UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant þ
Filed by
a party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under to § 240.14a-12 |
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Midwest Holding Inc. |
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant) |
Payment of Filing Fee (Check all boxes that apply):
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No fee required |
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Fee paid previously with preliminary materials |
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS
MIDWEST HOLDING INC.
Time and
Date: Tuesday, June 6, 2023, at 10:00 a.m. Central Time
Physical
Meeting: This year’s meeting will be held at the Lincoln Marriott Cornhusker Hotel, 333 South 13th Street, Lincoln, Nebraska,
68508.
Items
of Business:
| 1. | To elect two Directors named in this proxy statement to serve
on our Board of Directors until the Annual Meeting of Stockholders to be held in 2026, or until their successors are elected and qualified; |
| 2. | To hold an advisory vote on executive compensation of our named executive officers; |
| 3. | To ratify the appointment of Mazars USA LLP as our independent registered public accounting firm for the
year ending December 31, 2023; and |
| 4. | To transact such other business as may properly come before the Annual Meeting or to approve any postponements
or adjournment(s) thereof. |
Our Board of Directors has fixed the close
of business on April 12, 2023, as the record date for the determination of stockholders entitled to receive notice of and to vote at the
Annual Meeting or any adjournment thereof. Shares of Midwest’s Voting Common Stock may be voted at the Annual Meeting only if the
holder is present in person or by valid proxy.
We cordially invite you to attend the Annual
Meeting. To ensure your representation at the meeting, please vote as soon as possible even if you plan to attend the meeting in person.
You may vote by telephone, over the Internet or, if you have requested paper copies of our proxy materials by mail, by signing, dating,
and returning the proxy card in the envelope provided. Voting now will not prevent you from voting in person at the meeting if you are
a stockholder of record and wish to do so. Your vote is important regardless of the number of shares you own.
Our Board of Directors recommends that you
vote FOR (i) the election of the two Director nominees named in this proxy statement to our Board of Directors; (ii) the proposal to approve
the advisory vote on executive compensation; and (iii) the ratification of the appointment of Mazars USA LLP as our independent registered
public accounting firm for the year ending December 31, 2023.
The
proxy statement, shareholder letter and Annual Report on Form 10-K are available at
www.edocumentview.com/MDH
BY ORDER OF THE BOARD
OF DIRECTORS
/s/ Georgette Nicholas, Chief Executive Officer
IMPORTANT NOTICE REGARDING
AVAILABILITY OF PROXY MATERIALS
We have elected to use the Notice and
Access Model of the Securities and Exchange Commission (“SEC”), which allows us to make the proxy materials available on
the Internet, as the primary means of furnishing proxy materials to stockholders. On or before April 24, 2023, we will mail to all stockholders
a Notice of Internet Availability of Proxy Materials, which contains instructions for accessing our proxy materials on the Internet and
voting on the Internet or by telephone. The Notice of Internet Availability of Proxy Materials also contains instructions for requesting
a printed set of proxy materials. The proxy statement, shareholder letter and our Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 are available at www.edocumentview.com/MDH. In accordance with SEC rules,
we do not use “cookies” or other software identifying visitors accessing these materials on this website. We encourage
you to access and review all of the important information contained in the proxy materials before voting.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This document includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and we intend that all forward-looking statements that we make will be subject
to the safe harbor protections created thereby. In some cases, you can identify forward-looking statements by terminology including “could,”
“may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “intend,” or “continue,” the negative
of these terms, or other comparable terminology used in connection with any discussion of future operating results or financial performance. These
statements are only predictions and reflect our management’s good faith present expectation of future events and are subject to
a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking
statements. Forward-looking statements are subject to many risks and uncertainties, including the risk factors that we identify in our
SEC filings, and actual results may differ materially from the results discussed in such forward-looking statements. Any forward-looking
statements that we make in this proxy statement speak only as of the date of this proxy statement. We undertake no obligation to update
any forward-looking statement that we may make to reflect events or circumstances after the date of this proxy statement or to reflect
the occurrence of unanticipated events.
MIDWEST
HOLDING INC.
2900 South 70th Street, Suite 400
Lincoln, Nebraska 68506
PROXY STATEMENT
FOR 2023 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2023
GENERAL INFORMATION
This proxy statement
is furnished in connection with the solicitation of proxies from the stockholders of Midwest Holding Inc., a Delaware corporation, to
be voted at our 2023 annual meeting of Stockholders (the “Annual Meeting”) to held at the Lincoln Marriott Cornhusker Hotel,
333 South 13th Street, Lincoln, Nebraska, 68508. The terms “Midwest,” “Midwest Holding,” the “Company,”
“we,” “us,” and “our” refer to Midwest Holding Inc. YOUR PROXY IS SOLICITED BY MIDWEST’S
BOARD OF DIRECTORS. If not otherwise specified, all proxies received pursuant to this solicitation will be voted “FOR”
the proposals as specified in this proxy statement and, at the discretion of the proxy holder, upon such other matters as may properly
come before the Annual Meeting or any adjournment thereof. This proxy statement (including the Notice of Annual Meeting of Stockholders)
is first being made available to stockholders beginning on or before April 24, 2023. This proxy statement, including the Notice of 2023
Annual Meeting, proxy card, shareholder letter and Annual Report on Form 10-K for the fiscal year ended December 31, 2022, are collectively
referred to herein as the “Meeting Materials.”
Proxy Voting
Stockholders of record on the record date are entitled to vote by proxy
before the meeting in the following ways:
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By calling 1-800-652-VOTE (8683)
(toll free) in the
United States or Canada |
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Online at
www.envisionreports.com/MDH
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By returning a
properly completed, signed
and dated proxy card |
Notice and Access Model
We are making
the Meeting Materials available to stockholders on the Internet under the SEC’s Notice and Access model. On or before April 24,
2023, we will mail to all our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) in lieu of
mailing a full printed set of the Meeting Materials. Accordingly, our Meeting Materials are first being made available to our stockholders
on the Internet at www.edocumentview.com/MDH, on or before April 24, 2023. The Notice
includes instructions for accessing the Meeting Materials and voting by mail, telephone or on the Internet at the foregoing address.
You will also find instructions for requesting a full printed set of the Meeting Materials in the Notice.
We believe that the electronic method of delivery
under the Notice and Access model will decrease postage and printing expenses, expedite delivery of Meeting Materials to you, and reduce
our environmental impact. We encourage you to take advantage of the availability of Meeting Materials on the Internet. If you received
the Notice but would like to receive a full printed set of the Meeting Materials in the mail, you may follow the instructions in the Notice
for requesting such materials.
Principal Executive Offices
Our principal executive offices are located
at 2900 South 70th Street, Suite 400, Lincoln, Nebraska, 68506.
QUESTIONS AND ANSWERS
ABOUT THESE PROXY MATERIALS AND VOTING
Who can vote at the Annual Meeting?
Stockholders of record of the outstanding
shares of voting common stock, $0.001 par value, of Midwest (the “Common Stock”) at the close of business on April 12, 2023
(the “Record Date”) will be entitled to vote at the Annual Meeting or any postponement or adjournment thereof. On the Record
Date, there were 3,727,976 shares of Common Stock outstanding and entitled to vote.
Stockholder of Record; Shares Registered
in your Name
If on the Record Date your shares were registered
directly in your name with Midwest’s transfer agent, Computershare Investor Services, then you are a stockholder of record. As a
stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting
in person, we urge you to vote by proxy pursuant to the instructions set forth below to ensure your vote is counted.
Beneficial Owner; Shares Registered in
the Name of a Broker or Bank
If on the Record Date your shares were held,
not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial
owner of shares held in “street name” and Meeting Materials are being forwarded to you by that organization. The organization
holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner,
you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the
Annual Meeting in person. However, because you are not the stockholder of record, you may not vote your shares during the Annual Meeting
unless you request and obtain a valid proxy from your brokerage firm, bank or other nominee by contacting such organization that holds
your shares to obtain a proxy from them and bring it with you to the Annual Meeting. You will not be able to vote at the Annual Meeting
unless you have a proxy from your brokerage firm, bank or other nominee. We urge you to respond to the request for instructions from
your brokerage firm, bank or other organization holding your shares and instruct them to vote FOR the proposals to be considered at the
Annual Meeting.
How do I vote prior to the meeting?
Stockholders of record may vote before the meeting as follows:
By Telephone:
Stockholders may vote by telephone at 1-800-652-VOTE (8683) by following the instructions included with the Notice. You will need the
control number included on the Notice in order to vote by telephone.
By Internet:
Stockholders may vote over the Internet at www.envisionreports.com/MDH by following the instructions
included on the Notice. You will need the control number included on the Notice to obtain your records and to create an electronic voting
instruction form.
By Mail:
Stockholders may request a printed proxy card from us by following the instructions on the Notice. When you receive the proxy card, mark
your selections on the proxy card, date and sign your name exactly as it appears on your proxy card, and mail the proxy card in the enclosed
postage-paid envelope provided to you.
If your shares are held in “street name,” you must submit
voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this by telephone, over the Internet
or by mail. Please refer to information provided by your bank, broker or other nominee on how to submit voting instructions.
The deadline for voting by telephone or electronically before the
meeting is 1:00 a.m. Eastern Time, on Tuesday, June 6, 2023. Mailed proxy cards with respect to shares held of record must be received
by us no later than 5:00 p.m. Central Time on Monday, June 5, 2023.
What am I voting on?
The Company is presenting three proposals
for stockholder vote:
1.
To elect two Directors named in this proxy statement to serve on our Board until the Annual Meeting of Stockholders to be held
in 2026 or until their successors are elected and qualified;
2.
To hold an advisory vote on executive compensation of our named executive officers; and
3.
To ratify the appointment of Mazars USA LLP as our independent registered public accounting firm for the year ending December 31,
2023.
How does the Board recommend that I vote
on each of the matters?
Our Board recommends that you vote FOR each
of the Director nominees in Proposal 1 (election of Directors), FOR Proposal 2 (advisory vote on compensation), and FOR Proposal 3 (ratification
of appointment of Mazars USA LLP).
What if another matter is properly brought
before the Annual Meeting?
The Board knows of no other matters that will
be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention
of the persons named in the proxy to vote on those matters in accordance with their best judgment.
What if I vote by proxy but do not make
specific choices?
If you voted by proxy without marking any
voting selections, then the proxy holders will vote your shares as recommended by the Board on all matters presented in this proxy statement,
and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual
Meeting.
Who is paying for this proxy solicitation?
Midwest will bear the cost of this solicitation,
including amounts paid to banks, brokers, and other nominees to reimburse them for their expenses in forwarding solicitation materials
regarding the Annual Meeting to beneficial owners of Common Stock. Our Directors, officers and employees, at no additional compensation,
may also solicit proxies from stockholders by personal contact, by telephone, or by other means if necessary in order to assure sufficient
representation at the Annual Meeting.
What does it mean if I receive more than
one set of proxy-related materials?
If you receive more than one set of proxy-related
materials, your shares are registered in more than one name or are registered in different accounts. Please follow the voting instructions
with respect to each set of proxy-related materials to ensure that all of your shares are voted.
May I change my vote or revoke my proxy?
Yes. If you are a stockholder of record, you may change your vote or
revoke your proxy at any time before your shares are voted at the Annual Meeting by:
| ● | Notifying
our Acting Corporate Secretary in writing at Midwest Holding Inc., 2900 South 70th
Street, Suite 400, Lincoln, Nebraska, 68506 that you are revoking your proxy; |
| ● | Executing
and delivering a later-dated proxy card or submitting a later-dated vote by telephone or
the Internet; or |
| ● | Attending
the meeting in person and voting in person according to established rules of procedure. |
Attendance at the Annual Meeting will not
cause your previously granted proxy to be revoked unless you specifically make that request and vote at the meeting. If you hold your
shares in “street name,” you may submit new voting instructions by contacting your bank, broker or other nominee, or, if you
have obtained a legal proxy from your bank, broker or other record holder giving you the right to vote your shares, by attending the Annual
Meeting and voting in person.
What is the quorum requirement?
A quorum of stockholders is necessary to hold
a valid Annual Meeting. A quorum will be present if a majority of the voting power of the issued and outstanding shares of Common Stock
entitled to vote are represented by stockholders present at the Annual Meeting in person or by proxy. On the Record Date, there were 3,727,976
shares of Common Stock outstanding and entitled to vote.
Your shares will be counted towards the
quorum if you vote in person, by mail, by telephone or through the Internet (either before or during the Annual Meeting, as described
above). Abstentions and shares represented by broker non-votes that are present and entitled to vote are also counted as present for purposes
of determining a quorum. If there is no quorum, the chair of the Annual Meeting may adjourn the meeting to another date.
What are “broker non-votes”?
