ADF Aldel Financial Inc

Item 1. Security and Issuer.

This statement on Schedule 13D relates to the Class A common stock, par value $0.0001 per share (“Class A Common Stock”) of Hagerty, Inc. (formerly known as Aldel Financial Inc.), a Delaware corporation (the “Company”), whose principal executive office is located at 121 Drivers Edge, Traverse City, Michigan 49684.

Item 2. Identity and Background.

(a-c, f)     This Schedule 13D is being filed by Hagerty Holding Corp., a Delaware corporation (“HHC” or the “Reporting Person”). The address and principal office of HHC is 121 Drivers Edge, Traverse City, Michigan 49684.

The name, business address, present principal occupation or employment and citizenship of each principal shareholder and each executive officer of HHC is set forth on Annex A hereto and is incorporated by reference herein.

(d-e) During the past five years, none of HHC or, to the best of its knowledge, any person listed on Annex A attached hereto, has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was, or is, subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

On December 2, 2021, pursuant to the closing under the Business Combination Agreement, dated as of August 17, 2021 (the “Business Combination Agreement”), among Aldel Financial Inc., Aldel Merger Sub LLC, a Delaware liability company and wholly owned subsidiary of Aldel Financial Inc. (“Merger Sub”), and The Hagerty Group, LLC, a Delaware limited liability company (“Hagerty”): (i) all of the outstanding equity interests of Hagerty were exchanged for shares of Class V common stock, par value $0.0001 per share, of the Company (the “Class V Common Stock”) and limited liability company interests of Hagerty (“OpCo Units”); (ii) Merger Sub merged with and into Hagerty (the “Merger”), whereupon Merger Sub ceased to exist and Hagerty continued as the surviving company (Hagerty following the Merger being the “OpCo”) under the Delaware Limited Liability Company Act (the “LLC Act”); (iii) the existing limited liability company agreement of Hagerty was amended and restated to, among other things, make Aldel Financial Inc. a member of the OpCo; and (iv) Aldel Financial Inc. changed its name to Hagerty, Inc. (the Merger and the other transactions contemplated by the Business Combination Agreement are collectively referred to as the “Business Combination”).

Item 4. Purpose of Transaction

The responses to Item 3 and Item 6 of this Schedule 13D are incorporated by reference herein.

The Reporting Person acquired the shares of Class V Common Stock of the Company for investment purposes. The Reporting Person expects to review from time to time its investment in the Company and, depending on its applicable legal, regulatory and contractual obligations (including as described in Item 6 herein), the Company’s financial position, business prospects and investment strategy, and prevailing market, economic and industry conditions, the Reporting Person may in the future take such actions with respect to its investment in the Company as it deems appropriate, including, among other things: (i) purchasing shares of Class A Common Stock and other securities of the Company in the open market, in privately negotiated transactions or otherwise; (ii) exchanging shares of Class V Common Stock and OpCo Units into shares of Class A Common Stock or, at the option of the Company, cash, or (iii) changing its intention with respect to any and all matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. 

Except as set forth above, the Reporting Person currently has no plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Person may, at any time and from time to time, review or reconsider its position and/or change its purpose and/or formulate plans or proposals with respect thereto.

Item 5. Interest in Securities of the Issuer.

(a)-(b) As of the date of this Schedule 13D, HHC may be deemed to be the beneficial owner of 176,033,906 shares of Class A Common Stock, or approximately 52.8% of the shares of Class A Common Stock outstanding. HHC’s beneficial ownership is composed of 176,033,906 shares of Class V Common Stock and an equal number of OpCo Units, which are, together, exchangeable, at the option of the holder, on a one-for-one basis for a share of Class A Common Stock or, at the option of the Company, an equivalent value in cash.

Each share of Class V Common Stock has no incidents of economic ownership and has ten (10) votes per share until the earlier of (i) December 2, 2036, and (ii) transfer to a non-qualified transferee, after which it has one (1) vote per share. While, pursuant to Rule 13d-3(d) under the Act, the Reporting Person may not technically have the “right” to acquire the shares of Class A Common Stock underlying the Class V Common Stock and OpCo Units, such shares have been included in the Reporting Person’s reported beneficial ownership throughout this Schedule 13D out of an abundance of caution.

