|
Item
1.01
|
Entry
into a Material Definitive Agreement
|
Promissory
Note
On May 31, 2019, GWG Life,
LLC (“GWG Life”), a wholly owned subsidiary of GWG Holdings, Inc. (the “Company”), entered into a Promissory
Note (the “Promissory Note”), made by Jeffrey S. Hinkle and Dr. John A. Stahl, not in their individual capacity but
solely as trustees of The LT-1 LiquidTrust, The LT-2 LiquidTrust, The LT-5 LiquidTrust, The LT-7 LiquidTrust, The LT-8 LiquidTrust
and The LT-9 LiquidTrust (collectively, the “Borrowers”) in the principal amount of $65,000,000 and payable to the
order of GWG Life. Pursuant to the terms of the Promissory Note, GWG Life will fund a term loan to the Borrowers in an aggregate
principal amount of $65,000,000 (the “Loan”), which Loan is to be funded in two installments as described below.
Proceeds of the
Loan will be used primarily to further the Company’s diversification into alternative assets and ancillary businesses by
positioning The Beneficient Company Group, L.P.’s (“Beneficient”) balance sheet, working capital and liquidity
profile to satisfy audit and anticipated State of Texas regulatory requirements.
The Borrowers are
common law trusts established as part of alternative asset financings extended by a subsidiary of Beneficient, of which the Company
owns approximately 90% of the issued and outstanding common units. Although each Borrower is allocated a portion of the Loan equal
to approximately 16.7% of the aggregate outstanding principal of the Loan, the Loan constitutes the joint and several obligations
of the Borrowers.
An initial advance
in the principal amount of $50,000,000 was funded on June 3, 2019 and, subject to satisfaction of certain customary conditions,
it is anticipated that the second advance, in the principal amount of $15,000,000, will be funded no sooner than September 15,
2019 and no later than December 31, 2019. The Loan bears interest at 7.0% per annum, with interest payable at maturity, and matures
on June 30, 2023. Subject to the Intercreditor Agreements (as defined below), the Loan can be prepaid at the Borrowers’ election
without premium or penalty.
The Loan is unsecured
and is subject to certain covenants (including a restriction on the incurrence of any indebtedness senior to the Loan other than
existing senior loan obligations to each of HCLP Nominees, L.L.C. (“HCLP”) and Beneficient Holdings, Inc. (“BHI”,
and together with HCLP, the “Senior Lenders”), as lenders) and events of default. The Senior Lenders are directly or
indirectly associated with one of Beneficient’s founders, who is also Chairman of the Company’s Board of Directors.
A special committee of
the Board of Directors of the Company (the “Special Committee”) composed solely of independent and disinterested directors
of the Company, together with the assistance of its independent legal advisors, reviewed, negotiated and approved the terms of
the Loan.
The foregoing description of the Promissory Note is qualified in its entirety
by reference to the full and complete terms of the Promissory Note, which is filed as Exhibit 10.1 to this Form 8-K and is incorporated
herein by reference.
Intercreditor
Agreements
In connection with the
Promissory Note, the Company also entered into two intercreditor and subordination agreements: (1) an Intercreditor Agreement
between the GWG Life and HCLP and (2) an Intercreditor Agreement between the GWG Life and BHI (the “Intercreditor Agreements”). Under
the Intercreditor Agreements, GWG Life agrees to subordinate the Loan to the secured obligations of Beneficient and its affiliates
outstanding to the Senior Lenders (the “Senior Loan Obligations”), agrees to not take any liens to secure the Loan
(and to subordinate such liens, if any, to the liens of the Senior Lenders), and agrees not to take enforcement actions under
the Promissory Note until such Senior Loan Obligations are paid in full. The Intercreditor Agreements establish various other
inter-lender and subordination terms, including, without limitation, with respect to permitted actions by each party, permitted
payments, waivers, voting arrangements in bankruptcy, application of certain proceeds and limitations on amendments of the respective
loan obligations of the parties. The Senior Lenders have agreed not to extend the maturity of their respective loan obligations
beyond June 30, 2023 or increase the outstanding principal of the loans made by the Senior Lenders without the written consent
of GWG Life. GWG Life has agreed not to transfer the Promissory Note except with the written consent of the Senior Lenders (such
consent not to be unreasonably withheld) or to the Company or direct or indirect wholly owned subsidiaries thereof. The Special
Committee, together with the assistance of its independent legal advisors, reviewed, negotiated and approved the terms of the
Intercreditor Agreements.
The foregoing description of the Intercreditor Agreements are
qualified in their entirety by reference to the full and complete terms of the Intercreditor Agreements, which are filed as Exhibit
10.2 and Exhibit 10.3 to this Form 8-K and are incorporated herein by reference.