Broker non-votes occur when a beneficial owner
of shares held in “street name” fails to provide instructions to the broker or nominee holding the shares as to how to vote
on matters deemed “non-routine.” If the beneficial owner does not provide voting instructions, the broker or nominee cannot
vote the shares with respect to “non-routine” matters, but can vote the shares with respect to “routine” matters.
Typically, when brokers are able to vote the shares, they vote in favor of the matter.
As long as one of the matters is deemed to
be a “routine” matter, such as an adjournment proposal, proxies reflecting broker non-votes (if any) will be counted towards
the quorum requirement. Proposals 1 and 2 are not considered “routine” matters.
Whether a matter is “routine”
or not is generally determined by rules of the New York Stock Exchange (which regulates most banks, brokers and others acting as nominees),
and it may make a determination that is different from what we believe to be the case. If that occurs, brokers may be able to vote your
shares on matters we do not believe to be routine, or not vote your shares on matters that we believe to be routine. Accordingly, we strongly
encourage you to submit your proxy and exercise your right to vote as a stockholder to ensure that your shares are voted in the manner
in which you want them to be voted.
How are votes counted and what are the
voting requirements to approve each proposal?
Votes will be counted by the inspector of
elections appointed for the Annual Meeting, which will separately count “For” and “Against” votes, abstentions
and, if any, broker non-votes.
The holders of shares of Common Stock are
entitled to one vote per share. Cumulative voting rights for the election of Directors is not allowed.
The voting requirements to approve each proposal is as follows:
Proposals |
Board
Recommendation |
Votes
Required |
Effect of
Abstentions |
Effect of
Broker Non-
Votes |
Election of Directors |
FOR each nominee |
Majority of votes cast |
None |
None |
Advisory Vote to Approve Executive Compensation (“Say on Pay” Vote) |
FOR |
Majority of votes cast |
None |
None |
Ratification of Independent Registered Public Accounting Firm |
FOR |
Majority of votes cast |
None |
None |
If an adjournment is necessary, the affirmative
vote of a majority of the votes cast is required to approve the adjournment proposal. Abstentions are not considered to be votes cast
and will have no effect on the outcome of a vote to adjourn. If you are a stockholder of record and you return your signed and dated proxy
card without providing specific voting instructions on the adjournment proposal, or do not specify your vote on the adjournment proposal
when voting using the telephone or Internet, your shares will be voted “FOR” the adjournment proposal in accordance with the
recommendations of the Board. If you are a stockholder of record and you fail to return your proxy card, or to vote at all in person,
using the telephone or the Internet, it will have no effect.
We also believe that the proposal to ratify
Mazars USA LLP as our independent registered public accounting firm is a “routine” matter. Therefore, if you are a beneficial
owner of shares registered in the name of your broker or other nominee and you fail to provide instructions to your broker or nominee
as to how to vote your shares on this proposal, we believe that your broker or nominee will have the discretion to vote your shares on
this proposal.
How can I find out
the results of the voting at the Annual Meeting?
Preliminary voting results will be announced
at the Annual Meeting. Final voting results will be published in a current report on Form 8-K that we expect to file with the SEC no later
than four business days after the conclusion of the Annual Meeting. If final voting results are not available to us in time to file a
Form 8-K on or before the fourth business day after the Annual Meeting, we intend to file a Form 8-K to publish preliminary results and,
within four business days after the final results are known to us, file an amended Form 8-K to publish the final results.
How will voting on any other business be
conducted?
We do not expect any matters to be presented
for a vote at the Annual Meeting other than the three matters described in this proxy statement. If you grant a proxy, either of the officers
named as proxy holders, Georgette Nicholas or Mike Minnich, or their nominees or substitutes, will have the discretion to vote your shares
on any additional matters that are properly presented for a vote at the Annual Meeting and at any adjournment or postponement that may
take place.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Board is divided into three classes (commonly
known as a “staggered” board), each class to be as nearly equal in number as possible. At each annual meeting of stockholders,
members of one of the classes, on a rotating basis, are generally elected for a three-year term. The total authorized number of Directors
is currently set at twelve. The following table sets forth, by class, the current members of our Board:
Term Expiring at the 2023 Annual
Meeting
(Class II Directors) |
Terms Expiring at the 2024
Annual Meeting
(Class III Directors) |
Terms Expiring at the 2025
Annual Meeting
(Class I Directors) |
Georgette Nicholas (current member and nominee) |
Nancy Callahan |
John Hompe |
Mike Minnich (current member and nominee) |
Diane Davis |
Yadin Rozov |
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Firman Leung |
Kevin Sheehan |
Board Transition
On September 16, 2022, the Company and Crestline
Assurance Holdings LLC, (“Crestline”) executed a Letter of Understanding (the “Letter of Understanding”) relating
to that certain Stockholders Agreement (the “Stockholders Agreement”) entered into as of April 24, 2020 with Xenith Holdings
LLC (“Xenith”), Vespoint LLC (“Vespoint”), Mike Minnich, A. Michael Salem and Crestline.
Under the Stockholders Agreement, Crestline
is entitled to name an individual (the “Crestline Designated Director”) to be elected to the Company’s Board as well
as the board of directors of the Company’s primary insurance subsidiary, American Life & Security Corp. (“ALSC”).
Douglas Bratton had previously served as the Crestline Designated Director. In addition, under the Stockholders Agreement, for so long
as Crestline has the right to name the Crestline Designated Director, Crestline is also permitted to designate an observer (the “Observer”)
to attend all meetings of the Company’s Board and ALSC’s Board of Directors as well as their respective committees. Pursuant
to the Letter of Understanding, the Company and Crestline agreed that Mr. Bratton would resign from the Boards of Directors of the Company
and ALSC and that Crestline would cease designating a person as an Observer. Notwithstanding the foregoing, the parties agreed in the
Letter of Understanding that Mr. Bratton’s resignation and Crestline’s decision to no longer appoint an Observer does not
constitute a permanent waiver of Crestline’s rights under the Stockholders Agreement to appoint a Crestline Designated Director
and an Observer.
Also pursuant to the Letter of Understanding,
the Company and Crestline agreed that the Stockholders Agreement will remain in place until the earlier to occur of the date (i) the parties
reach written agreement otherwise, (ii) that Crestline is no longer an affiliate of a life insurance entity it recently acquired and (iii)
on which Crestline no longer has the right to elect or appoint a member and Observer to the Board of the Company.
Finally, pursuant to the Letter of Understanding,
without further written agreement between the Company and Crestline, the Company will not fill the vacancies on the Company’s and
ALSC’s respective Board of Directors. See “Certain Relationships and Related Transactions.”
Nominees for Director Whose Term of
Office Expires in 2026:
Stockholders are being asked to elect two
Directors at the Meeting. The Board is recommending the re-election of Georgette Nicholas and Mike Minnich, both to serve a three-year
term expiring at the annual meeting of stockholders in 2026.
Georgette
Nicholas. Ms. Nicholas has served as the Company’s Chief Executive Officer and a member of the Board since November 2021,
after serving as President and Chief Financial Officer from September to November 2021. Ms. Nicholas has more than 30 years of experience
in the global financial services industry including insurance, reinsurance and capital markets. She has a commitment to developing strong
culture and leadership in organizations, supporting diversity and inclusion to grow engagement. Ms. Nicholas previously held the position
of CEO and Managing Director for Genworth Mortgage Insurance Australia, a publicly listed ASX company in Sydney, Australia from October
2015 until March 2020. She also held various roles with Genworth Financial, Inc. in investor relations, chief financial officer roles
in the mortgage insurance business and controllership. Ms. Nicholas also worked in public accounting, including as a firm director with
Deloitte. Ms. Nicholas is qualified to serve as a Director on our Board due to her experience serving as a chief executive in our industry
and the extensive knowledge of business operations that she has brought to bear in her role as Chief Executive Officer.
Mike Minnich.
Mr. Minnich has served as a member of the Board since June 2019. He was named Executive Chair of Midwest in April 2019 and Co-Chief Executive
Officer in November 2020. Mr. Minnich was named President and a member of the board of American Life in June 2018. In November 2021, he
transitioned from the Co-Chief Executive Officer and Executive Chair of Midwest to its President and Chief Investment Officer. Mr. Minnich
has over 25 years of experience in insurance, private investment companies, technology, risk-management, and investing. Mr. Minnich is
a Founder and has been Co-Chief Executive of Vespoint Capital LLC since 2018. Since July 2010, he has been managing member of Rendezvous
Capital LLC, a New York firm advising insurers on capital and investments. From February 2013 to May 2017, he was Chief Investment Officer
of A-Cap, an insurance holding and investment company. Mr. Minnich graduated with a B.S. in Electrical Engineering in 1994 from the Massachusetts
Institute of Technology (“MIT) as well as an MBA in 1995 from MIT. Mr. Minnich is qualified to serve as a Director on our Board
due to his deep knowledge of our business and his extensive experience in the industry.
The persons named on the proxy card will vote
the shares represented by such proxy for the election of the nominees for Director named above unless other instructions are shown on
the proxy card. If, at the time of the meeting, a nominee becomes unavailable for any reason, which is not expected, the persons entitled
to vote the proxy will vote for such substitute nominee, if any, as they determine in their sole discretion.
Biographical information for each person whose
term of office as a Director will continue after the 2023 Annual Meeting, is set forth below under the caption “Information Concerning
Executive Officers and Directors”.
Should any of the nominees become unable or
unwilling to accept nomination or election, it is intended, in the absence of contrary specifications, that the proxies will be voted
for the balance of those named and for a substitute nominee or nominees; however, the Board knows of no reason to anticipate such an occurrence.
All of the nominees have consented to be named as nominees and to serve as directors if elected.
Directors are elected by a majority of
the votes cast in respect of the shares present in person or represented by proxy at the Annual Meeting. Any shares not voted (whether
by withholding the vote, broker non-vote or otherwise) have no impact in the election of the two Directors. If you sign your proxy card
but do not give instructions with respect to the voting of Directors, your shares will be voted “FOR” the election of Georgette
Nicholas and Mike Minnich. However, if you hold your shares in street name
and do not instruct your broker how to vote in the election of Directors,
your shares will constitute a broker non-vote and will not be voted for any of the Director nominees.
In light of the individual skills and qualifications of each
of our Director nominees, our Board has concluded that each of our Director nominees should be elected to our Board.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” EACH OF THE DIRECTOR NOMINEES IDENTIFIED IN THIS PROPOSAL 1.
Director Independence
Our Board has undertaken a review of its composition,
the composition of its committees and the independence of each Director. Based upon information requested from and provided by each Director
concerning his or her background, employment and affiliations, including family relationships, our Board has determined that Nancy Callahan,
Diane Davis, Firman Leung, John Hompe, Yadin Rozov, and Kevin Sheehan do not have any relationships that would interfere with the exercise
of independent judgment in carrying out the responsibilities of a Director and that each of these Directors is “independent”
as that term is defined under the applicable rules and regulations of the SEC and the requirements of the Nasdaq Listing Rules. In making
this determination, our Board considered the current and prior relationships that each non-employee Director has with our company and
all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our
capital stock by each non-employee Director. These six independent Directors constitute a majority of the Board.
Board Meetings and Committees
The Board meets generally on the dates of
regularly scheduled Board meetings and at such other times as may be necessary. Our Board held eight meetings in 2022. Each Director attended
100% of the total number of Board meetings held while such person was a Director. Each Director also attended 100% of all of the meetings
held by all committees of the Board for which he or she served (during the periods that such person served). The Board acts from time
to time by unanimous written consent in lieu of holding a meeting.
If the Board includes outside directors who
are not independent, our non-management Directors (including both independent and non-independent Directors) will hold regularly scheduled
executive sessions in which those Directors meet without management participation, as do the independent Directors. Generally, the Independent
Board Chair presides over these sessions; John Hompe is our Independent Board Chair.
We typically schedule a Board meeting in conjunction
with our annual meeting of stockholders. Although we do not have a formal policy on the matter, we expect our Directors to attend each
annual meeting, absent a valid reason, such as illness or an unavoidable schedule conflict. Last year, all of the individuals then serving
as Directors participated in our 2022 annual meeting of stockholders, with all but two onsite as Sachin Goel and Yadin Rozov were participating
remotely.
There are three standing committees appointed
by the Board: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Each committee has
the power to employ the services of outside consultants and to have discussions and interviews with personnel of the Company and others.