The beneficial ownership percentage reported herein was calculated based the sum of (i) 82,327,466 shares of Class A Common Stock outstanding upon closing of the Company’s Business Combination, (ii) 176,033,906 shares of Class A Common Stock that could be issued upon conversion of Class V Common Stock and an equal number of OpCo Units held by the Reporting Person and (iii) 75,000,000 shares of Class A Common Stock that could be issued upon conversion of Class V Common Stock and an equal number of OpCo Units held by persons other than the Reporting Person for purposes of calculating the Reporting Person’s beneficial ownership percentage in accordance with Rule 13d-3(d)(1)(i) under the Act. Notwithstanding the percentage reported herein, based on the aggregate total of Class A and Class V Common Stock outstanding, and the voting power assigned to each class, HHC controls approximately 67.9 of the voting power of the Company.

Pursuant to Rule 13d-4 under the Act, HHC expressly disclaims beneficial ownership of any other shares of Class A Common Stock or other securities of the Company, including those held by the other parties to the Investor Rights Agreement and Lock-Up Agreement (each defined and described in Item 6 herein), and nothing herein shall be deemed an admission by HHC as to the beneficial ownership of such shares of Class A Common Stock or other securities.

(c) The response to Item 3 of this Schedule 13D is incorporated by reference herein. Except as described herein, none of HHC, nor to the best of its knowledge, any person listed on Annex A attached hereto, has acquired or disposed of any shares of Class A Common Stock or other securities of the Company during the past 60 days.

(d) HHC knows of no other person having the right to receive the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Class A Common Stock and other securities of the Company reported in this Schedule 13D.

(e) Not applicable.

The responses to Item 3 and Item 4 of this Schedule 13D are incorporated by reference herein. 

Investor Rights Agreement

In connection with the Business Combination, the Company, HHC, Markel Corporation (“Markel”) and State Farm Mutual Automobile Insurance Company (“State Farm”) entered into an Investor Rights Agreement, dated August 17, 2021 and effective at the closing of the Business Combination (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, among other things:

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. However, neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that HHC is a member of any such group. Each of Markel and State Farm will be separately making a Schedule 13D filing reporting the shares of Class A Common Stock and/or other securities of the Company it may be deemed to beneficially own. Pursuant to Rule 13d-4 under the Act, HHC expressly disclaims beneficial ownership of any shares of Class A Common Stock or other securities of the Company held by Markel and State Farm that are subject to the voting agreement under the Investor Rights Agreement, and nothing herein shall be deemed an admission by HHC as to the beneficial ownership of such shares of Class A Common Stock or other securities.

The foregoing description of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Investor Rights Agreement, which is filed as an exhibit to this Schedule 13D and is incorporated by reference herein.

Amended and Restated Registration Rights Agreement

In connection with the Business Combination Agreement, the Company, Aldel Investors LLC, FG SPAC Partners LP, ThinkEquity, HHC, Markel, State Farm and certain other parties (the “Holders” as defined therein) each entered into an Amended and Restated Registration Rights Agreement, dated August 17, 2021 (the “Amended and Restated Registration Rights Agreement”), pursuant to which, effective as of the consummation of the Business Combination, the Company has agreed to file a shelf registration statement registering the resale of the Company’s equity held by the Holders, and granted to the Holders certain registration rights, including customary piggyback registration rights and demand registration rights, which are subject to customary terms and conditions, including with respect to cooperation and reduction of underwritten shelf takedown provisions, subject to certain lock-up restrictions referenced therein, including those documented in the Lock-Up Agreement (as defined below).

The foregoing description of the Amended and Restated Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated Registration Rights Agreement, which is filed as an exhibit to this Schedule 13D and is incorporated by reference herein.

Lock-Up Agreement 

In connection with the closing of the Business Combination, Markel and HHC entered into a Lock-Up Agreement, dated December 2, 2021, with the Company (the “Lock-Up Agreement”), pursuant to which each of Markel and HHC agreed, subject to certain customary exceptions, not to:

until the date that is the earlier of (a) 180 days after the closing of the Business Combination, subject to certain customary exceptions, and (b) the date on which the closing price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the consummation of the Business Combination. Notwithstanding the foregoing, if after the consummation of the Business Combination, there is a “Change of Control” (as defined in the Lock-Up Agreement) of the Company, then all of the shares shall be released from the restrictions set forth therein.

Pursuant to Rule 13d-4 under the Act, HHC expressly disclaims beneficial ownership of any shares of Class A Common Stock or other securities of the Company held by Markel or other parties that are subject to the restrictions on disposition under the Lock-Up Agreement, and nothing herein shall be deemed an admission by HHC as to the beneficial ownership of such shares of Class A Common Stock or other securities.

