325 N. Saint Paul Street, Suite 2650
Dallas, Texas 75201
Tel: (612) 746-1944
Fax: (612) 746-0445
(Address, including zip code, and telephone
number, including area code, of Registrant’s principal executive offices)
Murray T. Holland
325 N. Saint Paul Street, Suite 2650
Dallas, Texas 75201
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
ABOUT
THIS PROSPECTUS
We
have prepared this prospectus as part of a registration statement that we filed with the SEC for our continuous offering of L
Bonds.
The registration statement we filed with
the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus and certain information
that is incorporated by reference. You should read this prospectus, the related exhibits filed with the SEC, and any prospectus
supplement(s), together with additional information described below under “Where You Can Find More Information,” and
the documents that are incorporated by reference into this prospectus. Any statement that we make in this prospectus will be modified
or superseded by any inconsistent statement made by us in a prospectus supplement (or other disclosure incorporated into this
prospectus by reference). This prospectus contains summaries of certain other documents, which summaries contain all material
terms of the relevant documents and are believed to be accurate, but reference is hereby made to the full text of the actual documents
for full and complete information concerning those documents. All documents relating to this offering, if readily available to
us, will be made available to a prospective investor or its representatives upon request.
The
L Bonds will be issued under an amended and restated indenture, as may be amended or supplemented from
time to time (referred to herein as the “indenture”). This prospectus is qualified in its entirety by the terms of
that indenture filed with SEC as an exhibit to the registration statement of which this prospectus is a part. All material terms
of the indenture are summarized in this prospectus. You may obtain a copy of the indenture upon written request to us or online
at www.sec.gov.
The indenture trustee did not participate
in the preparation of this prospectus and makes no representations concerning the L Bonds, the collateral, or any other matter
stated in this prospectus. The indenture trustee has no duty or obligation to pay the L Bonds from its funds, assets or capital
or to make inquiry regarding, or investigate the use of, amounts disbursed from any account.
You
should rely only on the information contained in this prospectus, as the same may be supplemented by prospectus supplements or
other public disclosure incorporated into this prospectus by reference. Neither we nor the dealer manager have authorized any
other person to provide you with any information different from that contained in this prospectus, a supplement, information incorporated
into this prospectus by reference, or information furnished by us upon request as described herein. The information contained
in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or sale of our securities.
No
information contained herein, nor in any prior, contemporaneous or subsequent communication should be construed by a prospective
investor as legal or tax advice. Each prospective investor should consult its, his or her own legal, tax and financial advisors
to ascertain the merits and risks of the transactions described herein prior to purchasing the L Bonds. This written communication
is not intended to be written advice as defined in Circular 230 published by the U.S. Treasury Department.
In
this prospectus, we use the term “day” to refer to a calendar day, and we use the term “business day”
to refer to any day other than Saturday, Sunday, a legal holiday or a day on which banks in New York City are authorized or required
to close.
INDUSTRY
AND MARKET DATA
The
industry and market data used throughout this prospectus have been obtained from our own research, surveys or studies conducted
by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained
information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. We believe
that each of these studies and publications is reliable.
HOW
TO PURCHASE L BONDS
If,
after carefully reading this entire prospectus, obtaining any other information requested and available, and being fully satisfied
with the results of pre-investment due-diligence activities, you would like to purchase L Bonds, you will have two different ways
in which to consummate a purchase: (1) DTC settlement, or (2) direct settlement with the Company.
1.
Depositary Trust Company Settlement (DTC settlement). You can place an order for the purchase of
L Bonds using DTC Settlement through your selling group member (i.e., your broker-dealer). A selling group member using this service
will have an account with a DTC participant in which your funds will be placed to facilitate a closing on our periodic DTC closing
cycle (typically, closings will occur on a bi-monthly cycle). Orders may be placed until the cyclical order due date. Orders will
be executed by your selling group member electronically and you must coordinate with your selling group member’s registered
representative to pay the full purchase price for the L Bonds by the trade date. You will be credited with ownership of an L Bond
on the second business day following the periodic DTC closing cycle in which the purchase is made. Nevertheless, interest will
accrue for a period of 15 or 30 days for the month in which your purchase is made, depending on when during the DTC closing cycle
your purchase is made. Your purchase price for L Bonds purchased in this way will not be held in escrow. This process is different
if you purchase L Bonds through direct settlement with the Company as described below.
2.
Direct Settlement with the Company. If you wish to purchase L Bonds through direct settlement with
the Company, then you must complete, execute and return the Subscription Agreement to us together with a certified check or personal
check payable to the order of “GWG Holdings, Inc. — Subscription Account” (or wire sent to the Subscription
Account) equal to the principal amount of L Bonds you wish to purchase. You will be credited with ownership of an L Bond, and
interest will begin to accrue, from the date on which your fully paid subscription is accepted. If you are working with a selling
group member, your subscription materials and the wire transfer, certified check or personal check should be delivered to your
selling group member, who will deliver it to us at the following address:
GWG
Holdings, Inc.
325 North St. Paul Street, Suite 2650
Dallas, TX, 75201
Wire
Instructions
GWG Holdings, Inc. — Subscription Account
Account: 500023916
Routing:
091310521
Bank
Name: Bell Bank
Your
purchase is subject to our acceptance. All information provided is confidential and will be disclosed only to our directors, officers
and employees who need to know, affiliates, the managing broker-dealer, legal counsel and, if required, to governmental authorities
and self-regulatory organizations or as otherwise required by law. For your purchase to be effective as of the first business
day of a calendar month, your completed and executed Subscription Agreement, together with your related funds, must be received
and accepted by us on or prior to the final settlement date (settlement dates normally occur on a bi-monthly basis).
Upon
our receipt of the signed Subscription Agreement and acceptance of your purchase, we will notify you of such acceptance. In our
sole discretion, we may accept or reject any purchase, in whole or in part. In the event we do not accept your purchase of L Bonds
for any reason, we will promptly return your payment. We may terminate or suspend this offering at any time, for any reason or
no reason, in our sole discretion. You may obtain a copy of the Subscription Agreement from our website at www.gwgh.com,
from your selling group member (if you are working with one), or by contacting us at 1-877-494-2388.
COVERED
SECURITY
Our
L Bonds are a “covered security.” The term “covered security” applies to securities exempt from state
registration pursuant to Section 18 of the Securities Act of 1933. Generally, securities listed on national exchanges are the
most common type of covered security exempt from state registration. A non-traded security also can be a covered security if it
has a seniority greater than or equal to other securities from the same issuer that are listed on a national exchange. Our L Bonds
are a covered security because they will be senior to our common stock, which is listed on The Nasdaq Capital Market, and therefore
our offering of L Bonds is exempt from state registration.
Although the status of our L Bonds as
a “covered security” will facilitate their purchase and sale to a broader range of investors than would otherwise be
available to us, and although the offer and sale of a “covered security” generally involves fewer issuance costs to
the issuer of such securities, our L Bonds are not a suitable purchase for all investors. Investors are urged to read carefully
the risk factors relating to our business and our Company contained in the Risk Factors section of this prospectus beginning on
page 11 and under Item 1A, entitled “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31,
2019, which is incorporated by reference herein. In addition, investors should understand that because our L Bonds are a “covered
security” exempt from state securities regulations, neither our Company, the L Bonds, or any other aspects of this offering
have been the subject of any merit-based review by state securities regulators.
QUESTIONS
AND ANSWERS ABOUT THIS OFFERING
The following questions and answers
about this offering highlight material information regarding us and this offering that you may wish to review. Nevertheless, you
should read this entire prospectus, including the section entitled “Risk Factors,” and the documents incorporated
by reference into this prospectus, before deciding to purchase our L Bonds.
Can
you explain and clarify the interplay between GWG Holdings, Inc. and GWG Life, LLC and its subsidiaries in relation to the L Bonds
and the registration statement?
GWG
Holdings, Inc. will be issuing the L Bonds, receiving all proceeds from the sale of L Bonds, and will be the only entity making
regular payments on the L Bonds. Nevertheless, because a significant amount of our consolidated assets is held in our subsidiary
GWG Life, LLC (and its own subsidiaries), GWG Life is a guarantor of our obligations under the L Bonds. As guarantor of the L
Bonds, SEC rules require that GWG Life be included as a co-registrant under this registration statement. GWG Life will not, however,
be otherwise involved in the offering of L Bonds.
It
seems as though you are offering several L Bonds with different interest rates and maturities but calling them all L Bonds. Is
this the case?
All bonds we issue in this offering will have identical terms, except (1) the interest rate and (2) the
maturity length or “term.” In this regard, we have essentially created multiple classes of L Bonds, similar to how
companies may have different classes of stocks with slightly different economic rights. Currently, we are offering four classes
of L Bonds, as follows:
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“Class
2-2” L Bonds will mature two years from their issuance and accrue interest at %
per annum.
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“Class
3-2” L Bonds will mature three years from their issuance and accrue interest at
% per annum.
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“Class
5-2” L Bonds will mature five years from their issuance and accrue interest at
% per annum.
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“Class
7-2” L Bonds will mature seven years from their issuance and accrue interest at
% per annum.
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The
economic terms for each L Bond in any particular class will be identical to all other L Bonds in the same class (other
than the date of maturity). In the event we adjust the interest rate for any class of bonds we offer, we will create a new class
of L Bonds. Upon the renewal of any L Bonds we have sold, any new interest rate applied to an L Bond will be applied
to all L Bonds in the same class.
Your
prospectus states that the interest rate for the L Bonds may be adjusted from time to time during the course of the offering.
Will any such adjustment apply retroactively to L Bonds already issued?
No.
Once you purchase an L Bond, the interest rate on that L Bond will not change during the entirety of its original term.
The interest rate on an issued L Bond may, however, be adjusted upon renewal of that L Bond. In any such case, we will
advise you of any different interest rate that may apply to your L Bond upon renewal. In sum, any new interest rates for
the L Bonds will apply only to newly issued L Bonds sold or renewed after the date of any interest rate change. Our
decision to change interest rates depends on numerous factors, including but not limited to things such as market interest rates,
our capitalization, the demand for our L Bonds, the life settlement market in general, our capital requirements, and other
factors. Please see “Description of the L Bonds — Interest Rate.”
How
do I subscribe for L Bonds, and what is the settlement process?
L
Bonds may be purchased either directly from the Company or through your broker-dealer (also referred to in this prospectus as
a selling group member), who utilizes a participant in the DTC system and offers “DTC settlement.”
Direct Settlement
If
you purchase directly from the Company, you will send your completed and executed Subscription Agreement, together with your subscription
amount to us at the address listed in “How to Purchase L Bonds.” Your subscription amount is the principal amount
of L Bonds you wish to purchase, and should be paid through a certified check or personal check payable to the order of “GWG
Holdings, Inc. — Subscription Account.” In lieu of paying by check, you may wire your subscription amount to the account
referenced in “How to Purchase L Bonds.” If you are working with a broker-dealer or other investment professional,
your broker-dealer or professional will gather and send in the required information on your behalf, and may facilitate your payment
of the subscription amount.
Once
we have received your subscription amount and required documentation, we will either reject or accept your subscription. If accepted,
you will be credited with ownership of the L Bond, we will have immediate access to your subscription amount and you will start
to accrue interest on your investment at the rate applicable to the L Bond you have purchased. If you purchase directly from the
Company, your L Bond will ordinarily be issued in book-entry (or, if requested, certificated) form and payments will be made directly
into the account you indicate in your Subscription Agreement.
DTC Settlement
Purchasing through a DTC participant is
a slightly different process. In this case, you will provide your order for the purchase of L Bonds to your broker-dealer, together
with such other information as your broker-dealer may require. Your broker-dealer will ensure your order is electronically placed
with the Company and that the Company timely receives your subscription amount. There is no need to furnish the Company with a
Subscription Agreement when you purchase through a broker-dealer that utilizes a participant in the DTC system and offers “DTC
settlement.” However, your broker-dealer may require additional documents.
Once we have received your subscription amount, we will either
reject or accept your subscription. Once accepted based on our DTC closing cycle, we will have immediate access to your subscription
amount and you will start to accrue interest on your investment at the rate applicable to the L Bond you have purchased. Nevertheless,
you will be credited with ownership of an L Bond on the second business day after the end of the closing cycle in which your subscription
is accepted. Interest will accrue for a period of 15 or 30 days for the month in which your purchase is made, depending on when
during the DTC closing cycle your purchase is made. If you purchase through a broker-dealer who utilizes a participant in the DTC
system and offers “DTC settlement,” your L Bond will be issued to DTC in the name of Cede & Co., as its nominee.
In this sense, DTC will be the legal owner of the L Bond and you will be the beneficial owner. Your ownership of the L Bond should
then appear on the brokerage or other investment statements you receive from your broker-dealer or custodian.
For so long as DTC settlement is approved,
we intend to issue each class of L Bonds a unique identifying number (CUSIP) each month to facilitate the settlement of L Bonds.
Thus, Class 2-2 L Bonds issued in May 2020 (and maturing May 2022) will all have the same CUSIP, which will be different from
the CUSIP applicable to Class 2-2 L Bonds issued in September 2020 (and maturing September 2022). In this way, all L Bonds belonging
to a single CUSIP will be completely fungible, meaning that they will all mature on the same date and have identical terms so
that one L Bond with a particular CUSIP is interchangeable with any other L Bond having the same CUSIP. This process creates a
tracking system for the L Bonds to be issued to and transferred through DTC.
What
is the role of the trustee?
The
Bank of Utah is the trustee for the L Bonds. The role of the trustee is essentially to enforce the terms of the L Bonds on behalf
of bondholders, including direct and beneficial holders, and facilitate the relationship between our Company and the bondholders.
We must notify the trustee of certain events as required under the indenture, and the trustee will in turn notify bondholders.
The trustee has also been granted a security interest in all of the assets of GWG Holdings and GWG Life for the benefit of the
bondholders. The trustee has no duty to pay any obligations under L Bonds or to make inquiry regarding, or investigate the use
of, amounts disbursed from any account. Upon an event of default under the indenture, and subject to those limitations in the
indenture designed to benefit our senior creditors, the trustee may take action against us to enforce the rights of holders of
the L Bonds.
What
is the role of the paying agent?
The paying agent is the term ascribed
to whomever it is that is making the payment to the holders of L Bonds. Presently, the Company has designated Computershare
Trust Company, N.A. (“Computershare”) to serve as the paying agent with respect to L Bonds settled through DTC, and
the Company itself is the paying agent with respect to L Bonds settled directly with the Company. Please see “How to Purchase
L Bonds,” below. Computershare and the Company are therefore responsible for tracking investors’ respective payment
dates and ensuring timely payment of principal and interest under the L Bonds. The role of the paying agent is essentially
mechanical, and does not ordinarily involve the exercise of discretion and judgment in the way that is typical for an indenture
trustee.
Do
I need to sign any paperwork in connection with the renewal of my L Bond?
No.
The terms of the L Bond allow for the automatic renewal into a new L Bond of an identical (or lesser) maturity, unless
we receive notice from you. Upon maturity, the L Bonds will be automatically renewed for the same term at the interest rate
we are offering at that time to other investors with similar aggregate L Bond portfolios for L Bonds.
Can
I resell or transfer my L Bond after it has been purchased?
Yes.
Since these L Bonds are being offered and sold pursuant to an effective registration statement, the L Bonds may be transferred
so long as the transfer is documented in a form approved by us. We do not, however, expect a public trading market to develop
for the L Bonds in the foreseeable future, if ever. Because of the lack of a trading market for L Bonds, it is unlikely that holders
will be able to sell their L Bonds easily. If you wish to transfer your L Bond held in book-entry (or certificated) form, you
should contact us. If you wish to transfer your L Bond held through DTC, you should contact your broker-dealer (i.e., your selling
group member).
How
will I receive interest and principal payments on my L Bonds?
This
will depend on how you purchased your L Bond. If you purchased your L Bond directly from us, we will directly deposit our payments
of interest and principal into the account indicated in your Subscription Agreement. If you purchased through DTC, all payments
of principal and interest will be made to DTC, who will forward such payment to the DTC participant you hold your L Bonds through,
which will then arrange to transfer the payment to your brokerage account. In this case, all accountings of what you have contributed
and what you are owed will be the responsibility of your broker-dealer.
What
is GWG Holdings, Inc.?
We are a financial services company committed to transforming
the alternative asset industry with disruptive and innovative products and services. In 2018 and 2019, we consummated a series
of transactions (as more fully described below) with Beneficient that has resulted in a significant reorientation of our business
and capital allocation strategy towards an expansive and diverse exposure to alternative assets. Beneficient, through its subsidiaries,
plans to operate three potentially high value, high margin lines of business: (i) private trust lending and liquidity products;
(ii) trust and custody services; and (iii) financial technology.
While we are continuing our work to maximize
the value of our secondary life insurance business, we do not anticipate purchasing additional life insurance policies in the
secondary market and have increased capital allocated toward providing liquidity to a broader range of alternative assets, primarily
through Beneficient. We believe Beneficient can finance investments in alternative assets that will generally produce higher risk-adjusted
returns than those we generally can achieve from life insurance policies acquired in the secondary market. Furthermore, although
we believe that our portfolio of life insurance policies is a meaningful component of a growing diversified alternative asset
portfolio, we continue to explore various strategic alternatives for our life insurance portfolio aimed at maximizing its value,
including a possible sale, refinancing or recapitalization of our life insurance portfolio.
Our common stock is listed on The NASDAQ
Capital Market under the ticker symbol “GWGH.” We are based in Dallas, Texas.
What
is your business strategy?
We are a financial services company committed
to transforming the alternative asset industry with disruptive and innovative products and services. In 2018 and 2019 we consummated
a series of transactions with Beneficient that has resulted in a significant reorientation of our business and capital allocation
strategy towards an expansive and diverse exposure to alternative assets.
Are
there any risks involved in investing in this offering?
Yes. Investing in our L Bonds involves
a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus and Item 1A, entitled
“Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference
herein, which contain a detailed discussion of the material risks that you should consider before investing in our L Bonds.
How
long will this offering last?
The
offering is a continuous offering. The offering expires under SEC rules after three years from the effective date of the registration
statement of which this prospectus forms a part. We may, however, conduct similar or identical offerings of L Bonds or other securities
during this same time or afterwards. We may also decide to terminate this offering at any time.
Will
I be notified of how my investment is doing?
We
will provide you with periodic updates on our performance through periodic filings we make with the SEC. Such filings will include:
(i) three quarterly financial reports; (ii) one annual report; (iii) supplements to this prospectus, as appropriate; and (iv)
such other reports as required under Section 13 of the Securities Exchange Act of 1934. Such information is also available on
our website at www.gwgh.com.
Will
I receive annual tax information regarding interest payments from you?
You
will receive a Form 1099-INT, which will be mailed by January 31 of each year.
Who
can help answer my questions about the offering?
If
you have more questions about our offering, you should contact a registered representative of your broker-dealer (i.e., your selling
group member) or other investment professional, or else contact:
GWG Holdings, Inc.
325 N. Saint Paul Street, Suite 2650
Dallas, TX 75201
(612) 746-1944
Attention: General Counsel
PROSPECTUS
SUMMARY
This
summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that
you may want to consider. To understand this offering fully, you should carefully read the entire prospectus, including the section
entitled “Risk Factors,” and the documents that are incorporated by reference into this prospectus, including Item
1A, entitled “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2019, before making
a decision to invest in our L Bonds. Unless otherwise noted or unless the context otherwise requires, the terms “we,”
“us,” “our,” the “Company” and “GWG” refer to GWG Holdings, Inc. together with
its wholly owned direct or indirect subsidiaries. In instances where we refer specifically to “GWG Holdings” or “GWG
Holdings, Inc.,” or where we refer to a specific subsidiary of ours by name, we are referring only to that specific legal
entity.
Our
Company
We are a financial services company committed
to transforming the alternative asset industry with disruptive and innovative products and services. In 2018 and 2019 we consummated
a series of transactions with The Beneficient Company Group, L.P. (“Ben LP,” and, including all of the subsidiaries
it may have from time to time, “Beneficient”) that has resulted in a significant reorientation of our business and
capital allocation strategy towards an expansive and diverse exposure to alternative assets. As part of this reorientation, we
also changed our Board of Directors and executive management team.
Beneficient,
through its subsidiaries, plans to operate three potentially high value, high margin lines of business:
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Private
Trust Lending & Liquidity Products. Through Beneficient Capital Company, L.L.C.
(“BCC”), Beneficient provides a unique suite of private trust, lending and
liquidity products focused on bringing liquidity to owners of professionally managed
alternative assets. Beneficient’s innovative liquidity solutions are designed to
serve mid-to-high net worth (“MHNW”) individuals, small-to-mid sized (“STM”)
institutions, and asset managers who have historically possessed few attractive options
to access early liquidity from their alternative assets. Beneficient targets MHNW clients
with $5 million to $30 million in net worth and STM institutional clients typically holding
less than $1 billion in assets.
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Trust
and Custody Services. Through Beneficient Administrative and Clearing Company, L.L.C.
(“BACC”) and (subject to capitalization) through PEN Indemnity Insurance
Company, LTD (“PEN”), Beneficient plans, in the future, to market retirement
funds, custody and clearing of alternative assets, and trustee and insurance services
for covering risks attendant to owning or managing alternative assets.
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Financial
Technology. Through Ben Markets Management Holdings, L.P., formerly called ACE Portal,
L.L.C. (“ACE”), Beneficient plans in the future to provide online portals
and financial technologies for the trading and financing of alternative assets.
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Beneficient’s existing and planned products and services
are designed to support the tax and estate planning objectives of its MHNW clients, facilitate a diversification of assets or simply
provide administrative management and reporting solutions tailored to the goals of the investor who owns alternative investments.