The principal functions of the committees are summarized as follows:
Audit Committee
The primary purposes of our Audit Committee
are to:
| · | review and provide oversight regarding the integrity of our financial statements and discuss the audited
and interim financial statements with our independent registered public accounting firm and management; |
| · | assess the qualifications and independence of our independent registered public accounting firm, as
required by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”); |
| · | oversee our disclosure controls and procedures, including internal control over our financial reporting, and review and discuss our
management’s periodic review of the effectiveness of our internal controls over financial reporting; |
| · | appoint and be responsible for the compensation, retention (including termination) and oversight of
our independent registered public accounting firm, with our independent registered public accounting firm reporting directly to the Audit
Committee, as required by the applicable requirements of the PCAOB; and |
| · | prepare the Audit Committee report required to be included in our annual proxy statement. |
Our
Audit Committee consists of Diane Davis, John Hompe, Firman Leung, and Yadin Rozov. Our Board has determined that all members are independent
under the Nasdaq Listing Rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our Audit Committee is Diane Davis, and our Board
has determined that she is an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation
S-K. The Board has also determined that each member of our Audit Committee is able to read and understand fundamental financial statements,
in accordance with applicable requirements. In arriving at these determinations, the Board has examined each Audit Committee member’s
scope of experience and the nature of his or her employment in the corporate finance and investment sector. The Audit Committee held
six meetings during 2022. The Audit Committee is governed by a charter that complies with the rules of Nasdaq and is available on our
website at www.midwestholding.com. The inclusion of our website address here and elsewhere
in this proxy statement does not incorporate by reference the information on our website into this proxy statement.
Audit Committee Report
The Audit Committee reviews the Company’s
financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate
internal control over financial reporting, for preparing the financial statements and for the reporting process. The Audit Committee members
do not serve as professional accountants or auditors and their functions are not intended to duplicate or to certify the activities of
management and our independent registered public accounting firm. The Company’s independent registered public accounting firm is
engaged to audit and report on the conformity of the Company’s financial statements to accounting principles generally accepted
in the United States.
In this context, the Audit Committee (i) reviewed
and discussed with management and the Company’s independent registered public accounting firm the audited financial statements for
the year ended December 31, 2022 (the “Audited Financial Statements”), (ii) discussed with the Company’s independent
registered public accounting firm the matters required to be discussed by the applicable requirements of the PCAOB and SEC, (iii) received
the written disclosures and the letter from the Company’s independent registered public accounting firm required by applicable requirements
of the PCAOB
regarding the independent registered public
accounting firm’s communications with the Audit Committee concerning independence, and (iv) discussed with the Company’s independent
registered public accounting firm its independence.
Based upon the reviews and discussions referred
to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2022, for filing with the SEC.
The Audit Committee
Diane Davis, Chair
John Hompe
Firman Leung
Yadin Rozov
Compensation Committee
The Compensation Committee of our Board approves
the compensation objectives for the Company, the compensation of our chief executive officer and approves, or recommends to our Board
for approval, the compensation for other executives. The Compensation Committee reviews all compensation components, including base salary,
bonus, benefits, and other perquisites. Also see the discussion below under the heading “Executive Compensation.”
Our
Compensation Committee consists of Firman Leung (Chair), Nancy Callahan, John Hompe, and Kevin Sheehan. Our Board has determined that
all of its members are independent under the Nasdaq Listing Rules. The Compensation Committee held six meetings during 2022. The
Compensation Committee is governed by a charter that complies
with the rules of Nasdaq and is available on our website at www.midwestholding.com. The
inclusion of our website address here and elsewhere in this proxy statement does not incorporate by reference the information on our
website into this proxy statement.
Nominating and Corporate Governance Committee
The
primary purposes of our Nominating and Corporate Governance
Committee are to assist the Board
in:
| · | identifying, screening and reviewing individuals qualified to serve as Directors
and recommending to the Board candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the
Board; |
| | |
| · | developing and recommending to the Board and overseeing implementation of
our corporate governance guidelines; |
| | |
| · | coordinating and overseeing the annual self-evaluation of the Board, its
committees, individual Directors and management in the governance of Midwest; and |
| | |
| · | reviewing on a regular basis our overall corporate governance and recommending
improvements as and when necessary. |
Our
Nominating and Corporate Governance Committee consists of Nancy Callahan (Chair), Diane Davis, John Hompe, and Yadin Rozov. Our Board
has determined that all of its members are independent under Nasdaq Listing Rules. The Nominating and Corporate Governance Committee
held four meetings during 2022. The Nominating and Corporate Governance Committee is governed by a charter that complies with
the rules of Nasdaq and is available on our website at www.midwestholding.com. The
inclusion of our
website address here and elsewhere in this
proxy statement does not incorporate by reference the information on our website into this proxy statement.
The
Board will also consider Director candidates recommended for nomination by our stockholders during such times as it is seeking proposed
nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Stockholders
desiring to nominate a Director for election to our Board should follow the procedures set forth in our bylaws. Pursuant to its
charter, the Nominating and Corporate Governance Committee has adopted a formal process for identifying and selecting potential Directors
in line with the Board membership criteria included as an exhibit to the charter. The Nominating and Corporate Governance Committee considers,
among other things, the following qualifications for Board service:
| · | Experience
at a strategic or policymaking level; |
| · | Diversity
in all forms, including gender, race, age, ethnic, geographic, cultural, and professional
backgrounds; |
| · | Highly
accomplished in his or her respective field; |
| · | Sufficient
time and availability to devote to the affairs of the Company; |
| · | Skills
that are complementary to those of other Directors; and |
| · | An
understanding of the fiduciary responsibilities required of a Director. |
Board’s Leadership Structure
Under our Corporate Governance Guidelines, the
Board selects an Independent Board Chair, and that person is responsible for, among other things, overseeing the Board, coordinating
the activities of the non-management Directors (including both independent and non-independent Directors, as the case may be) and acting
as the liaison with the Company’s senior executive officers. John Hompe currently serves as the Independent Board Chair. We believe
that shareholders are better served when the Board is led by an independent chair who, in our opinion, is better able to oversee the
executives of the Company and set a pro-shareholder agenda without the management conflicts that may exist when a Chief Executive Officer
(or “CEO”) or other executive serves as chairman.
Board’s Role in Risk Oversight
Our Board has an active role in overseeing
the management of our risks. The Board is responsible for the general oversight of risks and regular review of information regarding
our risks, including liquidity risks and operational risks. This oversight responsibility of the Board is enabled by management reporting
processes that are designed to provide visibility to the Board about the identification, assessment, and management of critical risks.
This reporting is designed to focus on areas that include strategic, operational, financial and reporting, compensation, compliance,
and other risks. For example, the Board regularly receives reports from management regarding the investments and securities held by our
insurance subsidiaries, as well as other reports regarding their insurance business.
Our Board, in coordination with the Compensation
Committee, is also responsible for overseeing the management of risks relating to our executive compensation plans and arrangements.
The Audit Committee is responsible for overseeing the management of risks relating to accounting matters and financial reporting. Although
the Audit Committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly
informed through discussions with
Audit Committee members about such risks.
Our Board believes its administration of its risk oversight function has not negatively affected our Board’s leadership structure.
Board Diversity Matrix
The Board views its diversity as an important
strength and a driver of the Company’s success. The following matrix illustrates the diversity of the Board as of the date of this
proxy statement, based on the Directors’ self-identification under the categories prescribed in the Nasdaq rules for listed companies.
Total
Number of Directors |
8 |
|
Female |
Male |
Non-
Binary |
Did
Not Disclose
Gender |
Part
I: Gender Identity |
|
|
|
|
Directors |
3 |
5 |
0 |
0 |
Part
II: Demographic Background |
|
|
|
|
African
American or Black |
0 |
0 |
0 |
0 |
Alaskan
Native or American Indian |
0 |
0 |
0 |
0 |
Asian |
0 |
1 |
0 |
0 |
Hispanic
or Latinx |
0 |
0 |
0 |
0 |
Native
Hawaiian or Pacific Islander |
0 |
0 |
0 |
0 |
White |
3 |
4 |
0 |
0 |
Two
or More Races or Ethnicities |
0 |
0 |
0 |
0 |
LGBTQ+ |
0 |
Did
Not Disclose Demographic Background |
0 |
Stockholder Nominations for the Board and Stockholder
Proposals
Stockholders may submit Director candidates for consideration by the
Nominating and Corporate Governance Committee or may seek to include a candidate or proposal in the Company’s proxy statement for
an annual meeting by complying with the procedures set forth under “Stockholder Proposals” on page 38 of this proxy statement.
Code of Ethics
We have adopted a Code of Business Conduct
and Ethics (the “Code”) that applies to all directors, officers, and other employees (“Covered Persons”) of Midwest
and its subsidiaries. The Code provides general statements of our expectations regarding ethical standards governing Covered Persons while
acting on our behalf. It also addresses matters such as conflicts of interest, related person transactions, corporate opportunities, and
confidentiality. Midwest’s Board is responsible for overseeing the Code and granting any waivers.
The
Code is publicly available on our website at: https://ir.midwestholding.com/governance/governance-documents/default.aspx.
The information contained on, or accessible from, our website is not part of this Proxy Statement by reference or otherwise.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our Directors, officers
and persons who beneficially own more than 10% of our Common Stock to file certain reports of beneficial ownership with the SEC. These
reports show the Directors’, officers’ and greater than 10% stockholders' ownership and the changes in ownership of our common
stock and other equity securities. SEC regulations also require that a copy of all such Section 16(a) forms filed must be furnished to
us by the person or entity filing the report. To the Company’s knowledge and based solely upon review of such reports, the Company
believes that all Section 16(a) filing requirements were met during the fiscal year ended December 31, 2022, except that Knott Partners
L.P. and David Knott each filed a late Form 4 with respect to transactions on August 9 and 11, 2022, due to an administrative error.
Information Concerning Executive Officers and
Directors
The following table sets forth, as of April 20, 2023, certain information
regarding our executive officers and current Directors.
|
|
|
|
|
|
|
|
Name |
|
Age |
|
|
Position |
|
Director/Executive Officer Since |
Georgette
Nicholas |
|
58 |
|
|
Chief Executive Officer, Director |
|
2021 |
|
|
|
|
|
|
|
|
Mike Minnich |
|
51 |
|
|
President, Chief Investment Officer, Director |
|
2019 |
|
|
|
|
|
|
|
|
Dan Maloney |
|
58 |
|
|
Executive Vice President of Finance & Accounting, |
|
2022 |
|
|
|
|
|
Principal Accounting Officer, and Treasurer |
|
|
|
|
|
|
|
|
|
|
Elliot Sperber |
|
48 |
|
|
Deputy Chief Investment Officer, 1505 Capital LLC |
|
2022 |
|
|
|
|
|
|
|
|
Eoin Elliffe |
|
46 |
|
|
Chief Risk Officer |
|
2022 |
|
|
|
|
|
|
|
|
Thomas
Bumbolow |
|
47 |
|
|
Managing Director of Business Development |
|
2022 |
|
|
|
|
|
|
|
|
John Hompe |
|
62 |
|
|
Director and Independent Board Chair |
|
2015 |
|
|
|
|
|
|
|
|
Firman Leung |
|
65 |
|
|
Director |
|
2016 |
|
|
|
|
|
|
|
|
Nancy Callahan |
|
62 |
|
|
Director |
|
2021 |
|
|
|
|
|
|
|
|
Diane Davis |
|
55 |
|
|
Director |
|
2021 |
|
|
|
|
|
|
|
|
Yadin Rozov |
|
45 |
|
|
Director |
|
2022 |
|
|
|
|
|
|
|
|
Kevin Sheehan |
|
39 |
|
|
Director |
|
2022 |
|
|
|
|
|
|
|
|
Set forth below is certain information regarding
each of our executive officers and current Directors, other than for Ms. Nicholas and Mr. Minnich, whose biographical information
is presented under “Proposal 1: Election of Directors—Nominees for Director Whose Term of Office Expires in 2026.”
Dan Maloney. Mr. Maloney
has served as the Company’s Executive Vice President of Accounting and Finance since May 2022 and the Principal Accounting Officer
and Treasurer since July 2022. Mr. Maloney has more than 30 years of experience in the financial services industry, including life and
annuity insurance. Immediately prior to joining the Company, Mr. Maloney was Head of Accounting at Players Health, Inc., an organization
providing safety and insurance services and products to athletes, beginning in February 2022. From August 2021 through February 2022,
he was Controller for AM Re Syndicate, Inc., a reinsurance provider for cyber, marine, transportation, and general liability programs.
From October 2015 to August 2021, he was Vice President, Controller for American Fidelity Assurance Company, a company providing supplemental
health insurance benefits and financial services. Mr. Maloney is a Certified Public Accountant and earned a B.S. in Business (Major in
Accounting) from Eastern Illinois University and an MBA from the University of Illinois.
Elliot
Sperber. Mr. Sperber serves as the Company’s Deputy Chief Investment Officer and Head of Structured Products with Midwest’s
affiliated asset manager 1505 Capital LLC (“1505”), having joined 1505 in February 2020. Mr. Sperber has 20 years of experience
in structured products and commercial real estate. Prior to 1505, he was a Portfolio Manager at Tricadia Capital from November 2010 until
February 2019 where he focused on CMBS, REITs, CRE debt, and other forms of structured products. He previously held investment analyst
roles as a Vice President at Brookfield Asset Management and Morgan Stanley. Mr. Sperber earned a B.S. in Mechanical Engineering from
the University of Michigan and an MBA from Columbia Business School.