The foregoing description of the Lock-Up Agreement does not purport to be complete and is qualified in its entirety by reference to the Lock-Up Agreement, which is filed as an exhibit to this Schedule 13D and is incorporated by reference herein.

Exchange Agreement

In connection with the Business Combination, Markel, HHC, OpCo and the Company entered into an Exchange Agreement, dated December 2, 2021 (the “Exchange Agreement”), pursuant to which, among other things, each of Markel and HHC will have the right from time to time, on the terms and conditions contained in the Exchange Agreement, to exchange its OpCo Units and shares of Class V Common Stock, together, for shares of Class A Common Stock or, at the option of the Company, an equivalent value in cash.

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement, which is filed as an exhibit to this Schedule 13D and is incorporated by reference herein.

Tax Receivable Agreement

In connection with the Business Combination, the Company entered into a Tax Receivable Agreement, dated December 2, 2021, with OpCo, HHC and Markel related to the tax treatment of OpCo (the “Tax Receivable Agreement”). Specifically, OpCo intends to have in effect an election under Section 754 of the Code for each taxable year in which sales and exchanges of OpCo Units in connection with or following the Business Combination (“TRA Exchanges”) occur, which is expected to result in adjustments to the tax basis of the assets of OpCo as a result of such TRA Exchanges. Among other things, the Tax Receivable Agreement generally provides for the payment by the Company to HHC and Markel of 85% of the cash tax benefits, if any, that the Company realizes (or in certain cases is deemed to realize), calculated using certain simplifying assumptions described in the Tax Receivable Agreement. Payments under the Tax Receivable Agreement are not conditioned on HHC’s or Markel’s continued ownership of the Company. HHC and Markel will not reimburse the Company for any payments previously made if such tax basis or other tax benefits are subsequently disallowed, except that any excess payments made to a party under the Tax Receivable Agreement will be netted against future payments otherwise to be made under the Tax Receivable Agreement, if any, after the determination of such excess. To the extent that the Company is unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid. 

The foregoing description of the Tax Receivable Agreement does not purport to be complete and is qualified in its entirety by reference to the Tax Receivable Agreement, which is filed as an exhibit to this Schedule 13D and is incorporated by reference herein.

Exhibit 99.1           Form of Subscription Agreement, dated as of August 17, 2021, by and between the Company and certain institutional and accredited investors party thereto (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on August 18, 2021)

Exhibit 99.2           Amended and Restated Registration Rights Agreement, dated as of August 17, 2021, among the Company, Aldel Investors LLC, FG SPAC Partners LP, ThinkEquity, HHC, State Farm, Markel and certain other parties (incorporated by reference to Exhibit 10.3 to the Form 8-K filed by the Company on August 18, 2021)

Exhibit 99.3           Tax Receivable Agreement, dated as of December 2, 2021, by and between the Company, OpCo, HHC and Markel (incorporated by reference to Exhibit 10.4 to the Form 8-K filed by the Company on December 8, 2021)

Exhibit 99.4           Lock-Up Agreement, dated as of December 2, 2021, by and between the Company, HHC and Markel (incorporated by reference to Exhibit 10.5 to the Form 8-K filed by the Company on December 8, 2021)

Exhibit 99.5           Investors Rights Agreement, dated as of August 17, 2021, among HHC, State Farm, Markel and the Company (incorporated by reference to Exhibit 10.8 to the Form 8-K filed by the Company on August 18, 2021)

Exhibit 99.6           Exchange Agreement, dated as of December 2, 2021, by and among the Company, OpCo, Markel and HHC (incorporated by reference to Exhibit 10.8 to the Form 8-K filed by the Company on December 8, 2021)

SIGNATURE 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

December 13, 2021

Annex A 

PRINCIPAL SHAREHOLDERS AND EXECUTIVE OFFICERS OF HAGERTY HOLDING CORP.

The following table sets forth the name, present principal occupation or employment and citizenship of each principal shareholder and executive officer of Hagerty Holding Corp. as of December 2, 2021. The business address of each person listed below is c/o Hagerty Holding Corp. 121 Drivers Edge, Traverse City, MI 49684.

PRINCIPAL SHAREHOLDERS OF HAGERTY HOLDING CORP.

EXECUTIVE OFFICERS OF HAGERTY HOLDING CORP.