While we are continuing our work to maximize
the value of our secondary life insurance business, we do not anticipate purchasing additional life insurance policies in the secondary
market and have increased capital allocated toward providing liquidity to a broader range of alternative assets, primarily through
investments in Beneficient. We believe Beneficient’s operations will generally produce higher risk-adjusted returns than
those we can achieve from life insurance policies acquired in the secondary market. Furthermore, although we believe that our portfolio
of life insurance policies is a meaningful component of a growing diversified alternative asset portfolio, we continue to explore
strategic alternatives for our life insurance portfolio aimed at maximizing its value, including a possible sale, refinancing or
recapitalization of our life insurance portfolio.
We completed our transactions with Beneficient
to provide us with a significant increase in assets and common shareholder equity. In addition, our transactions with Beneficient
provide us with the opportunity for a diversified source of future earnings within the alternative asset industry. As GWG and
Beneficient expand their strategic relationship, we believe the Beneficient transactions will transform GWG from a niche provider
of liquidity to owners of life insurance to, as GWG and Beneficient expand their strategic relationship, a full-scale provider
of trust and liquidity products and services to owners of a broad range of alternative assets.
Organizational Structure
GWG Holdings conducts its life
insurance secondary market business through a wholly owned subsidiary, GWG Life, and GWG Life’s wholly owned
subsidiaries, Life Trust and DLP IV. GWG Holdings’ indirect interests in loans collateralized by cash flows from other
alternative assets are held by Ben LP and its general partner, Beneficient Management, L.L.C. (“Beneficient
Management”). All of these entities are legally organized in the state of Delaware, other than GWG Life Trust, which is
governed by the laws of the state of Utah. GWG Holdings’ wholly owned subsidiary, Life Epigenetics Inc. (formerly named
Actüa Life & Annuity Ltd.) (“Life Epigenetics”), was formed to commercialize epigenetic
technology for the longevity industry. Through its wholly owned subsidiary, youSurance General Agency, LLC
(“youSurance”), GWG Holdings sought to offer life insurance directly to customers utilizing epigenetic
technology. On November 11, 2019, GWG Holdings contributed the common stock of Life Epigenetics and membership interests in
youSurance to a legal entity, InsurTech Holdings, LLC (“InsurTech Holdings”), in exchange for 100% of the
membership interest in InsurTech Holdings (on March 2, 2020, InsurTech Holdings changed its name to FOXO
BioScience LLC). Although we currently own 100% of the equity of InsurTech Holdings, we do not
have a controlling financial interest in InsurTech Holdings because InsurTech Holdings’ managing member has substantive
participating rights. Therefore, we account for our ownership interest in InsurTech Holdings as an equity method investment.
Our headquarters are currently located in Dallas, Texas.
Beneficient was formed in 2003 but began
its alternative asset business in September 2017. Beneficient operates primarily through its subsidiaries, which provide Beneficient’s
products and services. These subsidiaries include: (i) BCC, through which Beneficient offers loans and liquidity products; (ii)
BACC, through which Beneficient provides services for fund and trust administration and plans to provide custody services; (iii)
PEN, through which Beneficient plans to offer insurance services; and (iv) ACE, through which Beneficient plans to provide an online
portal for direct access to Beneficient’s financial services and products.
In the second quarter of 2019, in connection
with the expansion of our strategic relationship with Beneficient, (i) our former chief executive officer resigned and was
replaced with Murray T. Holland, a trust advisor of various related trusts (the “Seller Trusts”), which control a majority
of our outstanding common stock, and (ii) all then current members of our Board of Directors resigned as directors of the Company,
and 11 individuals designated by Beneficient were appointed as directors of the Company. Shortly thereafter, three additional directors
were appointed to our Board of Directors. On October 11, 2019, four members of the Board of Directors resigned as directors of
the Company, and the size of the Board of Directors was reduced from 14 to ten directors in order to facilitate the Board of Directors’
ability to oversee the Company’s operations in an efficient and effective manner. Under our current conflicts of interest
policy, all transactions between the Company and its wholly owned subsidiaries, on the one hand, and related parties (including
Beneficient and its controlled affiliates), on the other hand, must be approved by disinterested directors. On December 31, 2019,
we entered into a Preferred Series A Unit Account and Common Unit Investment Agreement (the “Investment Agreement”)
with Ben LP, Beneficient Company Holdings, L.P. and Beneficient Management pursuant to which, among other things, we obtained the
right to appoint a majority of the board of directors of Beneficient Management. As a result, the Company obtained control of Ben LP and began
reporting the results of Ben LP and its subsidiaries on a consolidated basis beginning on the transaction date of December 31,
2019.
Market Opportunity
Alternative Asset Liquidity Products
and Services
The market demand for liquidity from owners
of alternative assets is attributable to the outstanding net asset value of illiquid alternative assets (“NAV”) held
by U.S. investors. Using data from various published industry reports from 2017 to 2019, certain widely accepted commercial private-equity
databases, and applying its own proprietary assumptions and calculations (“Ben Estimates”), Beneficient estimates that
total outstanding NAV held by U.S. investors exceeded $4.0 trillion in 2019 (up from an estimated $3.0 trillion in 2018).
According to at least one industry report
from Prequin from 2018, total outstanding NAV in the hands of U.S. investors grew at a 12.1% compound annual growth rate (“CAGR”)
for the ten years ended 2018 and was forecasted to grow at an 8% CAGR through 2023 as a result of continued increases in capital
committed to the alternative asset class.
According to Ben Estimates, the large U.S.
institutions representing approximately 54% of the NAV have consistently sought liquidity on approximately 1.85% to 2.25% of their
outstanding NAV. Based on Ben Estimates, this has led to an annual demand for liquidity of nearly $50 billion in recent years.
A primary group not included in this demand
is the MHNW investor who holds investments of $5 million to $30 million compared to a large institution’s holdings in the
hundreds of millions or billions of dollars. Intermediary brokers will often not represent the MHNW individuals (or STM institutional
investors). According to Ben Estimates, MHNW investors hold over $700.0 billion in NAV, yet MHNW investors have only been able
to access liquidity representing less than 0.5% of the NAV held by them each year, compared to the average 2% achieved by the large
institutional owners, representing 54% of the market.
Based on these amounts, Beneficient estimates
that MHNW investors would seek liquidity of 3% of their outstanding NAV each year if liquidity was made available to them, or a
slightly greater percentage than that of large U.S. institutions. As a result, and according to Ben Estimates, the estimated market
demand for liquidity by MHNW individuals would have exceeded $20.0 billion in 2019.
Secondary Life Insurance Market
The market for life insurance is large.
According to the American Council of Life Insurers Fact Book 2018 (ACLI), consumers owned approximately $12.0 trillion in face
value of individual life insurance policy benefits in the United States in 2017. In that same year, the ACLI reports that individual
consumers purchased an aggregate of $3.1 trillion of new individual life insurance policy benefits. This figure includes all types
of individual life policies, including term insurance and permanent insurance known as whole life and universal life.
The life insurance secondary market primarily
serves consumers, 65 years and older, and their families who own life insurance.
The secondary market for life insurance
exists as a result of consumer lapse behaviors and surrender values far below economic value offered to consumers for their life
insurance by the issuing insurance carriers. The ACLI reports that the annual lapse and surrender rate for individual life insurance
policies is 5.7% of the in-force face value of benefits, amounting to over $680 billion in face value of policy benefits lapsed
and surrendered in 2017 alone.
In 2017, the National Association of Insurance
Commissioners (“NAIC”) issued a policy bulletin in support of products we provide. The bulletin described these products
as “innovative private market solutions for financing Americans’ long-term care needs.” The NAIC, citing the
Company’s August 25, 2016 presentation, discussed how consumers could exchange the market value of their life insurance policies
for products designed to fund long-term care expenses.
Primary Life Insurance Market and Technology (“Insurtech”)
The opportunity to apply technology to
transform the insurance industry is significant. The application of technology to the insurance industry, commonly referred to
as “insurtech”, provides opportunities for new entrants into the traditional insurance marketplace that have the potential
to significantly disrupt the insurance industry’s historical approach to assessing and selecting acceptable underwriting
risks.
As discussed in the Organizational Structure
section above, on November 11, 2019, GWG contributed the common stock and membership interests of its previously-wholly owned subsidiaries,
Life Epigenetics and youSurance, to InsurTech Holdings. This transaction affected a reorganization such that InsurTech owns only
two direct subsidiaries, Life Epigenetics and youSurance, which hold all insurtech assets, and one indirect subsidiary, Scientific
Testing Partners, LLC, a wholly owned subsidiary of Life Epigenetics. In connection with the transaction, GWG Holdings contributed
$2.1 million in cash to InsurTech Holdings during the fourth quarter of 2019 and is committed to contribute an additional $17.9
million to the entity over the next two years.
Business Strategies
1. Liquidity
for Alternative Assets
We believe we are now uniquely positioned
to provide liquidity and related services to investors holding a full range of illiquid alternative assets. We will continue to
work to create the most value for holders of alternative assets, the financial professionals who advise them and for our shareholders.
Beneficient provides private trust solutions,
including a unique suite of lending and liquidity products focused on bringing liquidity to owners of alternative assets. Beneficient’s
innovative liquidity solutions are designed to serve MHNW individuals, STM institutions, and asset managers who have historically
possessed few attractive options to access early liquidity from their alternative assets. Beneficient targets MHNW individual clients
with $5 million to $30 million in investments and institutional clients typically holding less than $1 billion in assets.
Beneficient’s products can also support
tax and estate planning objectives, facilitate a diversification of assets or provide administrative management and reporting solutions
tailored to the goals of the investor. In the future, Beneficient plans to offer insurance services covering risks associated with
owning or managing alternative assets.
Our life insurance secondary market business
is designed to serve consumers 65 years or older owning life insurance. We seek to earn non-correlated yield from life insurance
policies that we purchased in the secondary market. Since inception, we have purchased over $3.2 billion in face value of policy
benefits from consumers for over $620 million, as compared to the $52 million in surrender value offered by insurance carriers
on those same policies. Our products provide unique and valuable services to the senior consumers that we serve.
The goal of our secondary life insurance
business has been to build a profitable, large and well-diversified portfolio of life insurance assets. We believe that scale and
diversification are key factors and risk mitigation strategies to provide consistent cash flows and reliable investment returns.
We believe that we have reached the goal in terms of portfolio size and diversification. We do not anticipate making additional
investments in the life settlements portfolio as we believe Beneficient’s operations will generally produce higher risk-adjusted
returns than those we can achieve from life insurance policies acquired in the secondary market.
2. Developing
a World Class Financial Services Distribution Platform
GWG has developed a large and sophisticated
financial services product distribution platform. Today, this platform consists of over one hundred independent broker dealers
and several thousand “independent” financial advisors (“Retail Distribution”) who sell the Company’s
investment products. “Independent” in this context refers to broker-dealers that accommodate financial advisors who
carry securities licenses and need back-office support for services, such as compliance and trade execution, but allow their advisors
wide latitude in how they conduct business. Since inception, GWG has raised over $1.52 billion of debt and equity capital to support
our secondary market of life insurance business and related expenditures.
We believe that we are well positioned
to continue to grow our Retail Distribution for several reasons:
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We believe there is a trend towards financial professionals leaving large full-service broker-dealers to become “independent”;
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Newly independent financial professionals and their clients demand a high level of customer service and access to innovative and value added products;
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The significant demand for liquidity from owners of alternative assets by US investors;
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We believe that our expanded relationship with Beneficient will attract more and larger broker dealers to our platform due to our increased size and market capitalization as well as the increase in products offered; and
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We believe that by using capital to provide liquidity products to our current customers, and as they begin to realize the benefit of these products, we will able to raise more capital and attract additional broker dealers into our selling group.
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3. Commercializing
Advanced Epigenetic Technology for Primary Life Insurance Markets
We believe life insurance underwriting
will be transformed due to advancements in science and technology. As part of that transformational change, we believe the science
of epigenetics will serve as a foundational science to this advancement for the life insurance industry by achieving more accurate
and automated underwriting.
As described above, on November 11,
2019, the Company contributed the common stock and membership interests of its previously wholly-owned subsidiaries, Life
Epigenetics and youSurance to InsurTech Holdings. We believe that as a separate entity (rather than as a small subsidiary of
a large financial services holding company), the InsurTech Holdings businesses can reach their maximum potential in terms of
marketing and branding, attraction of talent, appropriate peer group comparisons and, ultimately, return to its owners. The
Company will retain substantially all of the economics of InsurTech Holdings.
The
Offering
Issuer
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GWG
Holdings, Inc.
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Indenture
Trustee
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Bank
of Utah
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Paying
Agent
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GWG
Holdings, Inc.
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Securities
Offered
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We
are offering up to 2,000,000 Units of L Bonds (“L Bonds”), with each whole Unit representing $1,000 in principal
amount of L Bonds. The L Bonds are being sold on a continuous basis.
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Method
of Purchase
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We
will sell L Bonds using two different closing or “settlement” services, whenever available. The first service
is DTC settlement, and the second is direct settlement with the Company. For more information, see “Plan of Distribution.”
The registration statement of which this prospectus is a part also registers the renewal of L Bonds that are outstanding from
time to time.
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Denomination
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The
minimum purchase amount is 25 L Bond Units, or $25,000 in principal amount. Additional L Bonds in excess of 25 Units may be
purchased in any number of whole or fractional Units.
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Offering
Price
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$1,000
per whole Unit, representing 100% of the principal amount of the L Bond represented by a whole Unit. Throughout this prospectus,
we refer to L Bond Units simply as “L Bonds.”
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Limited
Rescission Right
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If
you are purchasing L Bonds through direct settlement with the Company and your Subscription Agreement is accepted at a time
when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must
be filed with the SEC, but such post-effective amendment has not yet been declared effective, you will have a limited time
within which to rescind your investment subject to the conditions set forth in this prospectus. See “Description of
the L Bonds — Limited Rescission Right” for additional information.
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Maturity
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You
may generally choose maturities for your L Bonds of two, three, five or seven years. Nevertheless, depending on our capital
requirements, we may not offer and sell L Bonds of all maturities at all times during this offering.
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Interest
Rates
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The
interest rate of the L Bonds will be established at the time of your purchase, or at the time of renewal, based upon the rates
we are offering in this prospectus or our latest interest rate supplement to this prospectus (i.e., any prospectus supplement
containing interest rate information for L Bonds of different maturities), and will remain fixed throughout the term of the
L Bond. We may offer higher rates of interest to investors with larger aggregate L Bond portfolios, but only as set forth
in the then-current interest rate supplement.
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Interest
Payments
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We
will pay interest in cash on the L Bonds based on the terms you choose, which may be monthly or annually. Interest will
accrue from the effective date of the L Bond’s issuance. If you purchase your L Bond directly from the
Company, the effective date of your L Bond will be the date on which we accept your fully paid subscription. If you
purchase your L Bond through DTC settlement, interest will begin accruing on the trade date. Based on our
anticipated bi-monthly closing cycle, this means that interest will accrue for a period of 15 or 30 days for the month in
which your purchase is made, depending on when during the DTC closing cycle your purchase is made. Interest payments will
generally be made on the 15th day immediately following the last day of the month to the L Bond holder of
record as of the last day of that interest-payment period. Interest will be paid without any compounding.
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Principal
Payments
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The
maturity date for the L Bonds will be the last day of the month during which the L Bond matures. We are obligated to pay the
principal on the L Bond in cash by the fifth day of the month next following its maturity (or the first business day following
such date).
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Payment
Method
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Principal
and interest payments will be made in cash by direct deposit to the account you designate in your Subscription Agreement if
you purchase L Bonds through direct settlement with the Company. If you purchase L Bonds through DTC settlement, principal
and interest payments will be made to your brokerage or custodial account through DTC.
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Renewal
or Redemption at Maturity
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Upon maturity, the L Bonds will be automatically renewed for the same term at the interest rate we are offering at that time
to other investors with similar aggregate L Bond portfolios for L Bonds of the same maturity, unless repaid upon maturity
at our or your election. In this regard, we will notify you at least 30 days prior to the maturity date of your L Bonds. In
the notice, we will advise you if we intend to repay the L Bonds or else remind you that your L Bonds will be automatically
renewed unless you exercise your option, at least 15 days prior to the maturity date, to elect to have your L Bonds repaid.
If applicable, a new certificate will be issued.
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If
we determine that a post-effective amendment to the registration statement covering the offer and sale of L Bonds must be
filed during your 15-day repayment election period, we will extend your election period until ten days following the postmark
date of our notice to you that the amendment has become effective.
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For
any L Bonds offered hereby that mature after the three-year anniversary of the commencement of this offering, we expect that
the renewal of such L Bonds may require us to file a new registration statement. In such a case, the new registration statement
must be declared effective before we will be able to renew your L Bond. In this event, if the new registration statement has
not yet been filed or become effective, we will extend your election period until ten days following the date of our notice
to you that the new registration statement has become effective, which notice will include a new prospectus.
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If
L Bonds with similar terms are not being offered at the time of renewal, then (i) the interest rate upon renewal will be (a)
the rate specified by us in writing on or before the maturity date or (b) if no such rate is specified, the rate of your existing
L Bonds, and (ii) the maturity will the same if L Bonds of the same maturity are then being offered at the time of renewal.
If L Bonds of the same maturity are not then being offered at the time of renewal, then the maturity will be the next earliest
maturity. Accordingly, you should understand that the interest rate offered upon renewal may differ from the interest rate
applicable to your L Bonds prior to maturity. See “Description of the L Bonds — Renewal or Redemption on Maturity.”
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Call
and Redemption Prior to Maturity
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We may call and redeem the entire outstanding principal balance and accrued but unpaid interest of any
or all of the L Bonds at any time without penalty or premium. L Bond holders will have no right to require us to redeem any L Bond
prior to maturity unless the request is due to death, bankruptcy or total permanent disability. The indenture defines “total
permanent disability” as the determination by a
physician, approved by us, that a holder of an L Bond who is a natural person, and who was gainfully employed at the time of issuance
of the L Bond (or its renewal date), is unable to work on a full-time basis during a period of 24 consecutive months.
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In our sole discretion, we may accommodate other requests to redeem any L Bond prior to maturity.
If we agree to redeem an L Bond upon the request of an L Bond holder (other than in connection with death, bankruptcy
or total permanent disability of a holder), we will impose a redemption fee of 6% against the outstanding principal balance of
the L Bond redeemed, which fee will be subtracted from the amount paid.
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Ranking
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The
L Bonds will constitute secured debt of GWG Holdings. The payment of principal and interest on the L Bonds will be:
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● pari passu with respect to payment on and collateral securing
all L Bonds (including those issued under our prior L Bond offering) and the previously issued Seller Trust L Bonds due 2023 (the
“Seller Trust L Bonds”), of which approximately $948.1 million and $366.9 million in principal amount was outstanding,
respectively, as of December 31, 2019 (see the caption “— Collateral Security” below);
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● structurally junior to the present and future obligations owed
by DLP IV under a second amended and restated senior credit facility with LNV Corporation, and structurally or contractually junior
to any future obligations that DLP IV or other primary obligors or guarantors may have under future senior secured borrowing facilities;
and
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● structurally
junior to the present and future claims of other creditors of DLP IV, including trade creditors.
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The
indenture will permit us to issue other forms of debt, including senior and secured debt, in the future. Any such secured
senior debt will have priority over L Bonds with respect to claims for payment and claims for any collateral that is shared
as between the holders of L Bonds and such senior secured debt.
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To
fully understand the foregoing summary, you should understand that “pari passu” means that claims for payment
and entitlement to security among the holders of L Bonds (including the holders of previously issued L Bonds) and the holders
of any later-created class of “pari passu debt” of ours, will generally be treated equally and without preference.
Debt issued on a pari passu basis in the future would be treated equally and without preference in respect of the L Bonds.
Thus, in the event of any default on the L Bonds (or any other debt securities of ours that is pari passu with the L Bonds)
resulting in claims for payment or claims on collateral security, the holders of the L Bonds and all such other debt securities
that are pari passu with the L Bonds would share in payment or collateral in proportion to the amount of principal and interest
owed on each such debt instrument. See “Description of the L Bonds — Ranking” for further information.
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Guarantee
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The payment of principal and interest on the L Bonds (including
those issued under our prior L Bond offering) and Seller Trust L Bonds is fully and unconditionally guaranteed by GWG Life. On
December 31, 2019, there was approximately $948.1 million and $366.9 million, respectively, in outstanding principal amount of
previously issued L Bonds and Seller Trust L Bonds.
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Collateral
Security
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The
L Bonds are secured by the assets of GWG Holdings, Inc. and by a guarantee and corresponding grant of a security interest
in substantially all the assets of GWG Life. Our assets consist primarily of our investments in Beneficient, investments in
our subsidiaries (including financing receivables from affiliates) and any cash proceeds we receive from life insurance assets
of our subsidiaries, and all other cash and investments we hold in various accounts.
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GWG Life’s assets, including its equity in our subsidiary
DLP IV and its beneficial interest in Life Trust, serve as collateral for our L Bonds. However the life insurance policies
held by DLP IV and Life Trust, which comprise a substantial majority of our life insurance policies, do not serve as direct collateral
for the L Bonds. Further, the life insurance policies held by DLP IV are pledged as direct collateral securing the obligations
under DLP IV’s second amended and restated senior credit facility with LNV Corporation. The L Bonds’ security
interest will be structurally subordinate to the security interest in favor of our senior secured lender, together with any future
senior secured lenders of ours. The assets of GWG Life, including proceeds it receives as distributions from DLP IV and derived
from the insurance policies owned by DLP IV, are collateral for GWG Life’s guarantee of the repayment of principal and interest
on the L Bonds.
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The
L Bonds are also secured by a pledge of 3,952,155 shares of our common stock. For more information please see “Description
of the L Bonds — Collateral Security.”
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Indenture
Covenants
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The
indenture governing the L Bonds places restrictive covenants and affirmative obligations on us. For example, our debt coverage
ratio may not exceed 90%.