Eoin
Elliffe. Mr. Elliffe has served as the Company’s Chief Risk Officer since July 2022. Mr. Elliffe brings over 18 years
of experience in quantitative analysis, asset and liability modeling, and derivatives to the Company. Prior to joining Midwest, he had
been Head of Investment Risk at Selective Insurance starting in August 2021 and was Head of ALM and Hedging for Transamerica’s more
than 20 insurance companies from May 2015 until January 2020. Mr. Elliffe has also served as Director of Trading and Analytics (Alternative
Investments Arm) with the Man Group PLC, a United Kingdom-based hedge fund, and Senior Quantitative Analyst with the Royal Bank of Canada.
Mr. Elliffe holds a Ph.D. in Astrophysics from the University of Glasgow and an MBA from the University of Pennsylvania’s Wharton
School with a concentration in Finance and Management.
Thomas
Bumbolow. Mr. Bumbolow serves as the Company’s Managing Director of Business Development, having joined the Company in
January 2021. Prior to Midwest, he co-founded protoCapital, a merchant bank and private finance business that operated from June 2017
through April 2020 as a division of broker / dealer AK Capital. While there, he invested, raised capital, and consulted with various emerging
asset classes. He has also been an active board member and audit committee member of the Saba Income & Opportunities Fund (NYSE: BRW)
since 2020. Previously, Mr. Bumbolow spent 20 years at JPMorgan Chase where he held various roles in fixed-income sales and trading, generating
over $1 billion in net revenue. He was a leader in building a premier credit platform on Wall Street and an industry veteran of the derivatives
market. He earned a B.A. in Economics from Boston College.
John Hompe.
Mr. Hompe has served as a member of our Board since 2015 and as chair of the boards of directors for Midwest and American Life since 2021.
He is a member of Midwest’s Compensation and Nominating and Corporate Governance Committees, as well as the Audit Committees for
both Midwest and American Life. Mr. Hompe was the Managing Partner and co-founder of J.P. Charter Oak Advisors LLC, a private investment
firm focused on the financial services industry, from 2012 to 2019. Mr. Hompe has worked in the financial services sector for more than
35 years and he has held numerous board positions with insurance companies during his career. From 2003 through 2012, Mr. Hompe worked
in investment banking and asset management (KBW Asset Management from 2011 through 2012 as a Managing Director and Keefe Bruyette &
Woods, Inc. from 2003 to 2011 as Co-Head of Insurance and Asset Management Investment Banking). He served as an observer on the board
of directors of International Planning Group, Ltd., an international life insurance broker, and Preparis Inc., a provider of business
continuity services. From 2010 to 2012, he was an independent director of Island Capital, a Bermuda investment company. He was also a
director and member of the executive committee of Island
Capital’s predecessor company, EIC Corporation
Ltd., a Bermuda-domiciled insurance holding company, and Exporters Insurance Company, a New York-based trade credit insurer from 2005
to 2010. Mr. Hompe received a B.A. in Politics (cum laude) from Princeton in 1983, with distinction in American Studies. Mr. Hompe is
qualified to serve as a Director on our Board due to his deep knowledge of our business and his extensive business and finance experience
at various companies in the insurance industry.
Firman
Leung. Mr. Leung has served as a member of our Board since 2016, leading Midwest’s Compensation Committee as Chair
since 2022, and he has also been a member of the Audit Committees for both Midwest and American Life since 2016. Mr. Leung has over 30
years of experience in the financial services industry as an investment and capital markets banker in New York, London and Hong Kong.
Since July 2021, he has served as Managing Director, Investment Banking at Weild & Co., an investment banking firm. Since January
2016, he has also been the Managing Principal of Columbus Circle Capital, LLC, an investment advisory firm, and from January 2016 through
November 2020 he was Executive Managing Director of Investment Banking and Capital Markets at American Capital Partners, LLC, an investment
firm. From 2012 to 2015, he served as Managing Director, Investment Banking and Capital Markets at RCS Capital Corporation. From 2002
to 2012, he was Managing Director, Capital Raising, at Sandler O’ Neill & Partners, L.P. Mr. Leung received his B.S. in Economics
from The Wharton School at University of Pennsylvania and his MBA degree from The Amos Tuck School at Dartmouth College. Mr. Leung is
qualified to serve as a Director on our Board due to his wide-ranging experience in our industry and his extensive investment banking
knowledge.
Nancy Callahan.
Ms. Callahan has served as a member of our Board and Chair of our Nominating and Corporate Governance Committee since 2021.
She is also a member of Midwest’s Compensation Committee. Ms. Callahan has over 25 years of experience acting as a versatile business
leader, delivering market differentiation through profit and loss oversight, general management, strategy, corporate governance, product
development, and business development. She is currently Global Vice President for Customer Success at SAP, having worked in strategy,
executive leadership, and product management positions at SAP and SAP Concur since 2010. From 2001 to 2009, Ms. Callahan worked at American
International Group (“AIG”), serving in many capacities including VP of Commercial Insurance with the Financial Institutions
Division, VP of the Professional Liability Division, and VP of Business Development in the AIG Identity Theft & Fraud Division. Prior
to that, she was President of Reuters Futures Services, Inc., a business unit of Reuters Group which is now part of Thomson Reuters. Ms.
Callahan received her B.S. in Systems Engineering from the School of Engineering and Applied Sciences at the University of Virginia and
her MBA in Finance from the University of Virginia’s Darden School of Business. Additionally, she is NACD Directorship Certified®
and is a Certified Information Privacy Professional through IAPP. Ms. Callahan is qualified to serve as a Director on our Board due to
her extensive experience in the insurance and technology industries, holding key executive roles, and her knowledge of risk management.
Diane Davis.
Ms. Davis has served as a member of our Board since 2021. She has also served as the Chair of the Audit Committees of both Midwest and
American Life since 2021 and is a member of Midwest’s Nominating and Corporate Governance Committee. Ms. Davis has nearly 20 years
of experience in executive positions in data governance, risk management and finance. Since March 2020, she has served as a board member
with First Financial Northwest Bank. Additionally, since 2014, Ms. Davis has also served as a board member of the Habitat for Humanity
for Seattle-King County. In this capacity, she serves as the Secretary and Governance Committee Chair. From 2016 to 2019, Ms. Davis served
as President and CEO of Farmers New World Life Insurance Company. From 2013 to 2016, she served as Chief Risk Officer of Zurich Insurance
Company’s Global Life North America region. From 2010 to 2013, Ms. Davis served as Chief Risk Officer of Farmers New World Life
Insurance Company. From 2003 to 2010, she served in various senior executive roles at Kemper Investors Life Insurance Company. Prior to
that, she gained experience through actuarial, marketing, distribution and strategic finance positions. Ms. Davis received her B.S. in
Actuarial Science from the University of Illinois at Urbana-Champaign and her MBA from the University of Washington. She is a Fellow of
the Society of
Actuaries. Ms. Davis is qualified to
serve as a Director on our Board due to her wide-ranging experience in global financial services, both as an executive and a board member.
Yadin Rozov.
Mr. Rozov has served as a member of our Board since 2022. He is a member of Midwest’s Nominating and Corporate Governance Committee,
as well as the Audit Committees for both Midwest and American Life. Mr. Rozov is the founder and Managing Partner of Terrace Edge Ventures
LLC, a financial advisory firm providing consulting services to public and private companies as well as institutional investors. He has
substantial experience in the financial services industry, with over twenty years of exposure to capital markets, corporate finance, investment
banking and investment management. Prior to founding Terrace Edge Ventures in January 2022, Mr. Rozov was a Partner of GoldenTree Asset
Management LLC, a leading global credit asset management firm, from August 2019 to December 2021, where he was responsible for investments
in structured products and in the debt and equity securities of both private and public companies across a variety of industries. From
December 2019 through December 2021, he served as the CEO and President of Syncora Guarantee Inc. and CEO of Financial Guaranty UK Limited,
which are stand-alone specialty insurance companies owned by GoldenTree; American Life also has a financial interest in Financial Guaranty.
Prior to GoldenTree and Financial Guaranty, from May 2009 through August 2019, Mr. Rozov was a Partner and Managing Director at Moelis
and Company where he headed the Financial Institution Advisory group and was on the Management Committee of Moelis Asset Management. While
at Moelis, he co-founded College Avenue Student Loans LLC and served on its board. He also co-founded Chamonix Asset Management, a joint-venture
credit asset management firm between Natixis and Moelis Asset Management. Prior to joining Moelis, Mr. Rozov was a Managing Director at
UBS, where he was the Head of the Americas for the Repositioning Group. Mr. Rozov received an M.Sc. in Data Science from Columbia University
and a B.A./B.Sc. in Physics and Materials Engineering from Rutgers University. Mr. Rozov is qualified to serve as a Director on our Board
due to his extensive experience in the financial services industry, both as an executive and a founder.
Kevin Sheehan.
Mr. Sheehan has served as a member of our Board since 2022. He is a member of Midwest’s Compensation Committee. Mr. Sheehan has
served as the co-founder and Managing Director of Mellon Stud Ventures, LLC, an investment firm, since December 2016. Additionally, he
has also served as President and a board member for Paradise Cruise Line Ultimate Holdings, LLC, dba Margaritaville at Sea, since December
2016, and was promoted to Chief Executive Officer in August 2022. Previously, Mr. Sheehan held positions at A&M Capital Opportunities
from April 2015 to December 2016. Prior to that, he held positions at Berggruen Holdings from 2009 to 2015, including a director role
for Karstadt Holdings Gmbh, Germany’s largest department store chain. Mr. Sheehan has also held various positions at Bear Stearns
and Merrill Lynch. He currently serves on the boards of Margaritaville at Sea and USA Wheels Global, LLC. Mr. Sheehan is a graduate of
Dartmouth College. Mr. Sheehan is qualified to serve as a Director on our Board due to his deep knowledge of the financial services industry
and his experience in board service.
Family Relationships and Other Arrangements
There are no family relationships among our Directors
and executive officers.
Executive Compensation
Introduction and Overview
The Compensation Committee of the Board
is responsible for determining the types and amounts of compensation we pay to our executives. The Compensation Committee operates under
a written charter that may be viewed on our website at https://ir.midwestholding.com/governance/governance-documents/default.aspx.
The Board has determined that each member of the Compensation Committee meets the Nasdaq independence requirements. The Board determines,
in its business judgment, whether a particular Director satisfies the requirements for membership on the Compensation Committee set forth
in
the Compensation Committee’s charter. None of the members of
the Compensation Committee are current or former employees of Midwest Holding or any of its subsidiaries.
The Compensation Committee is responsible for
formulating and administering our overall compensation principles and plans. This includes establishing the compensation paid to our CEO,
meeting and consulting with our CEO to establish the compensation paid to our other executive officers, counseling our CEO as to different
compensation approaches, administering our stock equity plans, monitoring adherence to our compensation philosophy and conducting annual
and interim (as appropriate) reviews of our compensation programs and our philosophy regarding executive compensation.
The Compensation Committee periodically meets in executive session
without members of management or management Directors present and reports to the Board on its actions and recommendations. The Compensation
Committee, from time to time, also engages compensation consultants and other experts to provide data and guidance on appropriate compensation
practices, industry standards, peer selection and other items relevant to the responsibilities and deliberations of the Compensation Committee.
Compensation Philosophy and Objectives
Our compensation philosophy is to provide an executive compensation
program that:
| • | rewards the performance and skills necessary to advance our objectives and further the interests of our shareholders; |
| • | is fair, reasonable and appropriately applied to each executive officer; |
| • | is competitive with compensation programs offered by our competitors and industry peers; and |
| • | serves as an adequate retention tool in a competitive market with a finite number of experienced and qualified executives. |
The overall objectives of our compensation philosophy are to:
| • | provide a competitive level of current annual income that attracts and retains qualified executives at a reasonable cost to us; |
| • | retain and motivate executives to accomplish our company goals and uphold and model our company ethics, values and other standards; |
| • | provide long-term incentive compensation opportunities at levels appropriate for the respective responsibilities and performance of
each executive; |
| • | align compensation and benefits with our business strategies, goals and other values and standards; |
| • | encourage the application of a decision-making process that takes into account both short-term and long-term risks and the oftentimes
volatile nature of our industry; and |
| • | align the financial interests of our executives with those of our shareholders through the grant of equity-based awards, consider
the impact of equity-based awards on shareholders and, where appropriate, consider alternatives to equity-based awards to avoid unnecessary
shareholder dilution. |
Our Compensation Committee supports these objectives
by emphasizing compensation arrangements that we believe are reasonable, will attract and retain qualified executives and will reward
them for their efforts
to further our long-term growth and success. At
the same time, we remain cognizant of and aim to balance our executive compensation arrangements with the interests and concerns of our
shareholders.
