changes and related transactions which are subject
to regulatory, corporate and stockholders approvals, among others. Due to the
COVID-19 pandemic, there has been uncertainty and disruption in the global
economy and financial markets. While Apollo is unable to accurately predict the
full impact that COVID-19 will have on Apollo's results from operations,
financial condition, liquidity and cash flows due to numerous uncertainties,
including the duration and severity of the pandemic and containment measures,
Apollo's compliance with these measures has impacted Apollo's day-to-day
operations
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and could disrupt Apollo's business and operations, as well as that of the
Apollo funds and their portfolio companies, for an indefinite period of time.
Apollo believes these factors include but are not limited to those described
under the section entitled "Risk Factors" in Apollo's annual report on Form 10-K
filed with the SEC on February 19, 2021 and Quarterly Report on Form 10-Q filed
with the SEC on May 10, 2021, as such factors may be updated from time to time
in Apollo's periodic filings with the SEC, which are accessible on the SEC's
website at www.sec.gov. These factors should not be construed as exhaustive and
should be read in conjunction with the other cautionary statements that are
included in this Current Report on Form 8-K and in other filings.
Apollo undertakes no obligation to publicly update or review any forward-looking
statements, whether as a result of new information, future developments or
otherwise, except as required by applicable law. This Current Report on Form 8-K
does not constitute an offer of any Apollo fund.
* * *
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 The Supplemental Pro Forma Financial Statements
104 Cover Page Interactive Data File (embedded within the Inline
XBRL document)
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Additional Information Regarding the Transaction and Where to Find It
This Current Report on Form 8-K is being made in respect of the proposed
transaction involving HoldCo, Apollo and Athene. The proposed transaction will
be submitted to the stockholders of Apollo and the shareholders of Athene for
their respective consideration. In connection therewith, the parties have filed,
and will continue to file, relevant materials with the SEC, including a
definitive joint proxy statement/prospectus, which was mailed to the
stockholders of Apollo and the shareholders of Athene on November 5, 2021.
BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, AS APPLICABLE, INVESTORS
AND SECURITY HOLDERS OF APOLLO AND ATHENE ARE URGED TO READ THE DEFINITIVE JOINT
PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER
RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free
copies of the definitive joint proxy statement/prospectus, any amendments or
supplements thereto and other documents containing important information about
Apollo and Athene, once such documents are filed with the SEC, through the
website maintained by the SEC at www.sec.gov.
Copies of the documents filed with the SEC by Apollo will be available free of
charge under the "Stockholders" section of Apollo's website located at
http://www.apollo.com or by contacting Apollo's Investor Relations Department at
(212) 822-0528 or APOInvestorRelations@apollo.com.
Copies of the documents filed with the SEC by Athene will be available free of
charge under the "Investors" section of Athene's website located at
http://www.athene.com or by contacting Athene's Investor Relations Department at
(441) 279-8531 or ir@athene.com.
Participants in the Solicitation
Apollo, Athene, HoldCo and their respective directors, executive officers,
members of management and employees may, under the rules of the SEC, be deemed
to be participants in the solicitation of proxies in connection with the
proposed transaction.
Information about the directors and executive officers of Apollo and HoldCo is
set forth in Apollo's proxy statement for its 2020 annual meeting of
stockholders, which was filed with the SEC on August 20, 2020, its annual report
on Form 10-K for the fiscal year ended December 31, 2020, which was filed with
the SEC on February 19, 2021, and in subsequent documents filed with the SEC,
each of which can be obtained free of charge from the sources indicated above.
Information about the directors and executive officers of Athene is set forth in
Athene's proxy statement for its 2020 annual meeting of shareholders, which was
filed with the SEC on April 21, 2020, its annual report on Form 10-K for the
fiscal year ended December 31, 2020, which was filed with the SEC on
February 19, 2021, and in subsequent documents filed with the SEC, each of which
can be obtained free of charge from the sources indicated above.
Other information regarding the participants in the proxy solicitations of the
stockholders of Apollo and the shareholders of Athene, and a description of
their direct and indirect interests, by security holdings or otherwise, is
contained in the definitive joint proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become available.
No Offer or Solicitation
This Current Report on Form 8-K is for informational purposes only and not
intended to and does not constitute an offer to subscribe for, buy or sell, the
solicitation of an offer to subscribe for, buy or sell or an invitation to
subscribe for, buy or sell any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to or in connection with the proposed
transaction or otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
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