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The indenture defines the debt
coverage ratio as the ratio, expressed as percentage, of (A) the aggregate sum of all Indebtedness (as defined in the
indenture, other than Excluded Indebtedness, as described below) of GWG Holdings and its direct and indirect subsidiaries
(including the Securities issued under the indenture, but excluding any Indebtedness of Ben LP and its direct and indirect
subsidiaries) as reflected on GWG Holdings’ most recent consolidated balance sheet prepared in accordance with GAAP
over (B) the sum of (i) Net Present Asset Value (as defined in the amended indenture) of Life Insurance Policies (as defined
in the amended indenture) owned by GWG Holdings and its direct or indirect subsidiaries or affiliates, but excluding Life
Insurance Policies held by Ben LP and its direct and indirect subsidiaries and controlled affiliates, plus (ii) all cash (and
cash equivalents) held by GWG Holdings and its direct or indirect subsidiaries or affiliates, but excluding the cash (and
cash equivalents) held by Ben LP and its direct and indirect subsidiaries, plus (iii) the original cost basis in GWG
Holdings’ investment in common units or other securities of Ben LP, plus (iv) the outstanding principal amount of any
outstanding loans made under a commercial loan agreement with GWG Life, as lender, plus (v) the cost basis of assets
contributed to GWG Holdings or any direct or indirect subsidiary of GWG Holdings in connection with a Repurchase Transaction
(as defined below), plus (vi) without duplication, the value of all other assets of GWG Holdings and its direct and indirect
subsidiaries or affiliates (but excluding the value of assets of Ben LP and its direct and indirect subsidiaries) as
reflected on its most recent consolidated balance sheet prepared in accordance with GAAP.
The indenture defines “Excluded Indebtedness” as
Indebtedness or any portion thereof (A) the principal and accrued but unpaid interest of which is payable at GWG Holdings’
option, pursuant to the terms of such Indebtedness or otherwise, in Capital Stock (as defined in the amended indenture) of GWG
Holdings or securities mandatorily convertible into or exchangeable for Capital Stock of GWG Holdings, or (B) any Indebtedness
that is reasonably expected to be converted or exchanged, directly or indirectly, into Capital Stock of GWG Holdings, provided
that under the terms of such Indebtedness in the event any such conversion or exchange does not occur in accordance with the terms
of such transaction, such Indebtedness would be cancelled and any assets received in exchange for such Indebtedness would be returned
(a “Repurchase Transaction”).
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For this purpose, the net present asset value of our life insurance
assets is equal to the present value of the cash flows derived from the face value of policy benefit assets we own, discounted
at a rate equal to the weighted-average interest rate paid on indebtedness, excluding that of Seller Trust L Bonds.
The
net present asset value of our life insurance assets for purposes of this covenant is not necessarily the same as the fair value
of our life insurance assets as reflected on our most recently available balance sheet prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) and does not necessarily reflect the saleable or market value of those assets.
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We
are required to notify the indenture trustee in the event we violate this restrictive covenant for a period of 30 consecutive
days. An “event of default” will exist under the indenture if a violation of this covenant persists for a period
of 60 calendar days after the trustee’s notice to us of a breach, or such a notice received from the holders of at least
25% in principal amount of outstanding L Bonds.
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The
indenture also places limitations on our ability to engage in a merger or sale of all of our assets. See “Description
of the Indentures — Events of Default” and “— Consolidation Mergers or Sales” for more information.
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Use
of Proceeds
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If all the L Bonds are sold, we would expect to receive up to
approximately $ million of net proceeds from this offering after paying our estimated
average selling commissions, dealer-manager fees, accountable expense allowance, wholesale commissions and our own offering-related
expenses. There is no minimum amount of L Bonds that must be sold before we access investor funds. The exact amount of proceeds
we receive may vary considerably depending on a variety of factors, including how long the L Bonds are offered.
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We
intend to use the net proceeds from this offering to grow our alternative asset exposure, including through investments in
Beneficient in the form of equity investments or loans, and to meet our other obligations, including debt obligations.
Beneficient will have broad discretion to use the proceeds of any such investments and may use such proceeds to fund
alternative asset financings, to repay indebtedness, including to related parties, and for general working capital
purposes, including operating expenses. We may also use some of the proceeds from this offering to pay interest and
principal amounts owing under previously issued L Bonds, Seller Trust L Bonds, and L Bonds offered hereby
and for the payment of dividends on and redemption of our preferred stock. See “Use of Proceeds”
for additional information.
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No
Market for L Bonds Units; Transferability
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There
is no existing market for the L Bonds and we do not anticipate that a secondary market for the L Bonds will develop. We do
not intend to apply for listing of the L Bonds on any securities exchange or for quotation of the L Bonds in any automated
dealer quotation system. Nevertheless, you will be able to freely transfer or pledge L Bonds. See “Description of the
L Bonds — Transfers.”
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Book
Entry
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The
L Bonds may be issued in book-entry form, certificated form, or in the form of a global certificate deposited with a depositary.
See “Description of the L Bonds — Registration and Exchange.”
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Covered
Security
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Our
L Bonds are a “covered security.” The term “covered security” applies to securities exempt from state
registration because of their oversight by federal authorities and national-level regulatory bodies pursuant to Section 18
of the Securities Act of 1933. Generally, securities listed on national exchanges are the most common type of covered security
exempt from state registration. A non-traded security also can be a covered security if it has a seniority greater than or
equal to other securities from the same issuer that are listed on a national exchange. Our L Bonds are a covered security
because they are senior to our common stock, which is listed on The Nasdaq Capital Market, and therefore our offering of L
Bonds is exempt from state registration.
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Although
the status of our L Bonds as a “covered security” will facilitate their purchase and sale to a broader range of investors
than would otherwise be available to us, and although the offer and sale of a “covered security” generally involves
fewer issuance costs to the issuer of such securities, our L Bonds are not a suitable purchase for all investors.
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Risk
Factors
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An
investment in the L Bonds involves significant risks, including the risk of losing your entire investment, and may be
considered speculative. Importantly, we maintain a senior borrowing arrangement that subordinates the right to payment on,
and shared collateral securing, the L Bonds to our senior secured lender. From time to time we may add or replace senior
lenders and the particular arrangements under which we borrow from them. In addition, these borrowing arrangements with
senior lenders restrict, and are expected to continue to restrict, our cash flows and, subject to certain exceptions,
distributions from our operating subsidiaries. These provisions will restrict cash flows available for payment of principal
and interest on the L Bonds. For a summary of risks relating to this offering and our Company and business, please see
“Risk Factors” beginning on page 11 of this prospectus and Item 1A, entitled “Risk Factors,” of our
Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference herein.
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RISK
RELATING TO FORWARD-LOOKING STATEMENTS
Certain
matters discussed in this prospectus and the documents incorporated by reference contain forward-looking statements. These forward-looking
statements reflect our current expectations and projections about future events and are subject to risks, uncertainties and assumptions
about our operations and the investments we make, including, among other things, factors discussed under the heading “Risk
Factors” below.
The
words “believe,” “could,” “possibly,” “probably,” “anticipate,” “estimate,”
“project,” “expect,” “may,” “will,” “should,” “seek,”
“intend,” “plan,” “expect,” or “consider” and similar expressions are intended
to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements
are subject to risks and uncertainties, which could cause actual results to differ materially from such statements. Such risks
and uncertainties include, but are not limited to:
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the
valuation of assets reflected on our financial statements, including the fair value of Beneficient’s assets and liabilities, including noncontrolling interests,
which were consolidated as a result of the transactions with Beneficient on December 31, 2019;
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the
illiquidity of our life insurance and Beneficient-related investments and receivables
from affiliates;
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our
ability to realize the anticipated benefits from our consolidation of Beneficient;
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Beneficient’s
financial performance and ability to execute on its business plan;
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Beneficient’s
ability to obtain the trust charters from the Texas Department of Banking necessary to
implement its business plan;
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our
ability to obtain accurate and timely financial information from Beneficient;
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our
ability to effectively transition the management and oversight roles served by our former
executives and members of our Board of Directors;
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changes
resulting from the evolution of our business model and strategy with respect to Beneficient
and the life insurance secondary market;
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our
reliance on debt financing and continued access to the capital markets;
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our significant and ongoing financing requirements;
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our
predominant use of short term debt to fund a portfolio of long term assets could result
in a liquidity shortage;
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our
ability to make cash distributions in satisfaction of dividend obligations and redemption
requests;
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our
ability to satisfy our debt obligations if we were to sell our assets;
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our
history of operating losses;
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general
economic outlook, including prevailing interest rates and credit market conditions
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federal,
state and FINRA regulatory matters;
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our
ability to comply with financial and non-financial covenants contained in borrowing agreements;
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the
reliability of assumptions underlying our actuarial models, including life expectancy
estimates and our projections of mortality events and the realization of policy benefits;
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risks
relating to the validity and enforceability of the life insurance policies we have purchased;
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our
reliance on information provided and obtained by third parties, including changes in
underwriting tables and underwriting methodology;
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life
insurance company credit exposure;
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cost-of-insurance (premiums) increases on our life insurance
policies;
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performance
of our investments in life insurance policies; and
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risks
associated with causing Life Epigenetics and youSurance to become independent of GWG.
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We
caution you that the foregoing list of factors is not exhaustive. Forward-looking statements are only estimates and predictions,
or statements of current intent. Actual results, outcomes or actions that we ultimately undertake could differ materially from
those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions
underlying these statements.
RISK
FACTORS
An investment in our securities involves
a high degree of risk. Before purchasing the securities offered by this prospectus, you should carefully consider the risks, uncertainties
and additional information (i) set forth in our most recent Annual Report on Form 10-K filed with the SEC which is incorporated
by reference into this prospectus, and (ii) contained herein or in any applicable prospectus supplement. The information incorporated
by reference into this prospectus specifically includes the risk factors contained in our Annual Report on Form 10-K filed with
the SEC on March 27, 2020.
For a description of these reports
and documents, and information about where you can find them, see “Where You Can Find More Information” and “Incorporation
of Certain Documents by Reference.” The risks and uncertainties in this prospectus and in the documents incorporated by
reference in this prospectus are those that we currently believe may materially impact the Company and could result in the loss
of all or a portion of your investment in the L Bonds. Additional risks not presently known or are currently deemed immaterial
could also materially and adversely affect our financial condition, results of operations, business and prospects.
Risks Related to the Offering and the
L Bonds
There is no established trading
market for the L Bonds. If an actual trading market does not develop for the L Bonds, you may not be able to resell them quickly,
for the price that you paid or at all.
There is currently no existing market
for the L Bonds and the L Bonds will not be listed for trading on any exchange. We cannot assure you as to the liquidity of any
market that may develop for the L Bonds, the ability of holders of the L Bonds to sell them or the price at which the holders
of the L Bonds may be able to sell them. The liquidity of any market for the L Bonds will depend on numerous factors, including
prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our
own financial condition, performance and prospects. Historically, the market for debt securities, such as the L Bonds, has been
subject to disruptions that have caused substantial price volatility. We cannot assure you that if a market for the L Bonds were
to develop, such a market would not be subject to similar disruptions.
We also cannot assure you that you will
be able to sell your L Bonds at a particular time or at all, or that the prices that you receive when you sell them will be favorable.
If no active trading market develops, you may not be able to resell your L Bonds at their fair market value, or at all.
The collateral granted as security
for our obligations under the L Bonds and Seller Trust L Bonds may be insufficient to repay the indebtedness upon an event of default.
GWG Holdings (the issuer of the L Bonds and Seller Trust L Bonds)
and GWG Life (the guarantor of obligations under the L Bonds and Seller Trust L Bonds, and a wholly owned subsidiary of GWG Holdings)
have each granted a security interest in substantially all of their respective assets to serve as collateral security for obligations
under the L Bonds and Seller Trust L Bonds. Importantly, DLP IV, a wholly owned subsidiary of GWG Life, owns a substantial number
of our life insurance policies, 77% of the face value of our life insurance portfolio as of December 31, 2019, and is the borrower
under our second amended and restated senior credit facility with LNV Corporation. As the borrower under that second amended and
restated senior credit facility with LNV Corporation, all of its assets — including all of its life insurance policy assets
— serve as collateral for our obligations under the facility.
Because of the fact that a substantial number of our life insurance
assets are held in our DLP IV subsidiary, and all of those life insurance assets serve as collateral security first for our obligations
under our second amended and restated senior credit facility with LNV Corporation, holders of L Bonds and Seller Trust L Bonds
risk the possibility that the collateral security granted in our life insurance policies and our investments in Beneficient to
secure our obligations under the L Bonds and Seller Trust L Bonds may be insufficient to repay holders upon an event of default.
Furthermore, while the indenture governing the L Bonds and the Seller Trust L Bonds limits the amount of debt relative to a measure
of asset coverage we and our subsidiaries can incur, the indenture permits us and our subsidiaries to incur additional secured
debt (subject to the debt coverage ratio) that may be senior to the L Bonds and Seller Trust L Bonds.
Furthermore, the life insurance policies and out investments
in Beneficient that secure our obligations under the L Bonds and Seller Trust L Bonds are illiquid assets. As a result, the book
value of those assets as reflected on our financial statements are based on numerous assumptions and may not necessarily reflect
the current market price for those assets, especially in the event of a bulk or distressed sale. Furthermore, a substantial majority
of the net assets of Beneficient are currently represented by goodwill as of December 31, 2019. Some or a substantial portion of
the proceeds from L Bond sales may be used to make investments in Beneficient. Because these advances may be used by Beneficient
for working capital purposes and to repay indebtedness, such investments may not increase the tangible assets securing the L Bonds.
If the trustee for the L Bonds were forced to sell all or a portion of the collateral securing them, there can be no assurance
that the trustee would be able to sell them for the prices at which we have recorded them, and the trustee might be forced to sell
them at significantly lower prices.
Subordination provisions contained
in the indenture will restrict the ability of the trustee or the L Bond or Seller Trust L Bond holders to enforce their rights
against us under the indenture, including the right to payment on the L Bonds, if a default then exists under a senior credit facility.
The L Bonds and Seller Trust L Bonds will
be subordinate in right of payment to any claims of our senior lender under the second amended and restated senior credit facility
with LNV Corporation. In this regard, subordination provisions limiting the right of L Bond and Seller Trust L Bond holders to
enforce their rights are contained in the indenture. These provisions include:
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a prohibition on challenging any enforcement action taken by a senior lender, or interfering with any legal action or suits undertaken by a senior lender, against us and our affiliates;
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a 180-day standstill period during which there may not be brought any action against us or our affiliates to enforce rights respecting collateral unless our second amended and restated senior credit facility with LNV Corporation has been repaid in full, which period may be extended if the senior lender takes action during such standstill period; and
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a prohibition on filing a bankruptcy or insolvency case against us or our affiliates for at least one year plus one day after any senior lender has been paid in full.
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In the event of a default on a senior credit
facility, the indenture prohibits us from making any payment, direct or indirect (whether for interest, principal, as a result
of any redemption or repayment at maturity, on default, or otherwise), on the L Bonds, Seller Trust L Bonds and any other indebtedness
unless and until: (i) the default respecting the senior credit facility has been cured or waived or has ceased to exist; or (ii)
in the case of a non-payment default that permits a senior lender to declare as due and payable all amounts owing under a senior
credit facility (but where that senior lender has not yet so declared amounts as being due and payable), the end of the period
commencing on the date the trustee receives written notice of default from the senior lender and ending on the earliest of (1)
our discharge of the default (or other cure), (2) the trustee’s receipt of a valid waiver of default from the senior lender,
or (3) a written notice from the senior lender terminating the payment prohibition.
During any payment prohibition period,
neither the holders of the L Bonds, the Seller Trust L Bonds, nor the trustee will have the right, directly or indirectly, to sue
to enforce the indenture or the L Bonds or Seller Trust L Bonds. Other provisions of the indenture do permit the trustee to take
action to enforce the payment rights of L Bond and Seller Trust L Bond holders after 179 days have passed since the trustee’s
receipt of notice of default from a senior lender, but in such case any funds paid as a result of any such suit or enforcement
action shall be applied toward the senior credit facility until the facility is indefeasibly paid in full before being applied
to the L Bonds and Seller Trust L Bonds.
These subordination provisions present
the risk that, upon any default by us on obligations owed to our senior lender, the holders of the L Bonds and Seller Trust L Bonds
will be unable to enforce their rights to payment.
If the 180-day standstill period noted
above, or any other limitation on the rights of the trustee or L Bond and Seller Trust L Bond holders to assert their rights to
payment of principal or interest under the indenture, is ultimately determined to conflict with provisions of the Trust Indenture
Act of 1939 (most notably sections 316(b) and 317(a) of that Act), then the trustee, as well as any holder who shall not have earlier
consented to such subordination provisions, will (notwithstanding such provision contained in the indenture) be authorized to institute
a lawsuit for the enforcement of any payment of principal or interest after their respective due dates.
The debt coverage ratio, designed
to provide some assurance to the holders of the L Bonds and Seller Trust L Bonds that the value of our total assets exceeds our
total interest-bearing obligations, values our life insurance policy assets, which represent 56% of our total assets (excluding
goodwill) as of December 31, 2019, in a manner that may not be representative of the amount we would actually receive upon a sale
of those assets.
Under the indenture governing the L Bonds
and Seller Trust L Bonds, as amended, the maximum amount of L Bonds and Seller Trust L Bonds we may issue at any time is limited
to an amount such that our debt coverage ratio does not exceed 90%. This limitation is designed to provide some basis to ensure
that the net present value of policy benefits from our life insurance assets, plus the carrying value of our other assets (including
out investments in Beneficient), will be sufficient to meet our obligations to our L Bond and Seller Trust L Bond holders. Expressed
as a percentage, the debt coverage ratio is the ratio of (A) the aggregate sum of all Indebtedness (other than Excluded Indebtedness)
of GWG Holdings and its direct and indirect subsidiaries (including the Securities issued under the indenture, but excluding any
Indebtedness of Ben LP and its direct and indirect subsidiaries) as reflected on GWG Holdings’ most recent consolidated balance
sheet prepared in accordance with GAAP over (B) the sum of (i) Net Present Asset Value of Life Insurance Policies owned by GWG
Holdings and its direct or indirect subsidiaries or affiliates, but excluding Life Insurance Policies held by Ben LP and its direct
and indirect subsidiaries and controlled affiliates, plus (ii) all cash (and cash equivalents) held by GWG Holdings and its direct
or indirect subsidiaries or affiliates, but excluding the cash (and cash equivalents) held by Ben LP and its direct and indirect
subsidiaries, plus (iii) the original cost basis in GWG Holdings’ investment in common units or other securities of Ben LP,
plus (iv) the outstanding principal amount of any outstanding loans made under a commercial loan agreement with GWG Life, as lender,
plus (v) the cost basis of assets contributed to GWG Holdings or any direct or indirect subsidiary of GWG Holdings in connection
with a Repurchase Transaction, plus (vi) without duplication, the value of all other assets of GWG Holdings and its direct and
indirect subsidiaries or affiliates (but excluding the value of assets of Ben LP and its direct and indirect subsidiaries) as reflected
on its most recent consolidated balance sheet prepared in accordance with GAAP. For this purpose, Excluded Indebtedness”
is Indebtedness which is payable at GWG Holdings’ option in capital stock of GWG Holdings or securities mandatorily convertible
into or exchangeable for such capital stock of GWG Holdings, or any Indebtedness that is reasonably expected to be converted or
exchanged, directly or indirectly, into such capital stock, provided that under the terms of such Indebtedness in the event any
such conversion or exchange does not occur in accordance with the terms of such transaction, such Indebtedness would be cancelled
and any assets received in exchange for such Indebtedness would be returned.
Although the debt coverage ratio is designed
to provide some basis to ensure that our assets will be sufficient to meet our obligations to the holders of L Bonds and Seller
Trust L Bonds, the “net present value” of our life insurance assets used in the debt coverage ratio is not the same
as the GAAP “fair value” of those assets on our balance sheet. Accordingly, the debt coverage ratio is not informative
of the amount we and holders of L Bonds and Seller Trust L Bonds would actually receive if we were forced to sell or liquidate
our life insurance related assets. Furthermore, any sale or liquidation of all or a significant portion of our life insurance
policies or investments in Beneficient would include significant transactional costs. See “— The collateral granted
as security for our obligations under the L Bonds and Seller Trust L Bonds may be insufficient to repay the indebtedness upon
an event of default.” As a result, our mere compliance with the debt coverage ratio in the indenture will not guarantee
that the value of our life insurance assets plus the value of our investments in Beneficient, if sold or liquidated, would in
all cases exceed the amount of our obligations to the holders of L Bonds and Seller Trust L Bonds.
USE OF PROCEEDS
If all of the L Bonds are sold, we expect
to receive up to approximately $ million of net proceeds from this offering after
paying our estimated offering and related expenses and the estimated selling commissions and additional compensation (consisting
of (i) dealer-manager fees, (ii) wholesaling fees and non-transaction based compensation of the wholesalers, who are our employees
and associated with the dealer manager, (iii) accountable expense allowance (iv) non-cash compensation, and (v) up to a 1.00% reallowance
to selling group members). We expect the selling commissions and additional compensation to aggregate approximately $
million based on expected average selling commissions of $ million ( %),
dealer-manager fees of $ million ( %),
and additional expenses aggregating to $50.0 million (2.50%), assuming the sale of all of the L Bonds. We have also agreed to reimburse
Emerson Equity for certain pre-offering expenses that we expect will aggregate to no more than $ .
In addition, we expect that our offering expenses, consisting of legal, accounting, printing, mailing, registration, qualification
and associated securities offering filing costs and expenses, will aggregate to approximately $2,400,000 through the course of
this offering.
As explained elsewhere in this prospectus,
the maximum amount of commissions, dealer manager fees and additional compensation payable to the dealer manager and selling group
members is % of the aggregate principal amount of L Bonds sold. Therefore, if all
of the L Bonds were sold and the maximum commissions, dealer manager fees and additional compensation were paid, we estimate that
the net proceeds to us, after paying our own estimated offering and related expenses, would be approximately $
million. Nevertheless, because we do not know the total principal amount of L Bonds that will be ultimately sold, we are unable
to accurately forecast the total net proceeds that will be generated by this offering.