Elements of Our
Compensation Program
Element |
|
|
Characteristics |
|
Primary Objective |
Base Salary |
|
|
Cash |
|
Attract and retain highly talented individuals |
Short-Term Incentives |
|
|
Cash-based performance awards |
|
Reward for corporate and individual performance |
Long-Term Incentives |
|
|
Stock option awards which vest over several years |
|
Align the interests of our employees and shareholders by providing employees with an incentive to perform technically and financially in a manner that promotes share price appreciation |
Other Benefits |
|
|
401(k) matching plans and employee health benefit plans |
|
Provide benefits that promote employee health and support employees in attaining financial security |
We do not presently and have not in the past used any of the following
types of executive compensation:
| • | defined benefit pension plans; |
| • | employee stock purchase/ownership plans; or |
| • | supplemental executive retirement plans/benefits. |
Short-Term Incentive Program for 2022
In early 2022, the Compensation Committee established a set of performance
metrics and target goals pertaining to the CEO’s bonus during the 2022 performance period, which goals were based on key quantitative
and qualitative factors expected to impact the growth of the Company. Those metrics are return on equity; revenue growth; margin; state
expansion; ESG; diversity, equity and inclusion; risk management; compliance; leadership; and innovation. The Company has also established
a range of outcomes from low to high with associated weights to be used to determine the final bonus payout. For each metric, the base
case is tied to pay out at the target bonus amount, low case performance equates to ½ of the target bonus, and high case performance
equates to 2x the target bonus. Each metric receives a score based on actual performance and those scores are aggregated to determine
the final bonus achievement level, as a percentage of the target bonus (up to a maximum of 2x the target bonus amount if performance on
all metrics were to be achieved at the high case performance level.
The CEO’s target annual bonus opportunity is currently set at
75% of her Base Salary and based on the Company’s performance outcomes against the quantitative goals and the CEO’s individual
performance against the qualitative goals, the CEO could earn a potential bonus equal to 0 – 2 x the target bonus, which equals
between 0% and 150% of Base Salary. However, in connection with the amendment and restatement of the CEO’s employment agreement,
Ms. Nicholas was guaranteed a minimum bonus of $250,000 for 2022. This minimum bonus was established due to a leadership change at the
Company and deemed appropriate under the circumstances.
In March 2023, the Compensation Committee
evaluated the 2022 performance results and, based on Company and individual performance, determined that the bonus percentage earned equaled
190% of target or approximately 140% of the CEO’s Base Salary. In awarding this bonus, the Compensation Committee determined
that the CEO had achieved the high case on all quantitative measures (with a total weighted average of 60%) and collectively generally
exceeded expectations on qualitative measures (with a total weighted average of 40%).
Assistance Provided to the Committee
The Compensation Committee annually reviews and approves, or recommends
for approval by a majority of the independent directors of the Board, compensation for its executive officers (including the Company’s
CEO and its President), including salary, bonus and incentive compensation levels; deferred compensation; executive perquisites; equity
compensation (including awards to induce employment); severance arrangements; change-in-control benefits and other forms of executive
officer compensation. Our CEO annually reviews the performance of each of our executive officers (other than the CEO, whose performance
is reviewed by the Compensation Committee) and presents recommendations to the Compensation Committee with respect to salary and cash
bonus percentage adjustments as well as equity-based incentives for our executives (other than the CEO whose salary, cash bonus percentage
adjustments and stock option grants and other long-term incentives are determined solely by the Compensation Committee). The
Compensation Committee may exercise its discretion in modifying any recommendations made by our Chief Executive Officer.
The Compensation Committee also seeks the input and insight of our
CEO concerning specific factors that she believes to be appropriate for the Compensation Committee’s consideration and of which
the Compensation Committee may not be aware, such as extraordinary efforts or accomplishments on the part of our executive officers.
Since 2020, our Compensation Committee has engaged an independent compensation
consultant, Meridian Compensation Partners (the “Compensation Consultant”), to obtain objective, expert advice and assist
with compensation matters concerning our CEO and Directors. Our Compensation Consultant has advised the Compensation Committee on a variety
of compensation-related issues through and including 2022 to date, including:
| • | competitive pay analysis on executive compensation; |
| • | our executive compensation program design, including short-term incentive plan design, long-term incentive plan design and pay mix; |
| • | analysis and recommendations concerning peer group companies. |
In the course of conducting its activities, our Compensation Consultant
communicated with the
Compensation Committee and presented its findings and recommendations
for discussion. Through and including 2022 to date, our Compensation Consultant also met with our CEO to review its compensation report.
Since its engagement, our Compensation Consultant did not provide
any services to the Company, or receive any payments from the Company, other than in its capacity as a consultant to the Compensation
Committee. The Compensation Committee has assessed whether the services provided by our Compensation Consultant raised any conflicts
of interest pursuant to the SEC rules and has concluded that no such conflicts of interest existed since its engagement and through 2023
to date.
The following table sets forth
the compensation paid or accrued in the years indicated by Midwest to its (i) principal executive officer in 2022; (ii) two most highly
compensated executive officers serving as of December 31, 2022, other than the principal executive officer; and (iii), on a voluntary
basis two additional executive officers of the Company (collectively, the “named executive officers”).
SUMMARY COMPENSATION
TABLE
Name and Principal Position | |
Year | | |
Salary | | |
Bonus | | |
Option
Awards | | |
All Other
Compensation | | |
Total |
Georgette
Nicholas, Chief Executive Officer, Director (1) | |
| 2022 | | |
$ | 320,833 | | |
$ | 500,000 | (3) | |
$ | - | | |
$ | 35,700 | (6) | |
$ | 856,533 |
| |
| 2021 | | |
| 94,423 | (7) | |
| 100,000 | (7) | |
| 217,150 | (5)(8) | |
| 1,000 | | |
| 435,511 |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Mike
Minnich, President, Chief Investment Officer, Director (2) | |
| 2022 | | |
$ | 300,000 | | |
$ | 225,000 | (3) | |
$ | - | | |
$ | 35,250 | (6) | |
$ | 560,250 |
| |
| 2021 | | |
| 300,000 | | |
| 240,000 | (7) | |
| - | | |
| 11,000 | | |
| 551,000 |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Elliot Sperber, Deputy Chief Investment Officer, 1505
Capital LLC | |
| 2022 | | |
$ | 300,000 | | |
$ | 200,000 | (3) | |
$ | 263,345 | (5) | |
$ | 35,250 | (6) | |
$ | 798,585 |
| |
| 2021 | | |
| 250,000 | | |
| 150,000 | | |
| - | | |
| 35,250 | | |
| 435,250 |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Eoin Elliffe, Chief Risk Officer | |
| 2022 | | |
$ | 122,097 | | |
$ | 180,000 | (3) | |
$ | 238,600 | (5) | |
$ | 9,840 | (6) | |
$ | 550,537 |
| |
| 2021 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Thomas Bumbolow, Managing Director of Business Development | |
| 2022 | | |
$ | 280,000 | | |
$ | 225,000 | (4) | |
$ | 223,400 | (5) | |
$ | 28,750 | (6) | |
$ | 757,150 |
| |
| 2021 | | |
| 187,189 | | |
| 150,000 | | |
| 419,400 | (5) | |
| 3,495 | | |
| 760,084 |
| 1) | Ms.
Nicholas was appointed as our Chief Executive Officer on November 19, 2021. From September
8, 2021 through November 18, 2021, Ms. Nicholas served as our President and Chief Financial
Officer. |
| 2) | Mr.
Minnich was appointed as our President and Chief Investment Officer on November 22, 2021.
Prior to this date, he served as our Co-CEO. |
| 3) | For
Ms. Nicholas, the amount represents the 2022 annual cash bonus paid in March 2023 following
approval by the Board, including the portion of the bonus that was considered a guaranteed
minimum payment for 2022 and the portion earned based on achievement of company and |
|
|
individual performance metrics, as further described in the section labeled
“Short-Term Incentive Program for 2022.” For Mr. Minnich, Mr. Sperber, and Mr. Elliffe, the amount represents the bonus in
respect of 2022 performance, paid in March 2023. |
| 4) | Represents a payment of $75,000 paid in 2022, with the balance of the bonus
(with respect to 2022 performance) paid in March 2023. |
| 5) | Amounts represent the number of options granted multiplied by the fair value
of the options on the grant date, computed in accordance with FASB ASC Topic 718, as discussed in Note 12 to our Consolidated Financial
Statements included in the Company’s 2022 Annual Report on Form 10-K. Additional material terms of each grant are set forth in the
section labeled “Outstanding Equity Awards at Fiscal Year End” below. |
| 6) | Amounts represent contributions to each named executive officer’s
401(k) account and reimbursement for health insurance premiums. |
| 7) | Salary and bonus amounts reported in the Company’s 2022 Proxy Statement
were based on budgeted amounts available at the time of publication. Amounts currently presented represent amounts actually paid to Ms.
Nicholas and Mr. Minnich. |
| 8) | Option awards reported in the Company’s 2022 Proxy Statement were
the quantity of options granted to Ms. Nicholas. Amounts currently presented represent the dollar value of options granted, valued as
noted in footnote 5 above. |
We sponsor a 401(k) plan for all eligible
employees. The 401(k) plan was amended in December 2020 to allow for us to contribute 3% of each participant’s salary to the employee’s
401(k) and match up to 4% of the employee contributions up to the maximum allowed by law.
Outstanding Equity Awards at 2022 Fiscal Year End
The following table sets forth
outstanding options held by our named executive officers as of December 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
Option
Awards |
Name |
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised Unearned
Options (#) |
|
Option
exercise
price ($)/share |
|
Option
expiration
date |
Georgette
Nicholas |
|
4,285
6,142 |
|
25,715
(1) (6)
36,858 (1) (6) |
|
$16.37
41.25 |
|
12/22/2031
10/13/2031
|
Mike
Minnich |
|
29,900 |
|
44,851
(2) (6) |
|
$41.25 |
|
11/16/2030
|
Elliot
Sperber |
|
1,350
-
-
- |
|
1,350 (3)
(6)
10,000 (6)
5,000 (6)
20,000 (6) |
|
$25.00
41.25
21.13
12.03 |
|
7/31/2030
11/16/2030
3/15/2032
8/10/2032
|
Eoin
Elliffe |
|
- |
|
20,000
(4) (6) |
|
$11.83 |
|
7/11/2032
|
Thomas
Bumbolow |
|
-
-
- |
|
12,000
(5) (6)
5,000
(6)
15,000
(6) |
|
$55.02
21.13
12.03 |
|
1/28/2031
3/15/2032
10/10/2032 |
| 1) | Of the options granted to Ms. Nicholas, (i) 43,000 vest in equal installments 60 days after each of the
first seven anniversaries of the date of grant (September 8, 2021), and (ii) 30,000 will vest in seven equal installments on each anniversary
of the date of grant (December 22, 2021). |
| 2) | The options granted to Mr. Minnich vest in equal installments 60 days after each of the first five anniversaries of the date of grant
(November 16, 2020). |
| 3) | 1,350 of the options granted to Mr. Sperber will vest on July 31, 2024. 10,000 options will vest in equal
installments on the third and fourth anniversaries of the date of grant (November 16, 2020). 5,000 options and 20,000 options will vest
in equal installments on the second and fourth anniversaries of the respective dates of grant (March 15, 2022 and August 10, 2022). |
| 4) | The options granted to Mr. Elliffe vest in equal installments on the second and fourth anniversaries of
the date of grant (July 26, 2022). |
| 5) | 12,000 of the options granted to Mr. Bumbolow vest in equal installments 18 days after the third and fourth
anniversaries of the date of grant (January 28, 2021). 5,000 and 15,000 options will vest in equal installments on the second and fourth
anniversaries of the respective dates of grant (March 15, 2022 and October 10, 2022). |
| 6) | All options are subject to accelerated vesting under certain circumstances, as well as to the terms of
either the Midwest Holding Inc. 2019 or 2020 Long-Term Incentive Plan and related stock option agreements, and each executive's continuous
employment with the Company through the applicable vesting dates. |
Long-Term Incentive Plans
We have adopted two equity incentive plans, the Midwest Holding Inc.
2019 Long-Term Incentive Plan (the “2019 Plan”) and the 2020 Long-Term Incentive Plan (the “2020 Plan” and, together
with the 2019 Plan, the “Plans”). The 2019 Plan was approved by our shareholders at our annual meeting of stockholders in
June 2019. The 2020 Plan was approved by the shareholders at our annual meeting of stockholders in June 2021, and an amendment to the
2020 Plan was approved by the stockholders at our annual meeting of stockholders in June 2022.
The terms of the Plans are essentially the same except the 2019 Plan
provides that a maximum of 102,000 shares of our voting common stock may be issued in conjunction with awards granted under the 2019 Plan
while the 2020 Plan (as amended) provides that a maximum of 500,000 shares of our common stock may be issued in conjunction with awards
granted under the 2020 Plan. In addition, the 2019 Plan will expire on March 26, 2029, while the 2020 Plan expires on November 16, 2030.
However, the terms and conditions of the Plans will continue to apply after the relevant expiration dates to all 2019 and 2020 Plan awards
granted prior to the relevant expiration date until they are no longer outstanding pursuant to the terms of such awards.
The purposes of the Plans are to create incentives designed to motivate
participants to exert maximum effort toward our success and growth and to enable us to attract and retain experienced individuals who,
by their position, ability and diligence are able to make important contributions to our success, and thereby to enhance shareholder value.
Under the Plans, we may grant stock options, restricted stock awards,
restricted stock units, stock appreciation rights, performance units, performance bonuses, stock awards, and other incentive awards to
our employees or those of our subsidiaries or affiliates. We may also grant nonqualified stock options, performance units, stock appreciation
rights, restricted stock awards, restricted stock units, stock awards,
and other incentive awards to any persons rendering consulting
or advisory services and non-employee Directors.
Executive Employment-Related Agreements
Georgette Nicholas
The Company is party
to a Second Amended and Restated Employment Agreement with Ms. Nicholas for the position of CEO of the Company. Ms. Nicholas’s employment
agreement provides for an initial term ending on November 19, 2024, subject to automatic one-year extensions unless either the Company
or Ms. Nicholas provides written notice of intent not to renew at least 90 days prior to the expiration of the then applicable term. She
is entitled to a base salary of $350,000 per year, subject to increase at the discretion of the Company. Ms. Nicholas is also eligible
to receive an annual target bonus of 75% of the base salary, with the annual bonus range from 0% to a maximum of 150% of the base salary,
with each bonus to be determined based upon achievements of performance goals established by the compensation committee of our Board.
For 2022, Ms. Nicholas was guaranteed a minimum bonus of $250,000, which became payable as of March 15, 2023. Ms. Nicholas is also entitled
to customary benefits, including health insurance, and other fringe benefits and expense reimbursements, and may be granted equity grants
under the terms of the Plans.
Ms. Nicholas’s
employment agreement, together with the appended proprietary rights agreement, subjects Ms. Nicholas to the following restrictive covenants:
(i) non-solicitation of employees, vendors, customers and clients of the Company during employment and for two years thereafter; (ii)
non-competition during employment and for a period of one year thereafter; and (iii) perpetual non-disclosure of confidential information.
Ms. Nicholas’s
employment agreement also provides for severance upon certain terminations of employment, as described below under “Potential
Payments upon Termination or Change in Control.”
Mike Minnich
Mr. Minnich serves
as the Company’s President and Chief Investment Officer. His employment agreement provides for an initial term ending as of November
16, 2023, subject to automatic one-year extensions unless either the Company or Mr. Minnich provides written notice of intent not
to renew at least 90 days prior to the expiration of the then applicable term. Mr. Minnich’s base salary is $300,000 per year and
he is also eligible to receive an annual target bonus of 75% of the base salary, with the annual bonus range from 0% to a maximum of 150%
of the base salary, with each bonus to be determined based upon achievements of performance goals established by the Compensation Committee
of our Board. Mr. Minnich is also entitled to customary benefits, including health insurance, and other fringe benefits and expense reimbursements,
and may be granted equity grants under the terms of the Plans.
Mr. Minnich’s employment
agreement, together with the appended proprietary rights agreement, subjects Mr. Minnich to the following restrictive covenants: (i) non-solicitation
of employees, vendors, customers and clients of the Company during employment and for two years thereafter; (ii) non-competition during
employment and for a period of one year thereafter; and (iii) perpetual non-disclosure of confidential information.
Mr. Minnich’s employment
agreement also provides for severance upon certain terminations of employment, as described below under “Potential Payments upon
Termination or Change in Control.”
Elliot Sperber
Mr. Sperber serves as the Company’s Deputy Chief Investment Officer,
1505 Capital LLC. His employment arrangement provides for an annual base salary, as of August 1, 2022 of $300,000, and a guaranteed cash
bonus payment for 2022 of $200,000. In addition, on August 10, 2022, Mr. Sperber received a stock option grant in respect of 20,000 shares,
vesting in equal installments on the second and fourth anniversaries of the date of grant.
Mr. Sperber’s employment arrangements also provide for severance
upon certain terminations of employment, as described below under “Potential Payments upon Termination or Change in Control.”
Eoin Elliffe
Mr. Elliffe serves as the Company’s Chief
Risk Officer. His employment agreement provides for an initial term ending as of July 26, 2024, subject to automatic one-year extensions
unless either the Company or Mr. Elliffe provides written notice of intent not to renew at least 90 days prior to the expiration of the
then applicable term. Mr. Elliffe’s base salary is $265,000 per year and he is also eligible to receive an annual target bonus of
50% of the base salary, with the annual bonus range from 0% to a maximum of 100% of the base salary, with each bonus to be determined
based upon achievements of performance goals established by the compensation committee of our Board. Mr. Elliffe is also entitled to customary
benefits, including health insurance, and other fringe benefits and expense reimbursements, and may be granted equity awards under the
terms of the Plans.
Mr. Elliffe’s employment
agreement, together with the appended proprietary rights agreement, subjects Mr. Elliffe to the following restrictive covenants: (i) non-solicitation
of employees, vendors, customers and clients of the Company during employment and for two years thereafter; (ii) non-competition during
employment and for a period of (a) nine months, if termination occurs prior to July 26, 2023, or (b) twelve months, if termination occurs
on or after July 26, 2023; and (iii) perpetual non-disclosure of confidential information.
Mr. Elliffe’s employment
agreement also provides for severance upon certain terminations of employment, as described below under “Potential Payments upon
Termination or Change in Control.”
Thomas Bumbolow
Mr. Bumbolow serves as
the Company’s Managing Director of Business Development. His employment arrangement provides for an annual base salary, as of August
1, 2022, of $280,000, and a guaranteed cash bonus payment for 2022 of $175,000. Mr. Bumbolow was also entitled to additional bonus payments
in respect of 2022 if certain premium thresholds were met as of December 31, 2022. In addition, on August 10, 2022, Mr. Bumbolow received
a stock option grant in respect of 15,000 shares, vesting in equal installments on the second and fourth anniversaries of the date of
grant.
Mr. Bumbolow’s
employment arrangements also provide for severance upon certain terminations of employment, as described below under “Potential
Payments upon Termination or Change in Control.”
Potential Payments upon Termination or Change
in Control
Pursuant to the terms
of their individual agreements and arrangements, as applicable, each of Ms. Nicholas and Messrs. Minnich, Elliffe, Sperber, and Bumbolow
is entitled to receive certain payments in connection with certain termination events.
If Ms.
Nicholas’s, Mr. Minnich’s, or Mr. Elliffe’s employment terminates upon their death, disability or by the Company
for good cause (as defined therein), they will be entitled to only their earned but unpaid base salary and target bonus through the
date of termination. If Ms. Nicholas’s, Mr. Minnich’s, or Mr. Elliffe’s employment terminates as a result of their
resignation without good reason (as defined therein) or
retirement, they will be entitled to continued payment of their base salary
for a period equal to their non-compete period, as well as any earned but unpaid target bonus for the prior calendar year, subject
to certain restrictions and subject to (i) signing and not revoking a release of claims in favor of the Company and (ii) continued
compliance with their non-compete clause during such period.
In addition, if the Company
terminates Ms. Nicholas’s, Mr. Minnich’s, or Mr. Elliffe’s employment for any reason other than death, disability, or
for good cause, or if Ms. Nicholas, Mr. Minnich, or Mr. Elliffe resigns with good reason (as defined in their respective employment agreement),
and provided they sign and do not revoke a release of claims in favor of the Company, then Ms. Nicholas, Mr. Minnich, or Mr. Elliffe,
as applicable, is entitled to the following:
(A)
if such termination occurs in connection with or within the 12 month period following the effective date of a change in control event
(defined therein), (a) a lump sum payment in an amount equal to two times the sum of their base salary and target bonus relating to the
calendar year of termination; (b) full vesting of all equity awards granted to them (with all performance vesting awards being deemed
achieved at target); and (c) subject to their timely election of continuation coverage under COBRA, a lump sum amount equal to the total
monthly premiums that would be necessary to continue participation by Ms. Nicholas, Mr. Minnich, or Mr. Elliffe, as applicable, and their
eligible dependents in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan)
for a period of 18 months following the date of termination; or
(B)
if such termination occurs at any other time, (a) continued payment of an amount equal to their base salary and target bonus over a period
equal to their non-compete period; (b) either (i) for Ms. Nicholas, continued vesting for the twelve-month period of all equity awards
granted to her (with all performance vesting awards being deemed achieved at target), (ii) for Mr. Minnich, full vesting of all equity
awards granted to him as of his release date (with all performance vesting awards being deemed achieved at target), or (iii) for Mr. Elliffe,
accelerated vesting of all equity awards granted to him at the Board’s discretion; and (c) subject to their timely election of continuation
coverage under COBRA, reimbursement of the monthly premiums that would be necessary to continue participation by Ms. Nicholas, Mr. Minnich,
or Mr. Elliffe, as applicable, and their eligible dependents in the Company’s group health plan (to the extent permitted under applicable
law and the terms of such plan) for a period equal to their non-compete period (or, for Mr. Minnich, 18 months) following the date of
termination.
Messrs. Bumbolow and
Sperber are each entitled to a severance package in connection with a qualifying termination that occurs in connection with or within
12 months of a change in control event, and provided they sign and do not revoke a release of claims in favor of the Company, equal to
the following: (a) a lump sum amount equal to the sum of their annual base salary and target bonus; (b) full vesting of all of their equity
awards (with all performance vesting awards being deemed achieved at target); and (c) subject to their timely election of continuation
coverage under COBRA, reimbursement of the monthly premiums that would be necessary to continue participation by each of Messrs. Bumbolow
and Sperber, as applicable, and their eligible dependents in the Company’s group health plan (to the extent permitted under applicable
law and the terms of such plan) for a period of 12 months following the date of termination.
Director Compensation
As approved, per the recommendation of the Compensation Committee,
by the Board during its meeting on March 11, 2021 (and remained in effect during fiscal 2022):
Each non-employee member of the Board shall receive:
| · | An annual retainer of $30,000; |
| · | An annual retainer for the Independent Board Chair of $30,000; |
| · | Committee fees including, |
| o | for every committee other than the Audit Committee, each member (other than the Chair) shall receive
an additional $2,000 per annum and the Chair shall instead receive an additional $4,000 per annum; |
| o | for the Audit Committee, each member (other than the Chair) shall receive an additional $3,000 per annum
and the Chair shall instead receive an additional $6,000 per annum; |
| o | as determined by the Board (and generally paid per meeting) for service on special or ad hoc committees; |
| · | $30,000 restricted stock units or equivalent equity ownership, with up to one-year cliff vesting; and
|
| · | A stock ownership guideline of three times the annual cash retainer (i.e., $90,000), with a 100% retention
requirement until this threshold is met. |
The fees set forth above initially result in total annual compensation
of $60,000 per non-employee member of the Board, before taking into account any committee (or committee Chair) fees. The Directors’
fees provide compensation to our Directors for their service on the Company’s Board as well as their service on the board of directors
of American Life, a regulated insurance company and wholly owned subsidiary of the Company.
The following table sets forth the compensation paid or accrued by
us to our Directors, other than Directors who are also named executive officers, for 2022.
(In thousands, except option awards) | |
| | |
| | |
| |
Name | |
Fees
Earned or Paid in Cash | | |
Restricted
Stock
Unit Awards (1) | | |
Total | |
John Hompe | |
$ | 102,500 | | |
$ | 30,000 | | |
$ | 132,500 | |
| |
| | | |
| | | |
| | |
Firman Leung | |
| 44,500 | | |
| 30,000 | | |
| 74,500 | |
| |
| | | |
| | | |
| | |
Jack
Theeler (2) | |
| 11,000 | | |
| 0 | | |
| 11,000 | |
| |
| | | |
| | | |
| | |
Douglas Bratton | |
| 30,000 | | |
| 30,000
(3) | | |
| 60,000 | |
| |
| | | |
| | | |
| | |
Nancy Callahan | |
| 37,000 | | |
| 30,000 | | |
| 67,000 | |
| |
| | | |
| | | |
| | |
Diane Davis | |
| 39,500 | | |
| 30,000 | | |
| 69,500 | |
| |
| | | |
| | | |
| | |
Kevin Sheehan | |
| 32,000 | | |
| 30,000 | | |
| 62,000 | |
| |
| | | |
| | | |
| | |
Yadin Rozov | |
| 40,500 | | |
| 30,000 | | |
| 70,500 | |
| 1) | Each outside Director received a restricted stock unit award of 2,674 shares of our voting common stock on June 14, 2022. The restricted
stock units vest on the earlier of the first anniversary of their date of grant or the next date of the annual meeting of stockholders,
subject to the terms of the restricted stock unit agreement and the 2019 Long-Term Incentive Plan. Each restricted stock unit represents the contingent right to
receive one share of our voting common stock upon vesting. The amounts reported represent the grant date fair value of the RSU grants |
and were computed in accordance with FASB ASC Topic 718, as discussed in Note 12 to our Consolidated Financial Statements included in
the Company’s 2022 Annual Report on Form 10-K.
| 2) | Mr. Theeler retired and did not stand for reelection in 2022. He was named Director Emeritus for one year and was paid $10,000 for
the service. |
| 3) | Mr. Bratton resigned from the Board pursuant to the September 16, 2022 Letter of Understanding, causing his restricted stock units
to expire unvested. |
Pay versus Performance
In 2022 the SEC began to require the disclosure of designated pay versus
performance measures for the principal executive officer (“PEO”) and certain other named officers. As a qualifying Smaller
Reporting Company, Midwest is subject to scaled disclosure requirements.