There is no minimum amount of L Bonds
that must be sold before we access investor funds. The exact amount of proceeds we receive may vary considerably depending on
a variety of factors, including how long the L Bonds are offered.
We intend to use the net proceeds
from this offering to grow our alternative asset exposure, including through investments in Beneficient in the form of equity
investments and/or loans to Beneficient or related entities, and to meet our other obligations, including:
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servicing
our portfolio of life insurance assets (i.e., paying life insurance policy premiums);
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paying principal (at maturity or upon earlier prepayment or redemption), interest and fees to our lenders, including under DLP IV’s second amended and restated senior credit facility, previously issued L Bonds, Seller Trust L Bonds and the L Bonds offered hereby;
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paying
dividends on and, if applicable, redeeming our preferred stock;
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paying
transaction expenses relating to interest rate hedging and similar derivative transactions
(e.g., caps, collars, etc.); and
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general
working capital purposes.
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The extent to which we will use proceeds from this offering for any of these purposes, and the amounts
and timing of such expenditures, will depend on, among other things, how long the L Bonds are offered, the amount of net proceeds
that we receive from the sale of L Bonds being offered, our cash flows and needs for liquidity, the existence and timing of opportunities
to strategically increase our investment in Beneficient, the availability of funds from other sources, including realizations from
policy benefits, distributions from investments in Beneficient, the issuance of common or preferred equity, borrowings from senior
credit facilities, and other factors deemed relevant by our Board of Directors and management.
Beneficient will have broad discretion
to use the proceeds of any such investments and may use such proceeds to acquire alternative assets, to repay indebtedness, including
to related parties, and for general working capital purposes, including operating expenses.
Net offering proceeds not immediately
applied to the uses summarized above will be invested, at our sole discretion, in bank deposits or short-term investments such
as money market funds, commercial paper, U.S. Treasury Bills and similar securities investments pending their use.
The maximum amount of L Bonds we may issue
and have outstanding is limited by our debt coverage ratio discussed below.
DESCRIPTION
OF THE L BONDS
General
The
L Bonds are secured obligations of GWG Holdings. The L Bonds will be issued under the amended and restated indenture between us
and Bank of Utah as the indenture trustee, dated October 23, 2017, which amends and restates the original indenture dated October
19, 2011 and as may be amended or supplemented from time to time (referred to herein as the “indenture”). The terms
and conditions of the L Bonds include those stated in the indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. The following is a summary of the material provisions of the indenture. For a complete understanding of
the L Bonds, you should review the definitive terms and conditions contained in the indenture, which include definitions of certain
terms used below. A copy of the indenture has been filed with the SEC as an exhibit to the registration statement of which this
prospectus is a part, and is available from us at no charge upon request.
The following is a summary of the material
terms of the L Bonds:
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The L Bonds are general secured obligations of GWG Holdings. The obligations are secured by a grant of a security interest in all of the assets of GWG Holdings, which assets will serve as collateral for our obligations under the L Bonds. This grant of a security interest is effected pursuant to an amended and restated pledge and security that has been filed as an exhibit to the registration statement of which this prospectus forms a part.
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The
L Bonds are fully and unconditionally guaranteed by our wholly owned direct subsidiary,
GWG Life, but otherwise are not guaranteed by any other person or entity. The guarantee
is backed by a grant of a security interest in all of the assets of GWG Life, which assets
will serve as additional collateral for our obligations under the L Bonds. Chief among
these assets is GWG Life’s ownership interest in DLP IV. This guarantee is effected
pursuant to provisions contained in the indenture.
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The L Bonds are also secured by a pledge of the equity ownership interests in GWG Holdings beneficially owned by BCC and AltiVerse Capital Markets, L.L.C., a Delaware limited liability company (“AltiVerse”) (which is a limited liability company owned by an entity related to Beneficient’s founders)— which pledge is effected pursuant to an amended and restated pledge and security agreement that has been filed as an exhibit to the registration statement of which this prospectus forms a part.
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Through DLP IV, we are party to a $300.0 million second amended
and restated senior credit facility with LNV Corporation. The amount outstanding under this facility was $184.6 million at December
31, 2019.
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The
L Bonds are not savings accounts, certificates of deposit (CDs) or other forms of “deposits,”
and are not insured by the FDIC or any other governmental agency.
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The L Bonds are not directly secured by any life insurance assets
not owned by GWG Life. A substantial majority of our life insurance assets are held by DLP IV. Although GWG Life’s equity
ownership interest in DLP IV is an asset in which GWG Life has, pursuant to its guarantee, granted a security interest to serve
as collateral for obligations under the L Bonds, the payment on such equity interest will be subordinate to the interests of creditors
of DLP IV, including our senior creditor LNV Corporation.
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The
L Bonds do not have the benefit of a “sinking fund” for the retirement of
principal.
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The
L Bonds are not convertible into our capital stock or other securities.
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We
have the option to call and redeem the entire outstanding principal balance and accrued
but unpaid interest of any L Bonds at any time and without premium or penalty. If we
elect to call and redeem your L Bonds, those redeemed L Bonds will cease to accrue interest
after the redemption date under the terms and subject to the conditions of the indenture.
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Except in limited circumstances (death, bankruptcy or total permanent disability) L Bond holders will
have no right to require us to redeem any L Bond prior to its maturity date. Any early redemption will be for the total outstanding
principal balance and accrued but unpaid interest. If we in our sole discretion nonetheless elect to accommodate a redemption request,
we will redeem the entire (but not less than the entire) outstanding principal balance and accrued but unpaid interest of the L
Bonds and may impose a redemption fee of 6% against the outstanding principal balance of the L Bond redeemed. This fee will be
subtracted from the amount paid to you.
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The
L Bonds will be represented by “Units,” with each whole Unit representing $1,000 in principal amount (USD) of L Bonds.
Accordingly, L Bond Units will be sold at 100% of their principal face amount. Throughout this prospectus, we refer to L Bond
Units simply as “L Bonds.” The minimum investment amount in the L Bonds will be 25 Units, or $25,000. Above that minimum
amount, L Bonds may be purchased in whole Units. Subject to the minimum investment amount, you may select the principal amount
and term of the L Bonds (ranging from two to seven years) you would like to purchase when you subscribe. The interest rate of
your L Bonds will remain fixed until maturity. Depending on our capital requirements, we may not, however, always offer L Bonds
with the particular terms you seek. See “Description of the L Bonds — Interest Rate and Maturity” below.
Upon
acceptance of your subscription, we will create an account in a book-entry registration and transfer system for you, and credit
the principal amount of your subscription to your account. We will also send you a purchase confirmation that will indicate our
acceptance of your subscription. If your subscription is rejected, all funds deposited will be promptly returned to you without
any interest. See “— Registration and Exchange” below. Alternatively, you may subscribe for L Bonds as a direct
participant with Depository Trust Company (DTC settlement). See “Plan of Distribution — Settlement Procedures”
for more information.
Investors
whose subscriptions for L Bonds have been accepted and anyone who subsequently acquires L Bonds in a qualified transfer are referred
to as “holders” or “registered holders” in this prospectus. We may modify or supplement the terms of the
L Bonds described in this prospectus from time to time in a supplement to the indenture and a further supplement to this prospectus.
Except as set forth under “— Amendment, Supplement and Waiver” below, any modification or amendment will not
affect L Bonds outstanding at the time of such modification or amendment.
The
L Bonds are transferable pursuant to the terms of the indenture. The L Bonds may be transferred or exchanged for other L Bonds
of the same series and class of a like aggregate principal amount (i.e., the same number of Units) subject to limitations contained
in the indenture. We will not charge a fee for any registration, transfer or exchange of L Bonds. However, we may require the
holder to pay any tax, assessment fee, or other governmental charge required in connection with any registration, transfer or
exchange of L Bonds. The registered holder of any L Bonds will be treated as the owner of such L Bond Units for all purposes.
Denomination
You
may purchase L Bonds in the minimum amount of 25 Units, representing a minimum principal amount of $25,000, and in any whole Unit
amounts in excess thereof. You will determine the exact number of L Bond Units you purchase when you subscribe. You may not cumulate
multiple purchases L Bond Units in amounts less than 25 Units to satisfy the 25 Unit minimum requirement. In our discretion, however,
we may waive the 25 Unit minimum purchase requirement for any investor.
Term
We
may offer L Bonds with the following terms to maturity: two years, three years, five years, and seven years.
You
will select the term of the L Bonds you purchase when you subscribe. You may purchase multiple L Bonds with different terms by
filling in investment amounts for more than one term on your Subscription Agreement. Nevertheless, during this offering we may
not always offer L Bonds with each of the maturity terms outlined above.
The actual maturity date will be on the
last day of the month in which the L Bond matures (i.e., the month in which the L Bond’s term ends). For example, if you
select a two-year term and your L Bond becomes effective on June 1, 2020, then the actual maturity date will be June 30, 2022.
After actual maturity, we will pay all outstanding principal and accrued but unpaid interest on the L Bond no later than the fifth
day of the calendar month next following its maturity (or the first business day following the fifth day of such month). So, in
the case of an L Bond with a maturity date of June 30, 2022, actual payment will be made on or prior to July 5, 2022 (unless such
date is not a business day, in which case actual payment will be made on the next business day). The L Bonds do not earn interest
after the maturity date or any date set for prepayment.
Should
the original L Bond holder (x) no longer be the holder of the L Bond or (y) be unavailable, or a change in payee be necessary,
such as in the case of a surviving estate, we may require a copy of the executed assignment to any transferee, or an order from
a court or probate commission, as the case may be, in order that we know the principal is returned to the rightful party.
Interest
Rate
The
rate of interest we will offer to pay on L Bonds at any particular time will vary based upon market conditions, and will be determined
by the term to maturity of the L Bonds, our capital requirements and other factors described below. The interest rate on particular
L Bonds will be determined at the time of subscription or renewal and then remain fixed for the original or renewal term of the
L Bond. We will establish and may change the interest rates payable for L Bonds of various terms and at various investment levels
in an interest rate supplement to this prospectus.
We
may offer L Bonds that earn incrementally higher interest rates when, at the time they are purchased or renewed, the aggregate
principal amount of the L Bond portfolio of the holder increases. If applicable, the interest rates payable at each level of investment
will be set forth in an interest rate supplement to this prospectus. We may change the interest rate for any or all maturities
to reflect market conditions at any time by supplementing this prospectus. If we change the interest rates, the interest rate
on L Bonds issued before the date of the change will not be affected.
Payments
on the L Bonds; Paying Agent and Registrar
Investors
will have the opportunity to select whether interest on their L Bonds will be paid monthly or annually. For investors using direct
settlement with the Company, this selection opportunity will be presented in the Subscription Agreement.
Interest
will accrue on the L Bonds at the stated rate from and including the effective date of the L Bond until maturity. The effective
date of an L Bond will be as follows:
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If
you purchase an L Bond through DTC settlement, the effective date of your L Bond purchase
will be the date your subscription is accepted by the Company.
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If
you purchase an L Bond through direct settlement with the Company, the effective date
of your L Bond purchase will be the following, as applicable: (i) in cases where you
pay for your bond via wire transfer directly to us, the first business day of the next
calendar month after which we receive the wire; (ii) in cases where you pay for your
bond by bank draft directly to us, the first business day of the next calendar month
after which we receive the draft; or (iii) in cases where you pay for your bond by personal
check, the first business day of the calendar month that is at least five full business
days after which we receive the check. In all cases involving direct settlement with
the Company, we must also have received and accepted your completed and executed Subscription
Agreement.
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Interest
payments on L Bonds will be paid on the 15th day immediately following the last day of the applicable interest payment
period. Interest will be paid without any compounding. The first payment of interest will include interest for the partial period
in which the purchase occurred. The indenture provides that all interest will be calculated based on a year with twelve 30-day
months.
If
you purchase your L Bond Units through direct settlement, we will pay the principal of, and interest on, L Bonds by direct deposit
to the account you specify in your Subscription Agreement. We will not accept subscriptions from investors who are not willing
to receive their interest payments via direct deposit. If the foregoing payment method is not available, principal and interest
payments on the L Bonds will be payable at our principal executive office or at such other place as we may designate for payment
purposes. If you purchase your L Bond Units through DTC settlement, our payments of principal and interest will be paid to the
depositary (DTC) and then be credited to your brokerage or custodial account through the DTC procedures followed by your brokerage
firm or custodian. For more information, please see “Registration and Exchange — Global Certificates Deposited with
DTC” below.
We
will withhold 28% of any interest payable to any investor who has not provided us with a social security number, employer identification
number, or other satisfactory equivalent in the Subscription Agreement (or another document) or where the IRS has notified us
that backup withholding is otherwise required. Please see “Material Federal Income Tax Considerations — Backup Withholding
and Information Reporting.”
Registration
and Exchange
The
L Bonds that we settle directly will generally be issued in book-entry form, which means that no physical L Bond is created, subject,
however, to limited exceptions described in the indenture. The L Bonds settled through DTC settlement will be represented by global
certificates deposited with the depositary as described below.
Book-Entry
Registration
Evidence
of your ownership will be provided by written confirmation. As described below, holders may, under certain circumstance described
below, opt to receive physical delivery of a certificated security that evidences their L Bonds. Otherwise, the issuance and transfer
of L Bonds will be accomplished exclusively through the crediting and debiting of the appropriate accounts in our book-entry registration
and transfer system.
The
holders of the accounts established upon the purchase or transfer of L Bonds will be deemed to be the owners of the L Bonds under
the indenture. The holder of the L Bonds must rely upon the procedures established by the trustee to exercise any rights of a
holder of L Bonds under the indenture. We will regularly provide the trustee with information regarding the establishment of new
accounts and the transfer of existing accounts.
On
or prior to any interest payment date or upon redemption, we will also provide the trustee with information regarding the total
amount of any principal and interest due to holders of L Bonds. On each interest payment date, we will credit interest due on
each account and direct payments to the holders. We will determine the interest payments to be made to the book-entry accounts
and maintain, supervise and review any records relating to book-entry accounts for the L Bonds.
Book-entry
notations in the accounts evidencing ownership of the L Bonds are exchangeable for certificated L Bonds only: (i) at the request
of the holder, at the end of the Company’s next fiscal quarter; or (ii) after the occurrence of an event of default under
the indenture, if holders of more than 50% of the aggregate outstanding principal amount of the L Bonds advise the trustee in
writing that the continuation of a book-entry system is no longer in the best interests of the holders of L Bonds. In its discretion,
the Company may elect to terminate the book-entry system and replace book-entry notations with physical certificates.
Global
Certificates Deposited with DTC
L
Bonds may be issued in the form fully registered global certificates deposited with, or on behalf of, The Depository Trust Company
(“DTC”), New York, NY, and registered in the name of Cede & Co., as nominee of DTC. Unless and until exchanged,
in whole or in part, for L Bonds in definitive registered form, a global certificate may not be transferred except as a whole
by the depositary to a nominee of such depositary, by a nominee of such depositary to such depositary or another nominee of such
depositary, or by such depositary or any nominee of such depositary to a successor of such depositary or a nominee of such successor.
DTC
is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning
of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A
of the Exchange Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of
securities transactions, such as transfers and pledges, among its participants in such securities through electronic computerized
book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates.
DTC’s participants include securities brokers and dealers (including the managing broker-dealer), banks, trust companies,
clearing corporations and certain other organizations, some of whom own DTC. Access to DTC’s book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC.
If
available, purchases of L Bonds within the DTC system must be made by or through direct participants, which will receive a credit
for the L Bonds on DTC’s records. The ownership interest of each beneficial owner of the L Bonds will be recorded on the
direct and indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchases,
but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through which the beneficial owners entered into the transaction.
Transfers of ownership interests in the L Bonds are to be accomplished by entries made on the books of participants acting on
behalf of beneficial owners.
To
facilitate subsequent transfers, all L Bonds deposited by participants with DTC will be registered in the name of DTC’s
nominee, Cede & Co. The deposit of L Bonds with DTC and their registration in the name of Cede & Co. will effect no change
in beneficial ownership. DTC will have no knowledge of the actual beneficial owners of the L Bonds. DTC’s records will reflect
only the identity of the direct participants to whose accounts such notes are credited, which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance
of notices and other communications by DTC to direct participants, by direct participants to indirect participants and by direct
and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
We
will make payments due on the notes to Cede & Co., as nominee of DTC, in immediately available funds. DTC’s practice
is to credit direct participants’ accounts, upon DTC’s receipt of funds and corresponding detailed information, on
the relevant payment date in accordance with their respective holdings shown on DTC’s records. Payments by participants
to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in “street name,” and will be the responsibility of such participant
and not our responsibility or that of DTC, subject to any statutory or regulatory requirements as may be in effect from time to
time. Payment to Cede & Co. is our responsibility. Disbursement of such payments to direct participants is the responsibility
of Cede & Co. Thereafter, disbursement of such payments to the beneficial owners is the responsibility of direct and indirect
participants (i.e., brokers, dealers and custodians).
Except
as provided herein, a beneficial owner of an interest in a global certificate will not be entitled to receive physical delivery
of the L Bonds. Accordingly, each beneficial owner must rely on the procedures of DTC to exercise any rights under the L Bonds.
The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive
form. Such laws may impair the ability to transfer beneficial interests in a global certificate.
As
long as the depositary, or its nominee, is the registered holder of a global certificate, the depositary or such nominee will
be considered the sole owner and holder of the L Bonds represented thereby for all purposes under the L bonds and the indenture.
Except in the limited circumstances referred to below, owners of beneficial interests in a global certificate will not be entitled
to have such global certificate or any L Bonds represented thereby registered in their names, will not receive or be entitled
to receive physical delivery of certificated L Bonds in exchange for the global certificate and will not be considered to be the
owners or holders of such global certificate or any certificates represented thereby for any purpose under the L Bonds or the
indenture. Accordingly, each person owning a beneficial interest in such global certificate must rely on the procedures of the
depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest
to exercise any rights of a holder under the indenture.
If
the depositary for a global certificate representing L Bonds is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by us within 90 days, we will issue L Bonds in definitive form in exchange for such global
certificate. In addition, we may at any time and in our sole discretion determine not to have the L Bonds represented by one or
more global certificates and, in such event, we will issue the notes in definitive form in exchange for all of the global certificates
representing the L Bonds. Finally, if an event of default, or an event which with the giving of notice or lapse of time or both
would constitute an event of default, with respect to the L Bonds represented by a global certificate has occurred and is continuing,
then we will issue L Bonds in definitive form in exchange for all of the global certificates representing the notes.
Although
DTC has agreed to the procedures provided above in order to facilitate transfers, it is under no obligation to perform these procedures,
and these procedures may be modified or discontinued at any time.
Limited
Rescission Right
If
you are purchasing L Bonds through direct settlement with the Company and your Subscription Agreement is accepted at a time when
we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed
with the SEC, but such post-effective amendment has not yet been declared effective, we will send to you at your registered address
a notice and a copy of the related prospectus once it has been declared effective. You will thereupon have the right to rescind
your investment upon written request within ten business days from the postmark date of the notice we send to you that the post-effective
amendment has been declared effective (and containing the related prospectus). We will promptly return any funds sent with a Subscription
Agreement that is properly rescinded without penalty, although any interest previously paid on a rescinded L Bond will be deducted
from the funds returned to you upon rescission. A written request for rescission, except in the case of a mailed rescission, must
be postmarked on or before the tenth business day after our notice to you (described above). If you notify us other than by mail,
we must actually receive your rescission request on or before the tenth business day after our notice to you.
We
will not accept purchases of L Bonds through DTC settlement if, as of the end of the monthly closing for DTC settlement, we have
determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with
the SEC, but such post-effective amendment has not yet been declared effective. In any such case, settlement of your L Bond purchase
must occur in the following month.
Renewal
or Repayment on Maturity
At
least 30 days prior to the maturity of your L Bond, we will provide you with a notice indicating that your L Bond is about to
mature and whether we will allow automatic renewal of your L Bond. If we allow you to renew your L Bond, we will also provide
to you the then-current form of prospectus, which may include an interest rate or prospectus supplement and any other updates
to the information contained in this prospectus. The prospectus, or the interest rate or prospectus supplement, will set forth
the interest rates then in effect. The notice will recommend that you review the then-current prospectus, including any interest
rate or prospectus supplement, prior to exercising one of the below options. If we do not provide you a new prospectus because
the prospectus has not changed since the delivery of this prospectus in connection with your original investment or any prior
renewal, we will nonetheless send you a new copy of the prospectus upon your request. Unless the election period is extended as
described below, you will have until 15 days prior to the maturity date to exercise one of the following options:
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You
can do nothing, in which case (subject to applicable law) your L Bond will automatically
renew for a new term equal to the original term but at the interest rate in effect at
the time of renewal. Interest on renewed L Bonds will be paid on the same schedule (i.e.,
monthly or annually) as the original L Bond. If applicable, a new certificate will be
issued.
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You
can elect repayment of your L Bond, in which case the principal amount will be repaid
in full along with any accrued but unpaid interest. If you choose this option, your L
Bond will not earn interest on or after the maturity date.
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You
can elect repayment of your L Bond and use all or part of the proceeds to purchase a
new L Bond with a different term or principal amount. To exercise this option, you will
need to complete a new Subscription Agreement for the new L Bond and mail it along with
your request, or else work with your broker if you wish to purchase your new L Bond through
DTC settlement. Any proceeds from the old L Bond that are not applied to the new L Bond
will be sent to you.
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The
foregoing options will be available to holders unless and until terminated under the indenture. Interest will accrue from the
first day of each renewed term. Each renewed L Bond will retain all its original provisions, including provisions relating to
payment, except that the interest rate payable during any renewal term will be the interest rate that is being offered at that
time to other holders with similar aggregate L Bond portfolios for L Bonds of the same term as set forth in the interest rate
supplement delivered with the maturity notice. If similar L Bonds are not then being offered, the (i) interest rate upon renewal
will be the rate specified by us on or before the maturity date, or the rate of the existing L Bond if no such rate is specified,
and (ii) the maturity will, if L Bonds of the same maturity are being offered at the time of renewal, be the same or, if not,
the next earliest maturity.
If
we notify the holder of our intention to repay an L Bond at maturity, or if the holder timely requests repayment, we will pay
the principal and all accrued but unpaid interest on the L Bond on or prior to the fifth day of the calendar month after the maturity
date (or the first business day following the fifth day of such month). Thus, in the case of an L Bond with a maturity date of
January 31, 2020, actual payment will be made on or prior to February 5, 2020 (unless such date is not a business day, in which
case actual payment will be made on the next business day). No interest will accrue after the maturity date. You should be aware
that because payment is made by ACH transfer, funds may not be received in the holder’s account for two to three business
days.
We
will be required from time to time to file post-effective amendments to the registration statement of which this prospectus is
a part to update the information it contains. If you would otherwise be entitled to renew your L Bonds upon their stated maturity
at a time when we have determined that a post-effective amendment must be filed with the SEC, but such post-effective amendment
has not yet been declared effective, then the period during which you can elect renewal (or repayment) will be automatically extended
until ten days following the postmark date of our notice to you that the post-effective amendment has been declared effective,
which notice shall contain a copy of the related prospectus. All other provisions relating to the renewal or redemption of L Bonds
upon their stated maturity described above shall remain unchanged.
For
any L Bonds offered hereby that mature on or after the three-year anniversary of the date on which the registration statement
of which this prospectus is a part shall have been declared effective, we expect that the renewal of such L Bonds may require
us to file a new registration statement. In such a case, the new registration statement must be declared effective before we can
renew your L Bond. In this event, if the new registration statement has not yet been filed or become effective, we will extend
your election period until ten days following the date of our notice to you that the new registration statement has become effective,
which notice will include a new prospectus.
Call
and Redemption Prior to Stated Maturity
We
may call and redeem, in whole or in part, principal amount and accrued but unpaid interest on any L Bonds prior to their stated
maturity only as set forth in the indenture and described below. The holder has no right to put or otherwise require us to redeem
any L Bond prior to its maturity date (as originally stated or as it may be extended), except as indicated in the indenture and
described below.
Our
Voluntary Redemption
We
have the right to redeem any L Bond, in whole or in part, at any time prior to its stated maturity upon at least 30 days written
notice to the holder of the L Bond. The holder of the L Bond being redeemed will be paid a redemption price equal to the outstanding
principal amount thereof plus accrued but unpaid interest up to but not including the date of redemption without any penalty or
premium. We may use any criteria we choose to determine which L Bonds we will redeem if we choose to do so. We are not required
to redeem L Bonds on a pro rata basis.
Holder’s Put Election Upon Death
L Bonds may be redeemed prior to maturity
at the election of a holder who is a natural person (including L Bonds held in an individual retirement account and the holders
of a beneficial interest in a global certificate held by a depositary or its nominee), by giving us written notice within 45 days
following the holder’s total permanent disability or bankruptcy, as established to our satisfaction, or at the election of
the holder’s estate, by giving written notice within 45 days following the death of the holder. Subject to the limitations
described below, we will redeem the L Bonds not later than the 15th day of the month next following the month in which
we establish to our satisfaction the holder’s death, bankruptcy or total permanent disability. In the event that the 15th
day of the month next following the month in which we so establish such facts is not a business day, we will redeem the L Bonds
on the next business day. The redemption price, in the event of such a death, bankruptcy or total permanent disability, will be
the entire principal amount of the L Bonds, plus accrued but unpaid interest thereon up to and through the last day of the calendar
month preceding the redemption date. The indenture defines “total permanent disability” as the determination by a physician,
approved by us, that a holder of an L Bond who is a natural person, and who was gainfully employed at the time of issuance of the
L Bond (or its renewal date), is unable to work on a full-time basis during a period of 24 consecutive months.
If spouses are joint registered holders
of an L Bond, the right to elect to have us redeem L Bonds will apply when either registered holder dies, files bankruptcy or
suffers a total permanent disability. If the L Bond is held jointly by two or more persons who are not legally married, none of
these persons will have the right to request that we redeem the L Bonds unless all joint holders have died, filed bankruptcy or
suffered a total permanent disability. If the L Bond is held by a trust, partnership, corporation or other similar entity, the
right to request redemption upon death or total permanent disability does not apply.
Redemption
at Request of Holder
We
have no obligation to redeem any L Bonds other than upon maturity, or upon the death, bankruptcy or total permanent disability
of a natural person holder. Nevertheless, at our sole discretion we may agree from time to time, at the written request of a holder
(including the holder of a beneficial interest in a global certificate held by a depositary or its nominee), to redeem an L Bond,
subject, however, to a redemption fee of 6.0% of the principal amount of such L Bond. If we so redeem any L Bond prior to maturity,
we will redeem the entire principal amount of such L Bond together with accrued but unpaid interest thereon, The redemption fee
will be subtracted from the amount paid to you.
Transfers
The
L Bonds will be transferable in accordance with the indenture. For L Bonds that are issued solely in book-entry form, transfers
will be effective only upon the delivery to us of an executed assignment or other conveyance instrument in customary form. For
L Bonds that are represented by a global certificate held by a depositary or its nominee, transfers of beneficial interests in
such certificate must be effected in accordance with the procedures and rules of the depositary.
Upon
transfer of an L Bond, we will provide the new holder of the L Bond with a purchase confirmation that will evidence the transfer
of the account on our records. If applicable (e.g., if transferred to a custodial account), a new certificate will be issued.
No written confirmations will be provided with respect to transfers of beneficial interests in a global certificate held by a
depositary or its nominee.
Quarterly
Statements
We
will provide holders of the L Bonds with quarterly statements, which will indicate, among other things, the account balance at
the end of the quarter, interest credited, redemptions made, if any, and the interest rate paid during the quarter. These statements
will be sent electronically on or prior to the 10th business day after the end of each calendar quarter. If a holder
is unwilling or unable to receive quarterly statements electronically, we will mail the statements to the address of record on
or prior to the 10th business day after the end of each calendar quarter. In such a case, we may charge such holders
a reasonable fee to cover our expenses incurred in mailing the statements.
Ranking
The
L Bonds will constitute secured debt of GWG Holdings. The payment of principal and interest on the L Bonds will be:
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pari passu with respect to payment and collateral securing all
L Bonds and Seller Trust L Bonds previously issued by GWG Holdings, Inc., of which approximately $1,315.0 million in principal
amount is outstanding as of December 31, 2019 (see the caption “— Collateral Security” below);
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structurally and contractually junior to the present and future obligations owed by our subsidiary DLP IV under our second amended and restated senior credit facility with LNV Corporation, and structurally or contractually junior to any future obligations that DLP IV or other primary obligors or guarantors may have under future senior secured borrowing facilities; and
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structurally
junior to the present and future claims of creditors of our subsidiaries, other than
GWG Life, including trade creditors.
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The
indenture will permit us to issue other forms of debt, including secured and senior debt, in the future.
“Pari
passu” means that claims for payment and entitlement to security among the holders of L Bonds, including the holders of
previously issued L Bonds and Seller Trust L Bonds, and the holders of any later-created class of “pari passu debt,”
will be treated equally and without preference. Although we have no present intention of causing GWG Life to issue additional
secured debt in the future, any such debt issued on a pari passu basis in the future (including renewals of outstanding L Bonds
or other renewable pari passu debt) would also be treated equally and without preference in respect of all outstanding L Bonds
and Seller Trust L Bonds. Thus, in the event of any default on the L Bonds (or any other debt securities of ours that are pari
passu with the L Bonds) resulting in claims for payment or claims on collateral security, the holders of the L Bonds and all such
other debt securities pari passu with the L Bonds (such as the Seller Trust L Bonds) would share in payment or collateral in proportion
to the amount of principal and interest owed on each such debt instrument.
Guarantee
by GWG Life Subsidiary
The payment of principal and interest on
the L Bonds and Seller Trust L Bonds, including previously issued L Bonds, is fully and unconditionally guaranteed by GWG Life.
There were approximately $1,315.0 million in principal amount of previously issued L Bonds and Seller Trust L Bonds outstanding
as of December 31, 2019.
Collateral
Security
The L Bonds are secured by the assets of
GWG Holdings. We will grant a security interest in all of the assets of GWG Holdings to the indenture trustee for the benefit of
the L Bond holders. The assets of GWG Holdings consist, and are expected to consist, primarily of (i) any cash proceeds received
from its subsidiaries as distributions derived from life insurance assets of subsidiaries, (ii) all other cash and investments
held in various accounts, (iii) the equity ownership interests in subsidiaries of GWG Holdings, including the equity ownership
interest in GWG Life, together with (iv) all proceeds from the foregoing. This collateral security granted by us is referred to
as the “GWG Holdings Assets Collateral.”
As
indicated above, our direct and wholly owned subsidiary, GWG Life, will fully and unconditionally guarantee our obligations under
the L Bonds. This guarantee will be supported by GWG Life’s grant of a security interest in all of its assets. The assets
of GWG Life consist, and are expected to consist, primarily of (i) certain life insurance assets, (ii) any cash proceeds received
from life insurance assets owned by GWG Life or received from DLP IV, as distributions derived from life insurance policies owned
by that subsidiary, (iii) all other cash and investments held by GWG Life in its various accounts, (iv) GWG Life’s equity
ownership interest in its direct subsidiaries, including DLP IV, together with (v) all proceeds from the foregoing. The collateral
security granted by GWG Life pursuant to its guarantee of our obligations under the L Bonds is referred to as the “GWG Life
Assets Collateral.”
In
addition, BCC and AltiVerse, collectively, have pledged 3,952,155 shares of our common stock to further secure our obligations
under the L Bonds. This collateral security granted by BCC and Altiverse is referred to as the “GWG Holdings Equity Collateral.”
Together,
the GWG Holdings Assets Collateral, GWG Life Assets Collateral and GWG Holdings Equity Collateral comprise all of the collateral
security for our obligations under the L Bonds. To the extent that we subsequently establish one or more wholly owned subsidiaries
of GWG Holdings or GWG Life, the L Bonds will have a security interest in the equity ownership interests of those subsidiaries
if and to the extent owned by GWG Holdings or GWG Life.
The guarantee by GWG Life is contained
in the indenture, and the grant of security interests in the GWG Holdings Assets Collateral, GWG Life Assets Collateral and GWG
Holdings Equity Collateral is effected through an “Amended and Restated Pledge and Security Agreement” that is an exhibit
to the registration statement of which this prospectus forms a part. Neither the indenture nor the pledge and security agreement
contain any provision preventing a pledging party from disposing of any collateral in the ordinary course of business. In this
regard, the pledge and security agreement permits the disposition of GWG Holdings Equity Collateral to the extent the number of
shares continuing to constitute such collateral represents at least 10% of the number of shares beneficially held by each individual
grantor as of the date of the pledge and security agreement.
Substantially all of our life insurance
assets are held in our subsidiaries. The L Bonds will not be directly secured by any security interest in the assets of those subsidiaries,
including DLP IV. Instead, the L Bonds will be secured by a pledge of the equity ownership interests in those subsidiaries, including
DLP IV, owned by GWG Life by virtue of the guarantee provisions in the indenture and the pledge and security agreement referenced
above. An equity ownership interest is, by its very nature, subordinate to the interests of creditors. Therefore, although investors
in the L Bonds will have a security interest in the ownership of DLP IV (and other direct subsidiaries of GWG Life) any claim they
may have to the assets owned by such entity will be subordinate to the interests of creditors of that entity, including LNV Corporation,
which is the lender to DLP IV under our second amended and restated senior credit facility, and all other creditors of DLP IV,
including trade creditors. In addition, there is the risk that the collateral security granted for our obligations under the L
Bonds may be insufficient to repay the L Bonds upon an event of default. See “Risk Factors — The collateral
granted as security for our obligations under the L Bonds and Seller Trust L Bonds may be insufficient to repay the indebtedness
upon an event of default.”
Subordination;
Other Indebtedness
Our obligations under the L Bonds will
be subordinate to all our senior debt. For this purpose, “our senior debt” presently includes all indebtedness owed
or that may in the future become owing under our second amended and restated senior credit facility with LNV Corporation. As of
December 31, 2019, DLP IV had approximately $184.6 million of debt outstanding under the second amended and restated credit facility
with LNV Corporation. In addition, as of December 31, 2019, we had approximately $1,315.0 million in principal amount of debt outstanding
under previously issued L Bonds and Seller Trust L Bonds.
The maximum amount of debt, including the
L Bonds, we may issue is limited by the indenture. In particular, the indenture prohibits us from issuing debt in an amount such
that our “debt coverage ratio” would exceed 90%. The indenture defines the debt coverage ratio as the ratio, expressed
as percentage, of (A) the aggregate sum of all Indebtedness (other than Excluded Indebtedness) of GWG Holdings and its direct and
indirect subsidiaries (including the Securities issued under the indenture, but excluding any Indebtedness of Ben LP and its direct
and indirect subsidiaries) as reflected on GWG Holdings’ most recent consolidated balance sheet prepared in accordance with
GAAP over (B) the sum of (i) Net Present Asset Value of Life Insurance Policies owned by GWG Holdings and its direct or indirect
subsidiaries or affiliates, but excluding Life Insurance Policies held by Ben LP and its direct and indirect subsidiaries and controlled
affiliates, plus (ii) all cash (and cash equivalents) held by GWG Holdings and its direct or indirect subsidiaries or affiliates,
but excluding the cash (and cash equivalents) held by Ben LP and its direct and indirect subsidiaries, plus (iii) the original
cost basis in GWG Holdings’ investment in common units or other securities of Ben LP, plus (iv) the outstanding principal
amount of any outstanding loans made under a commercial loan agreement with GWG Life, as lender, plus (v) the cost basis of assets
contributed to GWG Holdings or any direct or indirect subsidiary of GWG Holdings in connection with a Repurchase Transaction, plus
(vi) without duplication, the value of all other assets of GWG Holdings and its direct and indirect subsidiaries or affiliates
(but excluding the value of assets of Ben LP and its direct and indirect subsidiaries) as reflected on its most recent consolidated
balance sheet prepared in accordance with GAAP.
We are required to notify the indenture
trustee in the event we violate this restrictive covenant. An “event of default” will exist under the indenture if
a violation of this covenant persists for a period of 30 calendar days after our initial notice to the trustee. The L Bonds are
guaranteed by GWG Life but otherwise are not guaranteed by any of our subsidiaries, affiliates or control persons. Neither indenture
nor the pledge and security agreement prevent holders of debt issued by our subsidiaries from disposing of, or exercising any other
rights with respect to, any or all of the collateral securing that debt. Accordingly, in the event of a liquidation or dissolution
of one of our subsidiaries (other than GWG Life), creditors of that subsidiary that are senior in rank will be paid in full, or
provision for such payment will be made, from the assets of that subsidiary prior to distributing any remaining assets to us as
an equity owner of that subsidiary.
The
indenture also contains specific subordination provisions, benefitting lenders under any senior credit facility, restricting the
right of L Bond holders to enforce certain of their rights in certain circumstances, including:
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a
prohibition on challenging any enforcement action taken by a senior lender or interfering
with any legal action or suits undertaken by our senior lenders against us and our affiliates;
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a
180-day standstill period during which there may not be brought any action against us
or our affiliates to enforce rights respecting collateral unless our senior credit facilities
have been repaid in full, which period may be extended if the senior lender takes action
during such standstill period; and
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a
prohibition on filing a bankruptcy or insolvency case against us or our affiliates for
at least one year plus one day after the senior credit facility lenders have been paid
in full.
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We
will not make any payment, direct or indirect (whether for interest, principal, as a result of any redemption or repayment at
maturity, on default, or otherwise), on the L Bonds and any other indebtedness, and neither the holders of the L Bonds nor the
trustee will have the right, directly or indirectly, to sue to enforce the indenture or the L Bonds, if a default or event of
default under any senior credit facility has occurred and is continuing, or if any default or event of default under any senior
credit facility would result from such payment, in each case unless and until:
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the
default and event of default has been cured or waived or has ceased to exist; or
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in
the case of a non-payment default that permits a senior lender to declare as due and
payable all amounts owing under a senior credit facility (but where that senior lender
has not yet so declared amounts as being due and payable), the end of the period commencing
on the date the trustee receives written notice of default from the senior lender and
ending on the earliest of (1) our discharge of the default (or other cure), (2) the trustee’s
receipt of a valid waiver of default from the senior lender, or (3) a written notice
from the senior lender terminating the payment prohibition.
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During
any payment prohibition period, neither the holders of the L Bonds nor the trustee will have the right, directly or indirectly,
to sue to enforce the indenture or the L Bonds. Other provisions of the indenture do permit the trustee to take action to enforce
the payment rights of L Bond holders after 179 days have passed since the trustee’s receipt of notice of default from a
senior lender, but in such case any funds paid as a result of any such suit or enforcement action shall be applied toward the
senior credit facility until the facility is indefeasibly paid in full before being applied to the L Bonds. The indenture contains
provisions whereby each investor in the L Bonds consents to the subordination provisions contained in the indenture and related
agreements governing collateral security.
If
the 180-day standstill period noted above or any other limitation on the rights of the trustee or L Bond holders to assert their
rights to payment of principal or interest under the indenture or L Bonds is ultimately determined to conflict with provisions
of the Trust Indenture Act of 1939 (most notably sections 316(b) and 317(a) of that Act), then the trustee, as well as any holder
who shall not have earlier consented to such subordination provisions, shall (notwithstanding such provision contained in the
indenture) be authorized to institute a lawsuit for the enforcement of any payment of principal or interest after their respective
due dates.
No
Sinking Fund
The
L Bonds are not associated with any sinking fund. A sinking fund is generally any account to which contributions will be made,
from which payments of principal or interest owed on the L Bonds will be made. See “Risk Factors,” page 11.
Restrictive
Covenants
The
indenture contains covenants that restrict us from certain actions as described below. In particular, the indenture provides that:
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we
will not declare or pay any dividends or other payments of cash or other property solely
in respect of our capital stock to our stockholders (other than a dividend paid in shares
of our capital stock on a pro rata basis to all our stockholders) unless no default and
no event of default with respect to the L Bonds exists or would exist immediately following
the declaration or payment of the dividend or other payment;
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to
the extent legally permissible, we will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or the performance of the indenture;
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our
Board of Directors will not adopt a plan of liquidation that provides for, contemplates
or the effectuation of which is preceded by (a) the sale, lease, conveyance or other
disposition of all or substantially all of our assets, otherwise than (i) substantially
as an entirety, or (ii) in a qualified sales and financing transaction, and (b) the distribution
of all or substantially all of the proceeds of such sale, lease, conveyance or other
disposition and of our remaining assets to the holders of our capital stock, unless,
prior to making any liquidating distribution pursuant to such plan, we make provision
for the satisfaction of our obligations under the renewable unsecured subordinated notes;
and
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our
debt coverage ratio may not exceed 90%.
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The
indenture defines the debt coverage ratio as the ratio, expressed as percentage, of (A) the aggregate sum of all
Indebtedness (other than Excluded Indebtedness) of GWG Holdings and its direct and indirect subsidiaries (including the
Securities issued under the indenture, but excluding any Indebtedness of Ben LP and its direct and indirect subsidiaries) as
reflected on GWG Holdings’ most recent consolidated balance sheet prepared in accordance with GAAP over (B) the sum of
(i) Net Present Asset Value of Life Insurance Policies owned by GWG Holdings and its direct or indirect subsidiaries or
affiliates, but excluding Life Insurance Policies held by Ben LP and its direct and indirect subsidiaries and controlled
affiliates, plus (ii) all cash (and cash equivalents) held by GWG Holdings and its direct or indirect subsidiaries or
affiliates, but excluding the cash (and cash equivalents) held by Ben LP and its direct and indirect subsidiaries, plus (iii)
the original cost basis in GWG Holdings’ investment in common units or other securities of Ben LP, plus (iv) the
outstanding principal amount of any outstanding loans made under a commercial loan agreement with GWG Life, as lender, plus
(v) the cost basis of assets contributed to GWG Holdings or any direct or indirect subsidiary of GWG Holdings in connection
with a Repurchase Transaction, plus (vi) without duplication, the value of all other assets of GWG Holdings and its direct
and indirect subsidiaries or affiliates (but excluding the value of assets of Ben LP and its direct and indirect
subsidiaries) as reflected on its most recent consolidated balance sheet prepared in accordance with GAAP.
The indenture defines “Excluded Indebtedness”
as Indebtedness or any portion thereof (A) the principal and accrued but unpaid interest of which is payable at GWG Holdings’
option, pursuant to the terms of such Indebtedness or otherwise, in Capital Stock (as defined in the amended indenture) of GWG
Holdings or securities mandatorily convertible into or exchangeable for Capital Stock of GWG Holdings, or (B) any Indebtedness
that is reasonably expected to be converted or exchanged, directly or indirectly, into Capital Stock of GWG Holdings, provided
that under the terms of such Indebtedness in the event any such conversion or exchange does not occur in accordance with the terms
of such transaction, such Indebtedness would be cancelled and any assets received in exchange for such Indebtedness would be returned
(a “Repurchase Transaction”).
For
this purpose, the net present asset value of our life insurance assets is equal to the present value of the face value of policy
benefit assets we own, discounted at a rate equal to the weighted-average interest rate paid on indebtedness, excluding that of
Seller Trust L Bonds. The net present asset value of our life insurance assets for purposes of this covenant is not necessarily
the same as the net present asset value of our life insurance assets as reflected on our most recently available balance sheet
prepared in accordance with GAAP and does not necessarily reflect the saleable or fair market value of those assets.