The new pay versus performance disclosures include:
| · | compensation paid to officers during the fiscal year; |
| · | average compensation paid to non-PEO executives; |
| · | the Total Shareholder Return (“TSR”) which is the extrapolated
value of an initial $100 investment in the company’s stock during the first year disclosed; and |
| · | net income of the company |
PAY VERSUS PERFORMANCE
|
|
|
Summary Compensation
Table Total for PEOs (3)
($) |
|
|
Compensation
Actually
Paid to PEOs (3)
($) |
|
|
Non-PEO
NEOs |
|
|
Value
of initial fixed
$100 investment
based on: |
|
|
Year |
|
|
Georgette
Nicholas |
|
|
Mike
Minnich |
|
|
A.
Michael
Salem |
|
|
Georgette
Nicholas |
|
|
Mike
Minnich |
|
|
A.
Michael
Salem |
|
|
Average
Summary
Compensation
Table Total
for non-PEOs
($) |
|
|
Average
Compensation
Actually Paid
to non-PEOs
($) |
|
|
Total shareholder
return (4)
($) |
|
|
Net income (4)
($) |
2022 (1) |
|
|
856,533 |
|
|
– |
|
|
– |
|
|
856,533 |
|
|
– |
|
|
– |
|
|
555,393 |
|
|
555,393 |
|
|
23.11 |
|
|
7,139,034 |
|
2021 (2) |
|
|
|
435,511 |
|
|
|
561,000 |
|
|
|
521,000 |
|
|
|
435,511 |
|
|
|
561,000 |
|
|
|
521,000 |
|
|
|
390,927 |
|
|
|
390,927 |
|
|
|
31.56 |
|
|
(16,635,806) |
| 1) | In 2022 Georgette Nicholas served as our only PEO. Our remaining non-PEO named executive officers were Mike Minnich, Elliot Sperber,
Eoin Elliffe, and Thomas Bumbolow. |
| 2) | From January 1, 2021, through November 21, 2021, the Company was overseen by co-CEOs Mike Minnich and A. Michael Salem. On November
22, 2021, Georgette Nicholas was appointed CEO, Mike Minnich was appointed President and Chief Investment Officer, and A. Michael Salem
resigned from Midwest Holding. Per the guidelines released by the SEC, the table above shows the amounts to be reported for all three
individuals acting as PEO during the year ending December 31, 2021. Our remaining non-PEO named executive officers were Eric del Monaco,
Todd Boeve, and Debra Havranek. |
| 3) | Summary Compensation paid to the PEO includes base wages, bonuses awarded, amounts paid by the Company for retirement plans, and the
fair value as of the grant date, of stock options granted. No subsequent adjustments were made to the valuation of the stock options resulting
in no difference between the columns labeled “Summary Compensation” and “Compensation Actually Paid.” |
| 4) | The SEC requires a measurement of return to shareholders based on an investment during the first year of reported results, reporting
the subsequent value of that initial investment for the subsequent years. An investment of $100 on December 31, 2020, would have a value
of $31.56 on December 31, 2021, and $23.11 on December 31, 2022. Values are based on the average of the open, high, low, and close price
of the Company’s stock on December 31st, or the last business day of the year for which prices are reported. We view
Compensation Actually Paid (“CAP”) as a means to enable our executives to focus on the key elements of the business that we
believe will ultimately lead to increased total shareholder return (although Midwest is still in the early stages of implementing the
business plan devised by current management and this result has not yet been achieved). The impact of CAP has been seen recently in the
form of increased net income. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information
as of April 12, 2023 regarding the beneficial ownership of our voting common stock by (i) each named executive officer, Director and Director
nominee, and (ii) all of our executive officers and Directors as a group, and (iii) each person who is known to us to be the beneficial
owner of more than 5% of our outstanding voting common stock.
The number of shares beneficially owned by
each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under
these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment
power. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment
power with respect to those securities and include shares of common stock that are issuable upon the exercise of stock options that are
either immediately exercisable or exercisable within 60 days of April 12, 2023, in each case with any shares of common stock issuable
upon the exercise of such stock options being deemed to be outstanding and beneficially owned by the person holding such options that
are either immediately exercisable or exercisable within 60 days of April 12, 2023. These shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other person. The number of shares beneficially owned is calculated using
3,727,976 shares outstanding as of April 12, 2023. Unless otherwise indicated, the address of each beneficial owner is c/o Midwest Holding
Inc., 2900 South 70th Street, Suite 400, Lincoln, Nebraska 68506.
|
|
Voting Common Stock |
Name |
|
Number of Shares
Beneficially Owned |
|
Percentage of Shares
Beneficially Owned |
Beneficial Owners of More than Five Percent: |
|
|
|
|
Crestline Assurance Holdings LLC (1) |
|
445,171 |
|
11.9% |
|
|
|
|
|
Knott Partners L.P. (2) |
|
390,241 |
|
10.5% |
|
|
|
|
|
A. Michael Salem (3) |
|
277,723 |
|
7.4% |
|
|
|
|
|
Named Executive Officers and Directors: |
|
|
|
|
Georgette Nicholas (4) |
|
10,427 |
|
* |
|
|
|
|
|
Mike Minnich (5) |
|
529,170 |
|
14.2% |
|
|
|
|
|
Eoin Elliffe (6) |
|
- |
|
* |
Dan Maloney (7) |
|
- |
|
* |
|
|
|
|
|
Elliot Sperber (8) |
|
1,350 |
|
* |
|
|
|
|
|
Thomas Bumbolow (9) |
|
- |
|
* |
|
|
|
|
|
John Hompe (10) |
|
3,534 |
|
* |
|
|
|
|
|
Firman Leung (10) |
|
3,434 |
|
* |
|
|
|
|
|
Nancy Callahan (10) |
|
3,401 |
|
* |
|
|
|
|
|
Diane Davis (10) |
|
3,401 |
|
* |
|
|
|
|
|
Yadin Rozov (10) |
|
22,661 |
|
* |
|
|
|
|
|
Kevin Sheehan (10) |
|
43,563 |
|
1.1% |
|
|
|
|
|
Named Executive Officers and Directors as a Group |
|
|
|
(12 persons): |
|
620,941 |
|
16.7% |
|
|
|
|
|
* Represents beneficial
ownership of less than 1%.
| 1) | The following information was obtained from a Schedule 13D filed by Douglas Bratton, Crestline Investors,
Inc., Crestline Management, L.P. and Crestline Assurance Holdings LLC with the SEC on May 4, 2020. These securities are held directly
by Crestline Assurance Holdings LLC (“Crestline”). The Manager of Crestline is Douglas Bratton and the sole member of Crestline
is Crestline Management, L.P. (“Crestline Management”). Crestline Investors, Inc. (“Crestline Investors”) is the
general partner of Crestline Management. Douglas Bratton is the sole director of Crestline Investors. Mr. Bratton has voting and investment
power over all securities held by Crestline, except for, with respect to voting power, the 74,425 shares of voting common stock covered
by the proxy granted to Vespoint LLC pursuant to the Stockholders Agreement described under “Certain Relationships and Related Transactions”
below. Crestline Management, Crestline Investors and Mr. Bratton may each be deemed to beneficially own the securities held by Crestline.
Therefore, Crestline, Crestline Management, Crestline Investors and Mr. Bratton share the power to (i) vote and direct the vote of 370,746
shares of our voting common stock beneficially owned by Crestline and (ii) dispose of and direct the disposition of the 445,171 shares
of voting common stock beneficially owned by Crestline. Mr. Bratton resigned as a Director pursuant to the September 16, 2022 Letter of
Understanding. The address of Crestline is 201 Main Street, Suite 1900, Fort Worth, Texas 76102. |
| 2) | As reported on the Form 4 filed with the Securities and Exchange Commission on September 26, 2022. The
address of the beneficial owner is 485 Underhill Boulevard, Suite 205, Syosset, New York 11791. |
| 3) | Consists of 203,298 shares of voting common stock indirectly owned through AMS Advisors LLC, an entity
which Mr. Salem controls and owns, as well as 74,425 shares pursuant to a shared proxy with respect to shares held by Douglas Bratton
/ Crestline (see footnote 1 above). The address for Mr. Salem and AMS Advisors LLC is 1075 Old Post Road, Bedford, New York 10507. |
| 4) | Ms. Nicholas has stock options granted of 73,000. 10,427 have vested but none have been exercised as of
April 12, 2023. |
| 5) | Consists of (i) 11,669 shares of voting common stock directly owned by Mr. Minnich, (ii) 413,176 shares of voting common stock indirectly
owned by Rendezvous Capital LLC, an entity controlled by Mr. Minnich and owned by Mr. Minnich and his spouse, (iii) 29,900 shares of voting
common stock underlying outstanding and vested but unexercised stock options exercisable at $41.25 per share, and (iv) 74,425 shares pursuant
to a shared proxy with respect to shares held by Douglas Bratton / Crestline (see footnote 1 above), but does not include 44,851 shares
underlying outstanding but unvested stock options. Mr. Minnich’s address is 19 Brookridge Dr., Greenwich, CT 06830. |
| 6) | Mr. Elliffe has stock options granted of 20,000. None have vested or been exercised as of April 12, 2023. |
| 7) | Mr. Maloney has stock options granted of 10,000. None have vested or been exercised as of April 12, 2023. |
| 8) | Mr. Sperber has stock options granted of 37,700 including 1,350 shares of voting common stock underlying
outstanding and vested but unexercised stock options and 36,350 unvested and unexercised as of April 12, 2023. |
| 9) | Mr. Bumbolow has stock options granted of 32,000. None have vested or been exercised as of April 12, 2023. |
| 10) | Includes 2,674 shares underlying outstanding restricted stock units that are scheduled to vest as of the
date of the 2023 Annual Meeting. |
Securities Authorized for
Issuance under Equity Compensation Plans
The table below sets forth certain information regarding options and
restricted stock awards granted to our employees, including officers, under our stock incentive plans for 2022.
|
|
Weighted
Average Exercise
Price Per Share |
|
Range of Option
Exercise Prices
per Share |
|
Total
Outstanding |
|
Outstanding,
Non-vested |
|
Vested and
Exercisable |
December 31, 2021 |
$ |
40.74 |
|
$16.37 - $55.02 |
|
399,053 |
|
298,180 |
|
100,873 |
Granted |
|
14.92 |
|
$11.20 - $21.16 |
|
117,367 |
|
117,367 |
|
- |
Vested |
|
36.53 |
|
$16.37 - $41.25 |
|
- |
|
(45,777) |
|
45,777 |
Exercised |
|
- |
|
- |
|
- |
|
- |
|
- |
Forfeited |
|
37.44 |
|
$15.57 - $55.02 |
|
(110,653) |
|
(98,253) |
|
(12,400) |
Expired |
|
40.38 |
|
$25.00 - $41.25 |
|
(86,646) |
|
- |
|
(86,646) |
December 31, 2022 |
$ |
36.53 |
|
$11.20 - $55.02 |
|
319,121 |
|
271,517 |
|
47,604 |
|
|
Total Outstanding Units |
|
Vested Units |
|
|
Units |
|
Weighted Average
Grand Date Fair
Value |
|
Units |
|
Weighted Average
Grant Date Fair
Value |
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
19,037 |
$ |
47.62 |
|
- |
$ |
- |
Granted |
|
18,718 |
|
11.22 |
|
- |
|
- |
Vested |
|
(1,163) |
|
50.00 |
|
1,163 |
|
50.00 |
Forfeited |
|
(10,810) |
|
40.41 |
|
- |
|
- |
Released |
|
(9,738) |
|
45.35 |
|
- |
|
- |
December 31, 2022 |
|
17,207 |
$ |
13.84 |
|
1,163 |
$ |
50.00 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Crestline
On April 24, 2020, we entered into a Securities
Purchase Agreement (the “Crestline Agreement”) with Xenith, Vespoint and Crestline. Pursuant to the Crestline Agreement, Crestline
purchased 444,444 shares of our voting common stock, at a purchase price of $22.50 per share for $10.0 million. In connection with the
Crestline Agreement, on April 24, 2020, we entered into the Stockholders Agreement with Xenith, Vespoint, Mike Minnich, A. Michael Salem
and Crestline.