Importantly,
we are not restricted from entering into “qualified sale and financing transactions” as defined in the indenture,
or incurring additional indebtedness, including additional senior debt.
Consolidation,
Mergers or Sales
The
indenture generally permits a consolidation or merger between us and another entity. It also permits the sale or transfer by us
of all or substantially all of our property and assets. These transactions are permitted if:
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the
resulting or acquiring entity, if other than us, is a United States corporation, limited
liability company or limited partnership and assumes all of our responsibilities and
liabilities under the indenture, including the payment of all amounts due on the notes
and performance of the covenants in the indenture; and
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immediately
after the transaction, and after giving effect to the transaction, no event of default
shall exist under the indenture.
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If
we consolidate or merge with or into any other entity or sell or lease all or substantially all of our assets, according to the
terms and conditions of the indenture, the resulting or acquiring entity will be substituted for us in the indenture with the
same effect as if it had been an original party to the indenture. As a result, the successor entity may exercise our rights and
powers under the indenture in our name, and we (as an entity) will be released from all our liabilities and obligations under
the indenture and under the L Bonds. Nevertheless, no such transaction will by itself eliminate or modify the collateral that
we have provided as security for our obligations under the indenture.
Events
of Default and Remedies
The
indenture provides that each of the following constitutes an event of default:
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the
failure to pay interest or principal on any L Bond for a period of 30 days after it becomes
due and payable;
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a
failure to observe or perform any material covenant, condition or agreement in the indenture,
but only after notice of failure from the indenture trustee and such failure is not cured
within 60 days;
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our
debt coverage ratio exceeds 90% for a period of 30 consecutive calendar days, but only
after notice of such breach from the indenture trustee and such breach is not cured within
60 days;
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certain
events of bankruptcy, insolvency or reorganization with respect to us; or
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the
cessation of our business.
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In addition, a default under the indenture
will create a default under our second amended and restated senior credit facility.
Through DLP IV, we are party to a second
amended and restated senior credit facility with LNV Corporation, as the lender. CLMG Corp (referred to in this prospectus as CLMG)
acts as the administrative agent for the lender under the second amended and restated senior credit facility.
Effective November 1, 2019, DLP IV entered
into the second amended and restated senior credit facility with LNV Corporation, as lender, and CLMG Corp., as the administrative
agent on behalf of the lenders under the agreement. The second amended and restated senior credit facility makes available a total
of up to $300,000,000 in credit to DLP IV with a maturity date of September 27, 2029. Additional advances are available under the
second amended and restated credit facility at the LIBOR rate as defined in the second amended and restated credit facility. Advances
are available as the result of additional borrowing base capacity, created as the premiums and servicing costs of pledged life
insurance policies become due. Interest will accrue on amounts borrowed under the second amended and restated credit facility at
an annual interest rate, determined as of each date of borrowing or quarterly if there is no borrowing, equal to (A) the greater
of 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 7.50%
per annum. The effective rate at December 31, 2019 was 9.54%. Interest payments are made on a quarterly basis. We may use proceeds
of the line of credit to repay short-term debt, acquire additional life insurance assets and make additional investments in Beneficient.
Under the second amended and restated senior
credit facility, DLP IV has granted the administrative agent, for the benefit of the lenders under the agreement, a security interest
in all of its assets. As with prior collateral arrangements relating to the senior secured debt of GWG Holdings and its subsidiaries
(on a consolidated basis), GWG Holdings’ equity ownership in DLP IV will serve as collateral for the obligations of GWG Holdings
under its L Bonds (although the life insurance assets owned by DLP IV will not themselves serve directly as collateral for those
obligations).
The second amended and restated senior
credit facility does not require DLP IV to maintain a reserve account for future premiums.
In addition, the second amended and restated
senior credit facility contains certain customary negative covenants restricting the ability of the borrower to directly or indirectly
engage in a merger or exchange transaction, sell substantially all of its assets, or permit the amendment of the contracts governing
the outstanding debt securities of GWG Holdings and its subsidiaries, without the prior consent of the lender.
The second amended and restated senior
credit facility contains customary events of default (e.g., payment defaults, covenant defaults, cross-defaults, defaults arising
by virtue of a change in control, and defaults arising from breaches of representations and warranties), as well as defaults for
amendments to the organizational documents of the borrower, defaults from pledged policies falling out of good standing, the occurrence
of an event that could terminate the arrangement by which GWG Life services the pledged life insurance policies, and the entry
of a judgment against the borrower in an amount exceeding $50,000 without payment or discharge, or a stay of execution obtained,
within 30 days thereafter.
The indenture requires that we give notice
to the indenture trustee upon the occurrence of an event of default under the indenture, unless it has been cured or waived. The
indenture trustee may then provide notice to the L Bond holders or withhold the notice if the indenture trustee determines in good
faith that withholding the notice is in your best interest, unless the default is a failure to pay principal or interest on any
L Bond.
If an event of default occurs, the indenture
trustee or the holders of at least 25% in principal amount of the outstanding L Bonds, may by written notice to us declare the
unpaid principal and all accrued but unpaid interest on the L Bonds to be immediately due and payable. Notwithstanding the foregoing,
the indenture limits the ability of the L Bond holders to enforce certain rights under the indenture in certain circumstances.
These limitations are required subordination provisions under our second amended and restated senior credit facility and are summarized
above under “— Subordination; Other Indebtedness.” The pledge and security agreement permits the trustee to exercise
on behalf of the holders of L Bonds all rights and remedies as are available to a secured creditor under applicable law, subject
to any limitations therein or in the indenture. In this regard, the trustee is not authorized under the pledge and security agreement
to distribute in kind any collateral in its possession to the holders of L Bonds.
Amendment,
Supplement and Waiver
Except
as provided in this prospectus or the indenture, the terms of the indenture or the L Bonds then outstanding may be amended, supplemented
or waived with the consent of the holders of at least a majority in principal amount of the L Bonds then outstanding (which consent
will be presumed if a holder does not object within 30 days of a request for consent), and any existing default or compliance
with any provision of the indenture or the L Bonds may be waived with the affirmative consent of the holders of a majority in
principal amount of the then outstanding L Bonds.
Notwithstanding
the foregoing, an amendment or waiver will not be effective with respect to the L Bonds held by a holder who him, her or itself
has not consented if such amendment or waiver:
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reduces
the principal of, or changes the fixed maturity of, any L Bond;
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reduces
the rate of or changes the time for payment of interest, including default interest,
on any L Bond;
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waives
a default or event of default in the payment of principal or interest on the L Bonds,
except for a rescission or withdrawal of acceleration of the L Bonds made by the holders
of at least a majority in aggregate principal amount of the then-outstanding L Bonds
and a waiver of the payment default that resulted from such acceleration;
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makes
any change in the provisions of the indenture relating to waivers of past defaults or
the rights of holders of L Bonds to receive payments of principal of or interest on the
L Bonds; or
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makes
any change to the subordination provisions of the indenture that has a material adverse
effect on holders of L Bonds.
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Notwithstanding
the foregoing, the following kinds of amendments or supplements to the indenture may be effected by us and the trustee without
any consent of any holder of the L Bonds:
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to
cure any ambiguity, defect or inconsistency;
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to
provide for assumption of our obligations to holders of the L Bonds in the case of a
merger, consolidation or sale of all or substantially all of our assets;
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to
provide for additional uncertificated or certificated L Bonds;
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to
make any change that does not materially and adversely affect the legal rights under
the indenture of any holder of L Bonds, including but not limited to an increase in the
aggregate dollar amount of L Bonds which may be outstanding under the indenture and limited
in amount thereunder;
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to
modify or eliminate our policy regarding redemptions elected by a holder of L Bonds prior
to maturity, including our obligation to redeem L Bonds upon the death, bankruptcy or
total permanent disability of any holder of the L Bonds, but only so long as such modifications
do not materially and adversely affect any then-existing obligations under pending repurchase
commitments for L Bonds;
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to
comply with requirements of the SEC in order to effect or maintain the qualification
of the indenture under the Trust Indenture Act of 1939, or to comply with other applicable
federal or state laws or regulations;
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to
comply with the rules or policies of a depositary of the L Bonds; or
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in
connection with an amendment, extension, replacement, renewal or substitution of any
senior debt, to amend the subordination provisions of the indenture to conform to the
reasonable requirements of the holder or holders of such senior debt.
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Rights
of L Bond Holders
As
an L Bond holder, you have limited rights to vote on our actions as set forth in the indenture. In general, you will have the
right to vote on whether or not to approve some amendments to the indenture. For a description of these rights, see “—
Amendment, Supplement and Waiver” above. You will also have the right to direct some actions that the trustee takes if there
is an event of default with respect to the L Bonds. For a description of these rights, see above under the caption “—
Events of Default.” For a complete description of your rights as an L Bond holder, we encourage you to read a copy of the
indenture, which is filed as an exhibit to the registration statement of which this prospectus is a part. We will also provide
you with a copy of the indenture upon your request.
The
trustee and the L Bond holders will have the right to direct the time, method and place of conducting any proceeding for some
of the remedies available, except as otherwise provided in the indenture. The trustee may require reasonable indemnity, satisfactory
to the trustee, from L Bond holders before acting at their direction. You will not have any right to pursue any remedy with respect
to the indenture or the L Bonds unless you satisfy the conditions contained in the indenture.
The
Indenture Trustee
General
Bank
of Utah has agreed to be the trustee under the indenture. The indenture contains certain limitations on the rights of the trustee,
should it become one of our creditors, to obtain payment of claims in certain cases, or to realize on certain property received
in respect of any claim as security or otherwise. The trustee will be permitted to engage in other transactions with us.
Subject
to certain exceptions, the holders of a majority in principal amount of the then-outstanding L Bonds will have the right to direct
the time, method and place of conducting any proceeding for exercising any remedy available to the trustee. The indenture provides
that if an event of default specified in the indenture shall occur and not be cured, the trustee will be required, in the exercise
of its power, to use the degree of care of a reasonable person in the conduct of his own affairs. Subject to such provisions,
the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder
of L Bonds, unless the holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability
or expense.
Resignation
or Removal of the Trustee
The
trustee may resign at any time, or may be removed by the holders of a majority of the aggregate principal amount of the outstanding
L Bonds. In addition, we may remove the trustee for certain failures in its duties, including the insolvency of the trustee or
the trustee’s ineligibility to serve as trustee under the Trust Indenture Act of 1939. However, no resignation or removal
of the trustee may become effective until a successor trustee has accepted the appointment as provided in the indenture.
Reports
to Trustee
We
will provide the trustee with (i) a calculation date report within 45 days after the end of each fiscal quarter containing a calculation
of the debt coverage ratio that includes a summary of all cash, life insurance policy investments serving as collateral, as well
as our total outstanding indebtedness including outstanding principal balances, interest credited and paid, transfers made, any
redemption or repayment and interest rate paid; (ii) copies of our audited annual financials, no earlier than when the same become
a matter of public record; and (iii) any additional information reasonably requested by the trustee.
Certain
Charges
We
and our servicing agents, if any, may assess service charges for changing the registration of any L Bond to reflect a change in
name of the holder, multiple changes in interest payment dates or transfers (whether by operation of law or otherwise) of an L
Bond by the holder to another person. The indenture permits us to set off, against amounts otherwise payable to you under the
L Bonds, the amount of these charges.
Variations
in Terms and Conditions
We
may from time to time vary the terms and conditions of the L Bonds offered, including but not limited to minimum initial principal
investment amount requirements, maximum aggregate principal amount limits, interest rates, minimum denominations, service and
other fees and charges, and redemption provisions. Terms and conditions may be varied by state, locality, principal amount, type
of investor (for example, new or current investor) or as otherwise permitted under the indenture governing the securities offered
by this prospectus. No change in terms, however, will apply to any L Bonds already issued and outstanding at the time of such
change.
Satisfaction
and Discharge of Indenture
The
indenture shall cease to be of further effect upon the payment in full of all of the outstanding L Bonds and the delivery of an
officer’s certificate to the trustee stating that we do not intend to issue additional L Bonds under the indenture or, with
certain limitations, upon deposit with the trustee of funds sufficient for the payment in full of all of the outstanding L Bonds.
Reports
We
will publish annual reports containing financial statements and quarterly reports containing financial information for the first
three quarters of each fiscal year. We will send copies of these reports, at no charge, to any holder of L Bonds who sends us
a written request.
PLAN
OF DISTRIBUTION
General
We are offering up to 2,000,000 Units,
representing $2,000,000,000 in aggregate principal amount, of L Bonds (referred to throughout this prospectus simply as “L
Bonds”) on a continuous basis. The L Bonds will be sold at $1,000 per Unit, and in minimum amounts of 25 Units, or $25,000
or more in principal. There is no minimum amount of L Bonds that must be sold before we access and use the proceeds. The proceeds
of new sales of L Bonds will be paid directly to us promptly following each sale and will not be placed in an escrow account.
Even if we sell less than the entire $2,000,000,000 in aggregate principal amount of L Bonds Units being offered, the L Bonds
that we sell will be issued, and the proceeds of those L Bond sales will be used by us, as described in this prospectus.
The
L Bonds will be offered and sold on a best efforts basis by Emerson Equity LLC (our “dealer manager”). Our dealer
manager will enter into participating dealer agreements with certain other broker-dealers that are members of FINRA, referred
to as “selling group members,” to authorize those broker-dealers to sell our L Bonds. The L Bonds will be offered
to the public on the terms set forth in this prospectus and any prospectus supplements we may file from time to time. Neither
our dealer manager nor any selling group members will have any obligation to take or purchase any L Bonds. In addition to forming
the selling group, our dealer manager provides services to us, which include conducting broker-dealer seminars, holding informational
meetings and providing information and answering any questions investors or selling group members may have concerning this offering.
Members of the selling group will receive
sales commissions of up to % of the gross offering proceeds depending upon the maturity
of the L Bonds sold. In addition, our dealer manager and selling group members may receive up to % of the gross offering proceeds
as additional compensation consisting of the following:
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a dealer-manager fee payable to the dealer manager in an amount equal to % of the principal amount of all L Bonds sold;
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an
accountable expense allowance to be paid to the selling group members, which may include
due diligence expenses of the dealer manager and selling group members set forth in a
detailed and itemized invoice and as further described below;
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wholesaling
fees, which may consist of commissions and non-transaction-based compensation of the
wholesalers;
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non-cash
compensation, which may consist of an occasional meal, a ticket to a sporting event or
the theater, or comparable entertainment that is neither so frequent nor so extensive
as to raise any question of propriety and is not preconditioned on achievement of a sales
target, the national and regional sales conferences of our selling group members, training
and education meetings for registered representatives of our selling group members, and
permissible forms of non-cash compensation to registered representatives of our selling
group members, such as gifts that do not exceed an aggregate value of $100 per annum
per registered representative and that are not pre-conditioned on achievement of a sales
target, including but not limited to seasonal gifts; and
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up
to a 1.00% reallowance to selling group members.
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As
part of the accountable expense allowance, the dealer manager and selling group members are expected to be reimbursed for accountable
out-of-pocket expenses incurred by them during the course of the offering. Expenses eligible for reimbursement may include:
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travel,
lodging, and meals for the wholesalers who are our employees and associated with the
dealer manager;
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reasonable
out-of-pocket expenses incurred by selling group members and their associated persons,
including reimbursement of actual costs of third-party professionals retained by them;
and
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due
diligence expenses of the dealer manager and selling group members set forth in a detailed
and itemized invoice.
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Upon
the sale of L Bonds by a selling group member, the selling group member effecting the sale will receive selling commissions and
additional compensation in connection therewith pursuant to the terms of the soliciting dealer agreement between the dealer manager
and the selling group member.
In no event will the total selling commissions
and additional compensation, including accountable due diligence expenses and reimbursements, exceed %
of the aggregate gross offering proceeds we receive from the sale of L Bonds.
We
may also sell our L Bonds at a discount through the following distribution channels in the event that the investor:
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purchases
L Bonds through fee-based programs, also known as wrap accounts;
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purchases
L Bonds through a selling group member that has an alternative fee arrangement with its
clients;
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purchases
L Bonds through certain registered investment advisers;
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purchases
L Bonds through bank trust departments or any other organization or person authorized
to act in a fiduciary capacity for its clients or customers; or
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is
an endowment, foundation, pension fund or other institutional investor.
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If
an investor purchases shares through one of the above distribution channels in our offering, we will sell the L Bonds at a discount,
reflecting that selling commissions are not being paid in connection with such purchase. The public offering price will be decreased
by an amount equal to such reduction; however, the net proceeds to us will not be affected by any such reduction in selling commissions.
Our
officers and directors and their family members may purchase the L Bonds offered hereby for investment and not for distribution
at a discount from the public offering price. For purposes of this discount, we consider a family member to be a spouse, parent,
child, sibling, mother- or father-in-law, son- or daughter-in-law or brother- or sister-in-law. In addition, if approved by our
Board of Directors, certain of our joint venture partners, consultants and other service providers may purchase the L Bonds offered
hereby at a discount from the public offering price. We will sell such L Bonds reflecting that selling commissions will not be
paid in connection with such sales. The public offering price will be decreased by an amount equal to such reduction; however,
the net proceeds to us from such sales made net of commissions will be the same as the net proceeds we receive from other sales
of L Bonds.
Also,
we may sell L Bonds to the dealer manager, selling group members, their retirement plans, their representatives and the family
members as described above, IRAs and qualified plans of their representatives at a purchase price reflecting that selling commissions
will not be payable in consideration of the services rendered by such dealer manager, selling group members, and their representatives
in the offering. Such sales, however, may not be made for the period of time from the effective date through 90 days after the
effective date. The public offering price will be decreased by an amount equal to such reduction; however, the net proceeds to
us from the sales of these L Bonds will be the same as the net proceeds we receive from other sales of L Bonds.
Neither
our dealer manager nor its affiliates will directly or indirectly compensate any person engaged as an investment advisor or a
bank trust department by a potential investor as an inducement for such investment advisor or bank trust department to advise
favorably for an investment in the L Bonds offered hereby. Also, we will not pay referral or similar fees to any accountants,
attorneys or other persons in connection with the distribution of the L Bonds.
In addition to the sales commissions,
fees, allowances, reimbursements and expenses described above, we expect to pay approximately $2,400,000 in offering and related
costs and expenses in connection with this offering. These kinds of expenses include all expenses to be paid by us in connection
with the offering (other than sales commissions, additional compensation, and expense allowances and reimbursement to our selling
group members), including but not limited to legal, accounting, printing and mailing expenses, registration, qualification and
associated securities filing fees and other costs and expenses.
The
table below sets forth the maximum amount of sales commissions and additional compensation, as described in footnote (1) to the
table below, we may pay in connection with this offering.
L Bond Term
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Sales Commission
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Additional
Compensation(1)
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Total(2)
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2 years
|
|
|
|
%
|
|
|
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%
|
|
|
|
%
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3 years
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
5 years
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
7 years
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
(1)
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As described above, additional compensation includes: (i) a dealer-manager fee payable to the dealer manager in an amount equal to % of the principal amount of all L Bonds sold; (ii) an accountable expense allowance to the selling group members as described above, which may include due-diligence expenses of the dealer manager and selling group members set forth in a detailed and itemized invoice; (iii) wholesaling fees, which may consist of commissions and non-transaction-based compensation of the wholesalers; (iv) non-cash compensation, which may consist of an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment that is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target, the national and regional sales conferences of our selling group members, training and education meetings for registered representatives of our selling group members, and permissible forms of non-cash compensation to registered representatives of our selling group members, such as gifts that do not exceed an aggregate value of $100 per annum per registered representative and that are not pre-conditioned on achievement of a sales target, including but not limited to seasonal gifts; and (v) up to a 1.00% reallowance to selling group members.
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(2)
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The combined selling commissions and additional compensation for this offering will not exceed % of the aggregate gross proceeds of this offering.
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The line items reflected in the table below
are our current estimates of average sales commissions and additional compensation (including accountable expenses) that we will
pay. Specifically, we estimate that the average sales commission will be %, or $
based on $2,000,000,000 in principal amount of L Bonds sold, and the average additional compensation will be %,
or $ based on $2,000,000,000 in principal amount of L Bonds sold. The components of “additional
compensation” are detailed in footnote (1) to the table above. Actual costs may differ from the percentages and amounts shown
in the table below, subject, however, to the limitations noted above.
L Bonds Sold
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Sales Commission
|
|
|
Additional Compensation
|
|
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Total
|
|
$
|
500,000,000
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
%
|
$
|
750,000,000
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
%
|
$
|
2,000,000,000
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
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%
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The
wholesalers employed by us are registered with and associated persons of our dealer manager. The wholesalers will:
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attend
local, regional and national conferences of the selling group members; and
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●
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contact
selling group members and their registered representatives to make presentations concerning
us and this offering.
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The wholesalers will receive a portion
of their non-transaction based compensation as compensation for their selling efforts. We host training and education meetings
for selling group members and their representatives. The costs of the training and education meetings will be borne by us, but
counted toward the % underwriting compensation limit.
Certain of our employees who are also registered
representatives and supervisory principals of the dealer manager have been granted certain share appreciation rights (“SARs”)
as part of their compensation. The SARs give such individual the contractual right to receive from us additional cash compensation
at any point before the SAR’s expiration, but only if the price of our common stock has increased between the grant date
and the date when we receive notice of such individual’s intention to exercise the SAR. At the termination of this offering,
the aggregate of the appreciation amount, as defined in the SAR agreement, will be calculated and added to the other items of value
(e.g., selling commissions and additional forms of compensation) to ensure that aggregate compensation paid in connection with
this offering does not exceed % of the gross offering proceeds.
In accordance with FINRA rules, in no event
will our total compensation to FINRA members, including but not limited to sales commissions, the dealer-manager fee and accountable
expense and other reimbursements to our dealer manager and selling group members, including non-transaction-based compensation
of the wholesalers and non-cash compensation, exceed % of our gross offering proceeds, in the
aggregate.
We will indemnify the selling group members
and our dealer manager against some civil liabilities, including certain liabilities under the Securities Act of 1933, as amended,
and liabilities arising from breaches of our representations and warranties contained in the Dealer Manager Agreement.
The
foregoing is a summary of the material terms relating to the plan of distribution of the L Bonds contained in the Dealer Manager
Agreement. Any amendment to the Dealer Manager Agreement will be filed as an exhibit to an amendment to the registration statement
of which this prospectus is a part.
Settlement
Procedures
You
can place an order for the purchase of L Bonds using DTC Settlement through your selling group member. A selling group member
using DTC settlement will have an account with a DTC participant in which your funds will be placed to facilitate settlement.
Orders may be placed until the cyclical order due date. Orders will be executed by such selling group member electronically and
you must coordinate with your selling group member’s registered representative to pay the full purchase price of the L Bonds
by the trade date. If you purchase your L Bonds using DTC settlement, you will be credited with ownership of an L Bond on the
second business day after the end of the DTC closing cycle in which the subscription is made (typically, closings will occur on
a bi-monthly cycle). If you purchase your L Bonds in this manner, your purchase price will not be held in escrow.
You
also have the option to elect to settle your purchase directly with us, the Company. If you elect to use direct settlement with
us, you should complete and sign a Subscription Agreement similar to the one filed as an exhibit to the registration statement
of which this prospectus is a part. A form of Subscription Agreement is available from your selling group member’s registered
representative. Once completed and signed, your Subscription Agreement should be provided to your selling group member who will
deliver it to us to be held, together with your related subscription funds, until our acceptance of your subscription. In connection
with a direct settlement subscription, you should pay the full purchase price of the L Bonds to us as set forth in the Subscription
Agreement. Subscribers may not withdraw funds from the subscription account. Subscriptions will be effective upon our acceptance
of your Subscription Agreement and related funds, and we reserve the right to reject any subscription in whole or in part.
Covered
Security
Our
L Bonds are a “covered security.” The term “covered security” applies to securities exempt from state
registration because of their oversight by federal authorities and national-level regulatory bodies pursuant to Section 18 of
the Securities Act of 1933. Generally, securities listed on national exchanges are the most common type of covered security exempt
from state registration. A non-traded security also can be a covered security if it has a seniority greater than or equal to other
securities from the same issuer that are listed on a national exchange. Our L Bonds are a covered security because they are senior
to our common stock, which is listed on The Nasdaq Capital Market, and therefore our offering of L Bonds will be exempt from state
registration.
Although the status of our L Bonds
as a “covered security” will facilitate their purchase and sale to a broader range of investors than would
otherwise be available to us, and although the offer and sale of a “covered security” generally involves fewer
issuance costs to the issuer of such securities, our L Bonds are not a suitable purchase for all investors. Investors are
urged to read carefully the risk factors relating to our business and our Company contained in the Risk Factors section of
this prospectus beginning on page 11 and under Item 1A, entitled “Risk Factors,” of our Annual Report on Form 10-K
for the year ended December 31, 2019, which is incorporated by reference herein. In addition, investors should understand
that because our L Bonds are a “covered security” exempt from state securities regulations, neither our Company,
the L Bonds, or any other aspects of this offering have been the subject of any merit-based review by state securities
regulators.
MATERIAL
FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general discussion of the material United States (“U.S.”) federal income tax considerations relating
to the initial purchase, ownership and disposition of the L Bonds by U.S. and non-U.S. holders. This discussion is a summary only
and is not a complete analysis of all the potential tax considerations relating to the purchase, ownership and disposition of
the L Bonds. We have based this summary on current provisions of the Code of 1986, as amended (the “Code”), applicable
U.S. Treasury Regulations promulgated thereunder, judicial opinions, and published rulings of the Internal Revenue Service (the
“IRS”), all as in effect on the date of this prospectus. However, these laws and other guidance are subject to differing
interpretations or change, possibly with retroactive effect. In addition, we have not sought, and will not seek, a ruling from
the IRS or an opinion of counsel with respect to any tax consequences of purchasing, owning or disposing of L Bonds. Thus, the
IRS could take a different position regarding one or more of the tax consequences or matters described in this prospectus; and
there can be no assurance that any position taken by the IRS would not be sustained.
This
discussion is limited to purchasers of L Bonds who acquire the L Bonds from us in this offering and hold the L Bonds as capital
assets for federal income tax purposes. This discussion does not address all possible tax consequences that may be applicable
to you in light of your specific circumstances. For instance, this discussion does not address the alternative minimum tax provisions
of the Code, or special rules applicable to some categories of investors such as financial institutions, insurance companies,
tax-exempt organizations, dealers in securities, real estate investment trusts, regulated investment companies, or persons who
hold L Bonds as part of a hedge, conversion or constructive sale transaction, straddle or other risk reduction transaction that
may be subject to special rules. This discussion also does not address the tax consequences arising under the laws of any foreign,
state or local jurisdiction; or any U.S. estate or gift tax laws.
If
you are considering the purchase of an L Bond, you should consult your own tax advisors as to the particular tax consequences
to you of acquiring, holding or otherwise disposing of the L Bonds, including the effect and applicability of state, local or
foreign tax laws, or any U.S. estate and gift tax laws.
As
used in this discussion, the term “U.S. holder” means a holder of an L Bond that is:
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(i)
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for
United States federal income tax purposes, a citizen or resident of the United States;
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(ii)
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a
corporation, partnership or other entity created or organized in or under the laws of
the United States or of any political subdivision thereof or other entity characterized
as a corporation or partnership for federal income tax purposes;
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(iii)
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an
estate, the income of which is subject to United States federal income taxation regardless
of its source; or
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(iv)
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a
trust, the administration of which is subject to the primary supervision of a court within
the United States and which has one or more United States persons with authority to control
all substantial decisions, or if the trust was in existence on August 20, 1996, and has
elected to continue to be treated as a United States trust.
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For
the purposes of this discussion, a “non-U.S. holder” means any holder of L Bonds other than a U.S. holder. Any L Bond
purchaser who is not a U.S. citizen will be required to furnish documentation, on IRS Form W-8BEN, that clearly states whether
it is subject to U.S. withholding taxes, in accordance with applicable requirements of the United States taxing authority.
Characterization
of the L Bonds
The
federal income tax consequences of owning L Bonds depend on characterization of the L Bonds as debt for federal income tax purposes,
rather than as equity interests or a partnership among the holders of the L Bonds. We believe that the L Bonds have been structured
in a manner that will allow the L Bonds to be characterized as debt for federal income tax purposes. However, this is only our
belief; and no ruling from the IRS or an opinion of counsel has been sought in this regard. Thus, the IRS could successfully challenge
this characterization.
If
the L Bonds were treated as equity interests, there could be adverse effects on some holders. For example, payments on the L Bonds
could (1) if paid to non-U.S. holders, be subject to federal income tax withholding; (2) constitute unrelated business taxable
income to some tax-exempt entities, including pension funds and some retirement accounts (if the relationship were characterized
as a partnership for tax purposes); and (3) cause the timing and amount of income that accrues to holders of L Bonds to be different
from that described below.
Because
of these potential adverse effects, you are urged to consult your own tax advisors as to the tax consequences that may apply to
your particular situation in the event the L Bonds are re-characterized as equity interests; and as to the likelihood that the
L Bonds could be so re-characterized. The remainder of this discussion assumes that the L Bonds are characterized as debt.
Taxation
of U.S. Holders
Stated
Interest
Under
general federal income tax principles, you must include stated interest in income in accordance with the method of accounting
you use for federal income tax purposes. Accordingly, if you are using the accrual method of tax accounting, you must include
stated interest in income as it accrues. If you are using the cash method of tax accounting, you must include stated interest
in income as it is actually or constructively received. Payments of interest to taxable holders of L Bonds will constitute portfolio
income, and not passive activity income, for the purposes of the passive loss limitations of the Code. Accordingly, income arising
from payments on the L Bonds will not be subject to reduction by losses from passive activities of a holder.
If
a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds L Bonds, the
tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If you
are a partner in a partnership purchasing L Bonds, we urge you to consult your tax advisor.
Disposition
of L Bonds
In
general, a U.S. holder will recognize gain or loss upon the sale, exchange or other taxable disposition of an L Bond measured
by the difference between (1) the sum of the cash and the fair market value of all other property received on such disposition,
excluding any portion of the payment that is attributable to accrued interest on the L Bonds; and (2) your adjusted tax basis
in the L Bond. A U.S. holder’s adjusted tax basis in an L Bond generally will be equal to the price the U.S. holder paid
for the L Bond. Any of this gain or loss generally will be long-term capital gain or loss if, at the time of any such taxable
disposition, the L Bond was a capital asset in the hands of the holder and was held for more than one year. Net long-term capital
gain recognized by individual U.S. holders is eligible for a reduced rate of taxation. The deductibility of capital losses is
subject to annual limitations.
The
terms of the L Bonds may be modified upon the consent of a specified percentage of holders and, in some cases, without consent
of the holders. In addition, the L Bonds may be assumed upon the occurrence of specific transactions. The modification or assumption
of an L Bond could, in some instances, give rise to a deemed exchange of an L Bond for a new debt instrument for federal income
tax purposes. If an exchange is deemed to occur by reason of a modification or assumption, you could realize gain or loss without
receiving any cash.
Additional
Tax on Net Investment Income
If
you are a U.S. holder other than a corporation, you generally will be subject to a 3.8% additional tax on the lesser of (1) your
“net investment income” for the taxable year, and (2) the excess of your modified adjusted gross income for the taxable
year over a certain threshold. Your net investment income generally will include any income or gain recognized by you with respect
to our L Bonds, unless such income or gain is derived in the ordinary course of the conduct of your trade or business (other than
a trade or business that consists of certain passive or trading activities).
Considerations
for Tax-Exempt Holders of L Bonds
Tax-exempt
entities, including charitable corporations, pension plans, profit sharing or stock bonus plans, individual retirement accounts
and some other employee benefit plans are subject to federal income tax on unrelated business taxable income. For example, net
income derived from the conduct of a trade or business regularly carried on by a tax-exempt entity or by a partnership in which
it is a partner is treated as unrelated business taxable income.
A
$1,000 special deduction is allowed in determining the amount of unrelated business taxable income subject to tax. Tax-exempt
entities taxed on their unrelated business taxable income are also subject to the alternative minimum tax for items of tax preference
which enter into the computation of unrelated business taxable income.
In
general, interest income does not constitute unrelated business taxable income. However, under the debt-financed property rules,
if tax-exempt holders of L Bonds finance the acquisition or holding of L Bonds with debt, interest on the L Bonds will be taxable
as unrelated business taxable income. The L Bonds will be treated as debt-financed property if the debt was incurred to acquire
the L Bonds or was incurred after the acquisition of the L Bonds, so long as the debt would not have been incurred but for the
acquisition and, at the time of the acquisition, the incurrence of the debt has already occurred or was foreseeable.
Non-U.S.
Holders
The
following discussion is a summary of the principal U.S. federal income consequences resulting from the ownership of the L Bonds
by non-U.S. holders. However, application of the U.S. federal income tax rules associated with non-U.S. holders is complex and
factually sensitive. Thus, if you could be considered to be a non-U.S. holder, you are urged to consult your own tax advisors
with respect to the application of the federal income tax rules for your particular situation.
Payments
of Interest to Non-U.S. Holders
Subject
to the discussion below under “Backup Withholding and Information Reporting,” payments of interest received by a non-U.S.
holder generally will not be subject to U.S. federal withholding tax, provided (1) that (a) the non-U.S. holder does not own,
actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote; (b) the
non-U.S. holder is not a controlled foreign corporation, actually or constructively, through stock ownership; and (c) the beneficial
owner of the L Bond complies with the certification requirements, including delivery of a statement, signed by the holder under
penalties of perjury, certifying that the holder is a foreign person and provides its name and address; or (2) that the non-U.S.
holder is entitled to the benefits of an income tax treaty under which the interest is exempt from U.S. withholding tax and the
non-U.S. holder complies with the reporting requirements. If an L Bond is held through a securities clearing organization or other
specified financial institutions (an “Intermediary”), the Intermediary may provide the relevant signed statement and,
unless the Intermediary is a “qualified” intermediary as defined under the Code, the signed statement provided by
the Intermediary must be accompanied by a copy of a valid Form W-8BEN provided by the non-U.S. beneficial holder of the L Bond.
Payments
of interest not exempt from United States federal withholding tax as described above will be subject to a withholding tax at the
rate of 30%, subject to reduction under an applicable income tax treaty.
Payments
of interest on an L Bond to a non-U.S. holder generally will not be subject to U.S. federal income tax, as opposed to withholding
tax, unless the income is effectively connected with the conduct by the non-U.S. holder of a trade or business in the United States.
To claim the benefit of a lower treaty withholding rate, a non-U.S. holder must provide a properly executed IRS Form W-8BEN to
us or our paying agent before the payment of stated interest; and may be required to obtain a U.S. taxpayer identification number
and provide documentary evidence issued by foreign governmental authorities to prove residence in the foreign country. You should
consult your own tax advisor to determine the effects of the application of the U.S. federal withholding tax to your particular
situation.
Disposition
of the L Bonds by Non-U.S. Holders
Subject
to the discussion below under “Backup Withholding and Information Reporting,” a non-U.S. holder generally will not
be subject to United States federal income tax, and generally no tax will be withheld with respect to gains realized on the disposition
of an L Bond, unless (a) the gain is effectively connected with a United States trade or business conducted by the non-U.S. holder
or (b) the non-U.S. holder is an individual who is present in the United States for 183 or more days during the taxable year of
the disposition and other requirements are satisfied.
Non-U.S.
Holders Subject to U.S. Income Taxation
If
interest and other payments received by a non-U.S. holder with respect to the L Bonds, including proceeds from the disposition
of the L Bonds, are effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States,
or the non-U.S. holder is otherwise subject to United States federal income taxation on a net basis with respect to the holder’s
ownership of the L Bonds, or are individuals that have by operation of law become residents in the United States for federal income
tax purposes, the non-U.S. holder generally will be subject to the rules described above applicable to U.S. holders of L Bonds,
subject to any modification provided under an applicable income tax treaty. If any of these non-U.S. holders is a corporation,
it may also be subject to a U.S. “branch profits tax” at a 30% rate.
Backup
Withholding and Information Reporting
Non-corporate
U.S. holders may be subject to backup withholding at a rate of 28% on payments of principal, premium, and interest on, and the
proceeds of the disposition of, the L Bonds. In general, backup withholding will be imposed only if the U.S. holder (1) fails
to furnish its taxpayer identification number (“TIN”), which for an individual would be his or her Social Security
number; (2) furnishes an incorrect TIN; (3) is notified by the IRS that it has failed to report payments of interest or dividends;
or (4) under some circumstances, fails to certify under penalty of perjury that it has furnished a correct TIN and has been notified
by the IRS that it is subject to backup withholding tax for failure to report interest or dividend payments. In addition, the
payments of principal and interest to U.S. holders generally will be subject to information reporting. You should consult your
tax advisors regarding your qualification for exemption from backup withholding and the procedure for obtaining an exemption,
if applicable.
Backup
withholding generally will not apply to payments made to a non-U.S. holder of an L Bond who provides the certification that it
is a non-U.S. holder, and the payor does not have actual knowledge that a certificate is false, or otherwise establishes an exemption
from backup withholding. Payments by United States office of a broker of the proceeds of a disposition of the L Bonds generally
will be subject to backup withholding at a rate of 28% unless the non-U.S. holder certifies it is a non-U.S. holder under penalties
of perjury or otherwise establishes an exemption. In addition, if a foreign office of a foreign custodian, foreign nominee or
other foreign agent of the beneficial owner, or if a foreign office of a foreign “broker” pays the proceeds of the
sale of an L Bond to the seller, backup withholding and information reporting will not apply; provided that the nominee, custodian,
agent or broker is not a “United States related person,” or a person which derives more than 50% of its gross income
for some periods from the conduct of a trade or business in the United States or is a controlled foreign corporation. The payment
by a foreign office of a broker that is a United States person or a United States related person of the proceeds of the sale of
L Bonds will not be subject to backup withholding, but will be subject to information reporting unless the broker has documentary
evidence in its records that the beneficial owner is not a United States person for purposes of the backup withholding and information
reporting requirements and other conditions are met, or the beneficial owner otherwise establishes an exemption.
The
amount of any backup withholding imposed on a payment to a holder of an L Bond will be allowed as a credit against the holder’s
United States federal income tax liability and may entitle the holder to a refund; provided that the required information is furnished
to the IRS.
STATE,
LOCAL AND FOREIGN TAXES
We
make no representations regarding the tax consequences of the purchase, ownership or disposition of the L Bonds under the tax
laws of any state, locality or foreign country. You should consult your own tax advisors regarding these state and foreign tax
consequences.
ERISA
CONSIDERATIONS
General
Title
I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Section 4975 of the Code impose
restrictions on employee benefit plans that are subject to ERISA, or plans or arrangements that are subject to Code Section 4975,
and on persons who are parties in interest or disqualified persons with respect to those plans or arrangements. Some employee
benefit plans, like governmental plans and church plans (if no election has been made under Section 410(d) of the Code), are not
subject to the restrictions of Title I of ERISA or Code Section 4975, and assets of these plans may be invested in the L Bonds
without regard to the ERISA considerations described below, subject to the Code and other applicable federal and state laws affecting
tax-exempt organizations generally. Any plan fiduciary that proposes to cause a plan to acquire any of the L Bonds should consult
with its counsel with respect to the potential consequences under ERISA and the Code of the plan’s acquisition and ownership
of the L Bonds. Investments by plans are also subject to ERISA’s and the Code’s general fiduciary requirements, including
the requirement of investment prudence and diversification and the requirement that a plan’s investments be made in accordance
with the documents governing the plan.
Prohibited
Transactions
General
Section
406 of ERISA and Section 4975 of the Code prohibits certain “parties in interest” and “disqualified persons”
with respect to a plan from engaging in select transactions involving a plan and its assets unless a statutory, regulatory or
administrative exemption applies to the transaction. Section 4975 of the Code imposes excise taxes on parties in interest that
engage in non-exempt “prohibited transactions.” Section 502(i) of ERISA requires the Secretary of the U.S. Department
of Labor (“Labor”) to assess a civil penalty against a fiduciary who breaches any fiduciary responsibility under,
or commits any other violation of, part 4 of Title I of ERISA, or any other person who knowingly participates in a breach or violation.
Plan
Asset Regulations
Labor
has issued regulations concerning the definition of what constitutes the assets of a plan for purposes of ERISA and the prohibited
transaction provisions of the Code. The plan asset regulations describe the circumstances where the assets of an entity in which
a plan invests will be considered to be “plan assets,” so that any person who exercises control over the assets would
be subject to ERISA’s fiduciary standards. Generally, under the plan asset regulation, when a plan invests in another entity,
the plan’s assets do not include, solely by reason of the investment, any of the underlying assets of the entity. However,
the plan asset regulation provides that, if a plan acquires an “equity interest” in an entity that is neither a “publicly-offered
security” nor a security issued by an investment company registered under the Investment Company Act of 1940 the assets
of the entity will be treated as assets of the plan investor unless exceptions apply.
Under
the plan asset regulations the term “equity interest” is defined as any interest in an entity other than an instrument
that is treated as indebtedness under “applicable local law” and that has no “substantial equity features.”
Although the plan asset regulation is silent with respect to the question of which law constitutes “applicable local law”
for this purpose, Labor has stated that these determinations should be made under the state law governing interpretation of the
instrument in question. In the preamble to the plan asset regulation, Labor declined to provide a precise definition of what features
are equity features or the circumstances under which the features would be considered “substantial,” noting that the
question of whether a plan’s interest has substantial equity features is an inherently factual one, but that in making that
determination it would be appropriate to take into account whether the equity features are such that a plan’s investment
would be a practical vehicle for the indirect provision of investment management services. We believe that the L Bonds will be
classified as indebtedness without substantial equity features for ERISA purposes.
Under
the plan asset regulations the term “publicly-offered security” is defined as a security that is (i) freely transferable,
(ii) part of a class of securities that is widely held, and (iii) either (A) part of a class of securities registered under section
12(b) or 12(g) of the Securities Exchange Act of 1934 or (B) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act of 1933 and the class of securities of which such security
is a part is registered under the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. For purposes of the above, a class of securities is considered
to be “widely held” if it is owned by 100 or more investors independent of the issuer and of one another. In the case
of this offering, while the offer and sale of the L Bonds have been registered under the Securities Act of 1933, the L Bonds themselves
have not been registered under the Securities Exchange Act of 1934. For this reason, we believe that the L Bonds will not likely
meet the definition for “publicly-offered security” under the plan asset regulations.
In
light of the foregoing, if the L Bonds were deemed to be equity interests for this purpose and no statutory, regulatory, or administrative
exception applies, we could be considered to hold plan assets by reason of a plan’s investment in the L Bonds. These plan
assets would include an undivided interest in all of our assets. In this case, we may be considered a fiduciary with respect to
the investing plans. We would be subject to the fiduciary responsibility provisions of Title I of ERISA, including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code, and to Section 4975 of the Code with respect to transactions
involving any of our assets. The ERISA fiduciary standards could affect the way we conduct the business, which would have consequences
for all investors, not just those that are employee benefit plans.
Depending
on the relevant facts and circumstances, prohibited transaction exemptions may apply to the purchase or holding of the L Bonds.
See, for example, Prohibited Transaction Class Exemption (“PTE”) 96-23, which exempts some transactions effected on
behalf of a plan or by an “in-house asset manager;” PTE 95-60, which exempts some transactions between insurance company
general accounts and parties in interest; PTE 91-38, which exempts some transactions between bank collective investment funds
and parties in interest; PTE 90-1, which exempts some transactions between insurance company pooled separate accounts and parties
in interest; or PTE 84-14, which exempts some transactions effected on behalf of a plan by a “qualified professional asset
manager.” However, there can be no assurance that any of these exemptions will apply with respect to any plan’s investment
in the L Bonds, or that the exemption, if it did apply, would apply to all prohibited transactions that may occur in connection
with the investment.
Any
plan fiduciary considering whether to purchase L Bonds on behalf of a plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code. Before purchasing any L Bonds, a
fiduciary of a plan should make its own determination as to (1) whether GWG Holdings, as issuer of and borrower under the L Bonds,
is a “party in interest” under ERISA or a “disqualified person” under the Code with respect to the plan;
(2) the availability of the relief provided in the plan asset regulation and (3) the availability of any other prohibited transaction
exemptions. In addition, purchasers that are insurance companies should consult their own ERISA counsel with respect to their
fiduciary responsibilities associated with their purchase and ownership of the L Bonds, including any responsibility under the
Supreme Court case John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank.
LEGAL MATTERS
Certain legal matters in connection with
the L Bonds will be passed upon for us by Mayer Brown LLP, Chicago, Illinois.
EXPERTS
The consolidated financial statements
of GWG Holdings, Inc. and its subsidiaries for the year ended December 31, 2019 incorporated by reference in this prospectus
from GWG Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 and the effectiveness of GWG
Holdings, Inc.’s internal control over financial reporting as of December 31, 2019, have been audited by Whitley
Penn LLP, independent registered public accounting firm, as set forth in their reports thereon, which are incorporated herein
by reference. Such financial statements have been so incorporated in reliance upon the report of Whitley Penn LLP pertaining
to such financial statements and the effectiveness of our internal control over financial reporting on the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements of
GWG Holdings, Inc. and its subsidiaries for the year ended December 31, 2018 incorporated by reference in this prospectus from
GWG Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 have been audited by Baker Tilly Virchow
Krause, LLP, independent registered public accounting firm, as set forth in their report thereon. Such financial statements have been so incorporated in reliance upon the report of Baker Tilly Virchow Krause, LLP on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of
The Beneficient Company Group, L.P. and its subsidiaries for the year ended December 31, 2019 incorporated by reference in this
prospectus from GWG Holdings, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 have been audited by
Whitley Penn LLP, independent registered public accounting firm, as set forth in their report thereon, which is incorporated herein
by reference. Such financial statements have been so incorporated in reliance upon the report of Whitley Penn LLP pertaining to
such financial statements on the authority of such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the L Bonds to be offered
and sold pursuant to this prospectus which is a part of that registration statement. This prospectus does not contain all the
information contained in the registration statement. For further information with respect to us and the L Bonds to be sold in
this offering, we refer you to the registration statement, including the agreements, other documents and schedules filed as exhibits
to the registration statement.
We
file annual, quarterly and current reports, and other information with the SEC. We intend to make these filings available on our
website at www.gwgh.com. Information on our website is not incorporated by reference in this prospectus. We maintain an
office at 325 N. Saint Paul Street, Suite 2650, Dallas, TX 75201 where all records concerning the L Bonds are to be retained.
L Bond holders and their representatives can request information regarding the L Bonds by contacting our office by mail at our
address or by telephone at (612) 746-1944 or by fax at (612) 746-0445. Upon request, we will provide copies of our filings with
the SEC free of charge to our investors. Our SEC filings, including the registration statement of which this prospectus is a part,
will also be available on the SEC’s Internet site at http://www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
We
are incorporating certain information about us that we have filed with the SEC by reference in this prospectus, which means that
we are disclosing important information to you by referring you to those documents. The information we incorporate by reference
is an important part of this prospectus.
We incorporate by reference the documents
listed below:
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●
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Our Annual Report on Form 10-K for the year ended December 31, 2019,
filed with the SEC on March 27, 2020; and
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All documents filed by us pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of this prospectus and before the
termination of the offering also are incorporated herein by reference. We are not, however, incorporating by reference any documents
or portions thereof that are not deemed “filed” with the SEC or any information furnished pursuant to Items 2.02 or
7.01 of Form 8-K or certain exhibits furnished pursuant to Item 9.01 of Form 8-K.
The section entitled “Where You
Can Find More Information” above describes how you can obtain or access any documents or information that we have incorporated
by reference herein. The information relating to us contained in this prospectus does not purport to be comprehensive and should
be read together with the information contained in the documents incorporated by reference in this prospectus.
Upon
written or oral request, we will provide, free of charge, to each person, including any beneficial owner, to whom a prospectus
is delivered, a copy of any or all of the reports or documents that are incorporated by reference into this prospectus. Such written
or oral requests should be made to:
Timothy
Evans, Chief Financial Officer
325 N. Saint Paul Street, Suite 2650
Dallas, TX 75201
Telephone Number: (612) 746-1935
In
addition, such reports and documents may be found on our website at www.gwgh.com.
2,000,000
Units
($2,000,000,000)
GWG
HOLDINGS, INC.
L
Bonds
PROSPECTUS
,
2020
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set
forth below are expenses (other than the selling agent’s commissions, dealer-manager fees and allowance expenses) we expect
to be incurred in connection with the issuance and distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee, the amounts set forth below are estimates and actual expenses may vary considerably
from these estimates depending upon how long the notes are offered and other factors:
Securities and Exchange Commission registration fee
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|
$
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259,600
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Accounting fees and expenses
|
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400,000
|
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Legal fees and expenses
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1,000,000
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|
Blue sky fees and expenses
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40,000
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Printing expenses
|
|
|
400,000
|
|
Trustee fees and expenses
|
|
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0
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Miscellaneous
|
|
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300,400
|
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Total
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$
|
2,400,000
|
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ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section
145 of the Delaware General Corporation Law (the “DGCL”) provides for, under certain circumstances, the indemnification
of our officers, directors, employees and agents against liabilities that they may incur in such capacities. A summary of the
circumstances in which such indemnification provided for is contained herein, but that description is qualified in its entirety
by reference to the relevant Section of the DGCL.
In
general, the statute provides that any director, officer, employee or agent of a corporation may be indemnified against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in a proceeding
(including any civil, criminal, administrative or investigative proceeding) to which the individual was a party by reason of such
status. Such indemnity may be provided if the indemnified person’s actions resulting in the liabilities: (i) were taken
in good faith; (ii) were reasonably believed to have been in or not opposed to our best interest; and (iii) with respect to any
criminal action, such person had no reasonable cause to believe the actions were unlawful. Unless ordered by a court, indemnification
generally may be awarded only after a determination of independent members of the board of directors or a committee thereof, by
independent legal counsel or by vote of the stockholders that the applicable standard of conduct was met by the individual to
be indemnified.
The
statutory provisions further provide that to the extent a director, officer, employee or agent is wholly successful on the merits
or otherwise in defense of any proceeding to which he or she was a party, he or she is entitled to receive indemnification against
expenses, including attorneys’ fees, actually and reasonably incurred in connection with the proceeding.
Indemnification in
connection with a proceeding by or in the right of GWG Holdings in which the director, officer, employee or agent is successful
is permitted only with respect to expenses, including attorneys’ fees actually and reasonably incurred in connection with
the defense. In such actions, the person to be indemnified must have acted in good faith, in a manner believed to have been in
our best interest and must not have been adjudged liable to us unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, in
view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expense which the
Court of Chancery or such other court shall deem proper. Indemnification is otherwise prohibited in connection with a proceeding
brought on behalf of the Company in which a director is adjudged liable to us, or in connection with any proceeding charging improper
personal benefit to the director in which the director is adjudged liable for receipt of an improper personal benefit.
Delaware
law authorizes us to reimburse or pay reasonable expenses incurred by a director, officer, employee or agent in connection with
a proceeding in advance of a final disposition of the matter. Such advances of expenses are permitted if the person furnishes
to us a written agreement to repay such advances if it is determined that he or she is not entitled to be indemnified by us.
The
statutory section cited above further specifies that any provisions for indemnification of or advances for expenses does not exclude
other rights under our certificate of incorporation, corporate bylaws, resolutions of our stockholders or disinterested directors,
or otherwise. These indemnification provisions continue for a person who has ceased to be a director, officer, employee or agent
of the corporation and inure to the benefit of the heirs, executors and administrators of such persons.
The
statutory provision cited above also grants the power to the Company to purchase and maintain insurance policies that protect
any director, officer, employee or agent against any liability asserted against or incurred by him in such capacity arising out
of his status as such. Such policies may provide for indemnification whether or not the corporation would otherwise have the power
to provide for it.
Article
6 of our corporate bylaws provides that we shall indemnify our directors, officers, employees and agents to the fullest extent
permitted by the DGCL. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing provisions, we understand that in the opinion
of the SEC such indemnification is against public policy as expressed in that Act and is therefore unenforceable.
We
have purchased directors’ and officers’ liability insurance in order to limit the exposure to liability for indemnification
of directors and officers, including liabilities under the Securities Act of 1933.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
On August 10, 2018, GWG issued and sold
5,000,000 shares of Convertible Preferred Stock to Beneficient for an aggregate purchase price of $50,000,000, or $10.00 per share
of Convertible Preferred Stock. No underwriting discounts or commissions were paid in connection with such sale. The Convertible
Preferred Stock will convert into 5,000,000 shares of GWG common stock at a conversion price of $10.00 per share immediately following
the Final Closing.
The Convertible Preferred Stock were offered
and sold in reliance upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933. The Master
Exchange Agreement and the Third Amendment contains representations to support GWG’s reasonable belief that Beneficient and
the Seller Trusts had access to information concerning GWG’s operations and financial condition, that each such recipient
is acquiring the securities for its own account and not with a view to the distribution thereof, and that each such recipient is
an “accredited investor” as defined by Rule 501 promulgated under the Securities Act of 1933.
On December 28, 2018, GWG issued and sold
27,013,516 shares of common stock (including shares issued upon conversion of the Convertible Preferred Stock) to the Seller Trusts.
No underwriting discounts or commissions were paid in connection with such sale.
The shares were offered and sold in reliance
upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933. The Master Exchange Agreement
contains representations to support GWG’s reasonable belief that Beneficient and the Seller Trusts had access to information
concerning GWG’s operations and financial condition, that each such recipient is acquiring the securities for its own account
and not with a view to the distribution thereof (other than pursuant to a public offering registered under the Securities Act of
1933 or another applicable exemption), and that each such recipient is an “accredited investor” as defined by Rule
501 promulgated under the Securities Act of 1933.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Exhibits. The exhibits listed below are filed as a part of this registration statement.
Exhibit
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Description
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1.1
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Form Managing Broker-Dealer Agreement with Emerson Equity(1)
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1.2
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Form of Soliciting Dealer Agreement(1)
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3.1
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Certificate of Incorporation(2)
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3.2
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Bylaws(3)
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3.3
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Amendment to Bylaws(19)
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3.4
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Certificate of Amendment to Certificate of Incorporation(5)
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3.5
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Certificate of Amendment to Certificate of Incorporation(8)
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3.6
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Certificate of Designation for Redeemable Preferred Stock(9)
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3.7
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Certificate of Amendment to Certificate of Designation for Redeemable Preferred Stock(9)
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3.8
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Certificate of Designation for Series 2 Redeemable Preferred Stock(11)
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3.9
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Certificate of Designations of Series B Convertible Preferred Stock(16)
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3.10
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Certificate of Correction of Certificate of Designation of Redeemable Preferred Stock(24)
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3.11
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Certificate of Correction of Certificate of Designation of Series 2 Redeemable Preferred Stock(24)
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4.1
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Amended and Restated Indenture with Bank of Utah, dated October 23, 2017(6)
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4.2
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Amended and Restated Pledge and Security Agreement by and among GWG Holdings, Inc., GWG Life,
LLC, Jon R. Sabes, Steven F. Sabes, and Bank of Utah, dated October 23, 2017(6)
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4.3
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Form
of L Bond (included as Exhibit A to Amended and Restated Indenture with Bank
of Utah, dated October 23, 2017)
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4.4
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Form of Subscription Agreement for L Bonds(26)
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4.5
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Amendment No 1 to Amended and Restated Indenture with Bank of Utah, dated March 27, 2018(21)
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4.6
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Supplemental Indenture, dated as of August 10, 2018, to the Amended and Restated Indenture, dated as of October 23, 2017, as amended(16)
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4.7
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Amendment No 2 to Amended and Restated Indenture with Bank of Utah, dated December 31, 2019(28)
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5.1
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Opinion
of Mayer Brown LLP(1)
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10.1
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Second
Amended and Restated Loan and Security Agreement with GWG DLP Funding IV, LLC (as borrower), CLMG Corp. (as agent) and LNV
Corporation (as lender), dated November 1, 2019(29)
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10.2
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Employment Agreement with William B. Acheson, dated June 30, 2017(10)
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10.3
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2013
Stock Incentive Plan as amended(14)
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10.4
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Form of Stock Option Agreement used with 2013 Stock Incentive Plan(12)
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10.5
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Master Exchange Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, MHT Financial SPV, LLC, a Delaware limited liability company, and various related trusts, as amended and restated on January 18, 2018 with effect from January 12, 2018(13)
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10.6
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First Amendment to Master Exchange Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, MHT Financial SPV, LLC, a Delaware limited liability company, and various related trusts, dated April 30, 2018(13)
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10.7
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Second Amendment to Master Exchange Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, MHT Financial SPV, LLC, a Delaware limited liability company, and various related trusts, dated June 29, 2018(15)
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10.8
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Third Amendment to Master Exchange Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, MHT Financial SPV, LLC, a Delaware limited liability company, and various related trusts, dated August 10, 2018(16)
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10.9
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Commercial Loan Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, dated August 10, 2018(16)
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10.10
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Amendment No. 1 dated December 27, 2018 to Commercial Loan Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership(17)
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10.11
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Exchangeable Note from The Beneficient Company Group, L.P., a Delaware limited partnership, dated August 10, 2018(16)
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10.12
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Registration Rights Agreement with certain trusts related to The Beneficient Company Group, L.P., a Delaware limited partnership, and as set forth in the Agreement, dated August 10, 2018(16)
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10.13
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Registration Rights Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, dated August 10, 2018(16)
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10.14
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Registration Rights Agreement with each of the Exchange Trusts, dated December 27, 2018(17)
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10.15
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Participating Option Agreement with The Beneficient Company Group, L.P., a Delaware limited partnership, dated December 27, 2018(17)
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Exhibit
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Description
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10.16
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Consent and Joinder to Amended and Restated Pledge and Security Agreement dated April 26, 2019(19)
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10.17
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Form of Indemnification Agreement with Directors and Officers(19)
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10.18
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Employment Agreement dated as of May 31, 2019 by and between GWG Holdings, Inc. and Murray T. Holland(22)
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10.19
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Performance Share Unit Agreement dated as of May 31, 2019 by and between GWG Holdings, Inc. and Murray T. Holland(22)
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10.20
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Promissory Note dated May 31, 2019 made by and on behalf of certain LiquidTrust Borrowers(23)
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10.21
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Intercreditor Agreement dated May 31, 2019 between GWG Life and HCLP Nominees, L.L.C.(23)
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10.22
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Intercreditor Agreement dated May 31, 2019 between GWG Life and Beneficient Holdings, Inc.(23)
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10.23
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Forbearance Letter Agreement dated July 3, 2019 between GWG DLP Funding IV, LLC and CLMG Corp. (as agent)(3)
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10.24
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Form of Non-employee Director Restricted Stock Agreement(3)
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21.1
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List of Subsidiaries(30)
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23.1
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Consent of Whitley Penn LLP (filed herewith)
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23.2
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Consent of Baker Tilly Virchow Krause, LLP (filed herewith)
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23.3
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Consent
of Mayer Brown LLP(1)
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24.1
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Power of Attorney (incorporated by reference to the signature page of this Registration Statement on Form S-1)
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25.1
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Statement of Eligibility of Trustee (filed herewith)
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99.1
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Letter from ClearLife Limited, dated February 24, 2020(30)
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99.2
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Portfolio of Life Insurance Policies as of December 31, 2019(30)
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99.3
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Purchase and Contribution Agreement dated as of April 15, 2018 by and among The Beneficient Company Group, L.P., Beneficient Company Holdings, L.P., AltiVerse Capital Markets, L.L.C., Sabes AV Holdings, LLC, Jon R. Sabes, Steven F. Sabes, Insurance Strategies Fund, LLC and SFS Holdings, LLC(18)
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99.4
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The Beneficient Company Group, L.P. and Subsidiaries Consolidated Financial Statements and Independent Auditor’s Report(30)
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99.5
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Fourth Amended and Restated Limited Partnership Agreement of Beneficient Company Holdings, L.P., dated as of April 26, 2019(25) †
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(1)
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To be filed by amendment.
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(2)
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Incorporated by
reference to Form S-1 Registration Statement filed on June 14, 2011 (File No. 333-174887).
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(3)
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Incorporated by
reference to Annual Report on Form 10-K filed on July 9, 2019.
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(4)
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Intentionally omitted.
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(5)
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Incorporated by
reference to Form S-1/A Registration Statement filed on August 23, 2011 (File No. 333-174887).
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(6)
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Incorporated by
reference to Current Report on Form 8-K filed on October 26, 2017.
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(7)
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Intentionally omitted.
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(8)
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Incorporated by
reference to Quarterly Report on Form 10-Q filed on August 8, 2014.
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(9)
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Incorporated by
reference to Annual Report on Form 10-K filed on March 22, 2016.
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(10)
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Incorporated by
reference to Current Report on Form 8-K filed on June 30, 2017.
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(11)
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Incorporated by
reference to Current Report on Form 8-K filed on February 22, 2017.
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(12)
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Incorporated by
reference to Form S-1/A Registration Statement filed on June 6, 2014 (File No. 333-195505).
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(13)
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Incorporated by
reference to Quarterly Report on Form 10-Q filed on May 11, 2018.
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(14)
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Incorporated by
reference to Current Report on Form 8-K filed on May 9, 2018.
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(15)
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Incorporated by
reference to Quarterly Report on Form 10-Q filed on August 14, 2018.
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(16)
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Incorporated by
reference to Current Report on Form 8-K filed on August 14, 2018.
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(17)
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Incorporated by
reference to Current Report on Form 8-K filed on January 4, 2019.
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(18)
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Incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to the Schedule 13D jointly filed on April 16, 2019 by Jon R. Sabes and
Steven F. Sabes, among others.
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(19)
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Incorporated by
reference to Current Report on Form 8-K filed on April 30, 2019.
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(20)
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Intentionally omitted.
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(21)
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Incorporated by
reference to Annual Report on Form 10-K filed on March 29, 2018.
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(22)
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Incorporated by
reference to Current Report on Form 8-K filed on June 6, 2019.
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(23)
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Incorporated by
reference to Current Report on Form 8-K filed on June 6, 2019.
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(24)
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Incorporated by
reference to Quarterly Report on Form 10-Q filed on November 14, 2019.
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(25)
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Incorporated by reference to Quarterly
Report on Form 10-Q filed on September 3, 2019.
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(26)
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Incorporated by reference to Form
S-1/A Registration Statement filed on October 10, 2017 (File No. 333-220288).
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(27)
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Intentionally omitted
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(28)
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Incorporated by reference to Current Report on Form 8-K filed on January 7, 2020.
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(29)
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Incorporated by reference to Current Report on Form 8-K filed on November 7, 2019.
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(30)
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Incorporated by reference to Annual Report on Form 10-K filed on March 27, 2020.
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†
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Certain information has
been excluded from this exhibit because it both is not material and would likely cause competitive harm to the registrant if publicly
disclosed.
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ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided,
however, that:
Paragraphs
(1)(i), (1)(ii) and (1)(iii) of this section do not apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or,
as to a registration statement on Form S-3, Form SF-3 or Form F-3, is contained in a form of prospectus filed pursuant to Rule
424(b) that is part of the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(5)
That, for purposes of determining any liability under the Securities Act of 1933:
(i)
the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(l) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be a part of this registration statement as of the time it was declared effective; and
(ii)
each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted
to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on March 30, 2020.
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GWG HOLDINGS, INC.
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By:
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/s/
Murray T. Holland
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President and Chief Executive Officer
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KNOW ALL MEN BY THESE
PRESENTS, that each of the undersigned constitutes and appoints Murray T. Holland and Timothy Evans his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any
and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments
and registration statements filed pursuant to Rule 462 under the Securities Act of 1933), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying
and confirming that any such attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed, as of March 30, 2020, by the following persons
in the capacities indicated below.
Name
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Title
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/s/
Murray T. Holland
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President
and Chief Executive Officer
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Murray
T. Holland
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(Principal
Executive Officer)
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/s/
Timothy Evans
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Chief Financial
Officer
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Timothy
Evans
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(Principal
Financial and Accounting Officer)
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/s/
Brad K. Heppner
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Director,
Chairman of the Board
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Brad K. Heppner
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/s/ Roy Bailey
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Director
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Roy Bailey
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/s/
Peter T. Cangany, Jr.
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Director
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Peter
T. Cangany, Jr.
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/s/
David F. Chavenson
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Director
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David F.
Chavenson
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/s/
Thomas O. Hicks
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Director
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Thomas O.
Hicks
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/s/
Dennis P. Lockhart
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Director
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Dennis P.
Lockhart
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/s/
Bruce W. Schnitzer
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Director
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Bruce W.
Schnitzer
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/s/
Roger T. Staubach
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Director
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Roger T.
Staubach
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/s/
David H. de Weese
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Director
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David H.
de Weese
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SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on March 30, 2020.
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GWG LIFE, LLC
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By:
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/s/ Murray T. Holland
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Chief Executive Officer
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Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed, as of March 30, 2020, by the following persons
in the capacities indicated below.
Name
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Title
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/s/ Murray
T. Holland
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Chief Executive Officer
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Murray T. Holland
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(Principal Executive Officer)
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/s/ Timothy
Evans
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Chief Financial Officer
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Timothy Evans
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(Principal Financial and Accounting Officer)
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/s/ Murray
T. Holland
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Manager of GWG Life, LLC
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Murray T. Holland
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