We also entered into a customary director’s
indemnification agreement with Douglas Bratton, a principal of Crestline, who, in connection with the execution of the Stockholders Agreement,
was appointed as a member of both our Board and the board of directors of our life insurance subsidiary, American Life.
Among other things, the Stockholders Agreement
provides:
Constituency
and election to our Board. As long as Crestline and its affiliates own at least 10% of our outstanding voting common stock,
Vespoint, Mr. Minnich and his affiliates (the “Vespoint Stockholders”) have agreed to vote their Company shares for one Crestline
representative on our Board and, subject to reasonable committee member suitability standards and applicable regulatory qualification
requirements, any committee thereof, and an additional Crestline representative with board observer rights. We also initially appointed
one Crestline designated member and a Crestline selected observer to the board of directors of American Life. Crestline agreed, so long
as it and its affiliates own at least 10% of our outstanding voting common stock, to vote its shares for the election of Mr. Minnich to
our Board as long as he separately owns at least 3% of the outstanding shares of our voting common stock and is an executive officer of
the Company.
Proxy.
Crestline currently beneficially owns 445,171 shares of our voting common stock (the “Crestline Owned Shares”), which represent
approximately 11.9% of our outstanding shares of voting common stock. However, Crestline has only full investment and voting authority
with respect to the proportion of the Crestline Owned Shares which represent 9.9% of our outstanding voting common stock (the “Voting
Threshold”). While Crestline currently holds the Crestline Owned Shares above the Voting Threshold as an economic investment, all
voting authority with respect to such shares has been delegated to Vespoint under a voting proxy (the “Proxy”) granted to
such entity pursuant to the Stockholders Agreement. As of December 31, 2022, 74,425 Crestline Owned Shares are subject to the Proxy.
This proxy will automatically terminate upon
(a) receipt of Form A approval from the Nebraska Department of Insurance permitting Crestline to exercise full investment and voting authority
with respect to all Crestline Owned Shares above the Voting Threshold or (b) the sale or transfer of Crestline Owned Shares by Crestline
to a third party, but any such termination will be only with respect to the Crestline Owned Shares.
Preemptive
and First Rights of Refusal. For a period of three years following the date of the Stockholders Agreement, (i) the Company
granted Crestline a pro rata preemptive right to purchase equity securities the Company may issue, (ii) Crestline granted us a right of
first refusal to purchase our voting common stock owned by Crestline (including shares it may subsequently acquire) that it may offer
to sell, and (iii) the Vespoint Stockholders granted Crestline a right of first refusal to purchase their shares of voting common stock
they currently own or subsequently acquire that they may offer to sell.
Co-Sale
Rights. For the earlier of (i) ten years following April 24, 2020 or (ii) the date on which Crestline and its affiliates
own less than 5% of the outstanding shares of voting common stock of the Company, the Vespoint Stockholders granted Crestline a
right of co-sale with respect to the Company shares they currently own or subsequently acquire. Pursuant to the provision, if a
Vespoint Stockholder desires to transfer or sell shares to a third-party and to the extent such shares have not been purchased by
Crestline pursuant to the right of first refusal described above but subject to the conditions indicated below, then Crestline has
the right, on a pro rata basis, to participate in the transfer or sale on the same terms and conditions as being offered to a
Vespoint Stockholder. However, Crestline may only exercise its co-sale right if (i) the amount of shares to be transferred or sold
by the Vespoint Stockholder is equal to or exceeds, together with all sales of our shares sold by such stockholder within the
preceding three months of the date of such proposed transfer, 1% of the total outstanding shares of our voting common stock (to be
increased to 3% of the total outstanding voting common stock in the event that we consummated a firm commitment underwritten public
offering of our common stock which netted at least $15 million of proceeds to us, which occurred) and (ii) our voting common stock
is listed for trading on the NYSE or the Nasdaq Capital Market. Completion of the December 2020 offering triggered the increase from
1% to 3%.
Registration
Rights. We granted customary demand and piggyback registration rights to Crestline and the Vespoint Stockholders to register
future public sales of their voting common stock subject to certain terms and conditions.
Master
Agreement. On July 27, 2020, American Life entered into a reinsurance agreement (the “Reinsurance Agreement”) with
Seneca Incorporated Cell, LLC 2020-02 (“SRC2”), a protected cell of Seneca Reinsurance Company, LLC (“Seneca Re”)
that was capitalized by Crestline.
The Reinsurance Agreement, which was effective
as of April 24, 2020, was entered into pursuant to a three-year Master Letter Agreement (the “Master Agreement”) dated and
effective as of April 24, 2020, by and among American Life, Seneca Re and Crestline. The purpose of the Reinsurance Agreement was to support
American Life’s new business production by providing reinsurance capacity for American Life to write MYGA and FIA products. Concurrently
with the Reinsurance Agreement:
| · | American Life and SRC2 each entered into investment management agreements with Crestline, pursuant to
which Crestline manages the assets that support the reinsured business; and |
| · | American Life and SRC2 entered into a trust agreement whereby SRC2 maintains for American Life’s
benefit a trust account that supports the reinsured business. |
In addition, on April 24, 2020, American Life
entered into a three-year master letter agreement and related reinsurance, trust, and asset management agreement with Seneca Re and a
Crestline affiliate regarding the flow of annuity reinsurance and related asset management, whereby Crestline agreed to provide reinsurance
funding for a quota share percentage of 25% of the liabilities of American Life arising from its MYGA products and a quota share percentage
of 40% of the liabilities of American Life arising from its FIA products. The Crestline affiliate contributed $40.0 million of assets
to capitalize SRC2, now known as Crestline Re SP1 (“Crestline SP1”). Through December 31, 2022, American Life had ceded $440.9
million face amount of annuities to Crestline SP1. American Life received total ceding commissions of $2.6 million and expense reimbursements
of $8.8 million in connection with these transactions for the year ended December 31, 2022. Effective December 8, 2020, American Life
entered
into a novation agreement with SRC2 and Crestline Re SPC, an exempted segregated portfolio company incorporated under the laws
of the Cayman Islands, for and on behalf of Crestline SP1, a segregated portfolio company of Crestline Re SPC, under which the above-described
reinsurance, trust, and related asset management agreements were novated and replaced with substantially similar agreements entered into
by American Life and Crestline SP1.
On September 16, 2022, Midwest Holding
and Crestline executed a Letter of Understanding relating to the Stockholders Agreement. The Company and Crestline agreed that Mr.
Bratton would resign from the Boards of Directors of the Company and ALSC. Notwithstanding the foregoing, the parties agreed that
Mr. Bratton’s resignation and Crestline’s decision to no longer appoint a director does not constitute a permanent
waiver of Crestline’s rights under the Agreement to appoint a Crestline Designated Director. The Company and Crestline agreed
that the foregoing described agreement will remain in place until the earlier to occur of the date (i) the parties reach written
agreement otherwise, (ii) that Crestline is no longer an affiliate of a life insurance entity it recently acquired and (iii) on
which Crestline no longer has the right to elect or appoint a member and Observer to the Board.
AMS Advisors
On April 8, 2022, we entered into a Cooperation
Agreement (the “Cooperation Agreement”) with AMS Advisors LLC and A. Michael Salem (collectively the “AMS Group”)
pursuant to which the Company agreed to nominate Kevin Sheehan (the “Independent Nominee”) to its Board as part of the Company’s
slate of nominees (collectively, the “2022 Slate”) for election to the Board at the 2022 annual meeting of stockholders (the
“2022 Annual Meeting”) for a three-year term. Under the terms of the Cooperation Agreement, the AMS Group and its Managing
Member, Mr. Salem, agreed that they would not enter into any agreement with, or compensate, the Independent Nominee with respect to his
role or service as a Director. In addition, the AMS Group confirmed that Mr. Sheehan was not associated with the AMS Group.
Also, under the terms of the Cooperation Agreement,
in the event the Independent Nominee for any reason failed to serve or was not serving as a Director (subject to exceptions set forth
in the Cooperation Agreement, including as a result of such Director not being nominated by the Company to stand for election at an annual
meeting of stockholders subsequent to the 2022 Annual Meeting, following which the AMS Group’s replacement rights shall terminate),
then a new independent nominee that is mutually acceptable to the Board and the AMS Group would be added to the Board or as a nominee
on the 2022 Slate, as applicable.
The Cooperation Agreement also included other
customary voting, standstill, and non-disparagement provisions such as, among other things:
| · | standstill restrictions relating to director nominations,
shareholder proposals, proxy contests, other activist campaigns, unsolicited takeover bids, and related matters. |
| · | the AMS Group would vote all of its shares of the Company’s
voting common stock (the “AMS Shares”) at the 2022 Annual Meeting in accordance with the Board’s recommendations, subject
to certain exceptions. |
| · | the AMS Group would vote all of the AMS Shares at any annual
or special meeting of stockholders subsequent to the 2022 Annual Meeting during the term of the Cooperation Agreement (a) for each director
nominated by the Board for election at such annual or special meeting, (b) against any (i) stockholder proposal to increase the size of
the Board (and in the case of a special meeting, against any proposal to remove directors) and (ii) nominees that are not nominated by
the Board for election at such annual or special meeting, and (c) in favor of the |
| | ratification of the Company’s auditors. Notwithstanding the foregoing sentence, the AMS Group is not restricted from voting or abstaining
from any other proposals at the 2023 Annual Meeting. |
| · | each party agreed not to make disparaging statements about
the other party. |
| · | each party agreed not to initiate any lawsuit against the
other party, subject to certain exceptions. |
| · | the Company would reimburse the AMS Group for its reasonable,
documented out-of-pocket fees, including legal expenses, incurred in connection with the negotiation and entry into the Cooperation Agreement,
in an amount up to $50,000. |
The Cooperation Agreement, including the standstill restrictions on
the AMS Group, will terminate upon the earlier of (a) the date of conclusion of the 2023 Annual Meeting and (b) December 31, 2023.
In connection with the Cooperation Agreement, the Company and AMS Group
entered into a Confidentiality Agreement, the form of which was attached to the Cooperation Agreement.
PROPOSAL 2
ADVISORY VOTE ON THE COMPENSATION OF
THE COMPANY’S NAMED EXECUTIVE OFFICERS
General
In accordance with Section 14A of the Exchange Act, the Board provides
stockholders with the opportunity to cast an advisory vote on the compensation of the Company’s named executive officers named in
the Summary Compensation Table of this proxy statement. This non-binding advisory stockholder vote, commonly known as “Say-on-Pay,”
gives you, as a stockholder, the opportunity to endorse or not endorse our executive pay program and policies. We do not believe a static,
systematic pattern exists between executive compensation and performance. Our compensation philosophy is not structured to “motivate”
managerial behaviors through incentive compensation. Rather, our primary objective is to acquire and retain people of integrity who take
pride in delivering positive results without the distraction of bonus incentives. We believe our compensation structure is a model structure
for our peers and alleviates the very concerns that “Say-on-Pay” is attempting to address. As such, our compensation structure
is something you, as a stockholder, should approve.
Recent Actions
In 2022 our stockholders voted in favor of a non-binding, advisory
proposal that the Company hold a “say-on-pay” vote annually, beginning in 2023.
Vote Required
Because your vote is advisory, it will not be binding upon the Company
or the Board. However, the Board values stockholders’ opinions and will take into account the outcome of the vote when considering
future executive pay. Accordingly, we are providing you the opportunity to cast a non-binding advisory vote on the compensation of the
Company’s named executive officers contained in this proxy statement, through the following resolution:
RESOLVED, that the stockholders of Midwest Holding Inc. approve,
on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
ABOVE ADVISORY RESOLUTION APPROVING THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has concluded that the retention of Mazars USA
LLP (“Mazars”) is in the best interests of Midwest and its stockholders and has appointed Mazars as Midwest’s independent
registered public accounting firm for the year ending December 31, 2023. Mazars was appointed as Midwest’s external auditor in 2019.
The Audit Committee evaluates the independent registered public accountant’s qualifications, performance, audit plan, and independence
each year. In addition to assuring the regular rotation of the lead audit partner every five years as required by SEC rules, one or more
members of the Audit Committee will also meet with candidates for the lead audit partner and the Audit Committee will discuss the appointment
before rotation occurs. Representatives of Mazars are expected to participate in the Annual Meeting. These representatives will be provided
an opportunity to make a statement at the Annual Meeting if they desire to do so and will be available to respond to appropriate questions
from stockholders.
We are asking our stockholders to ratify the selection of Mazars as
our independent registered public accounting firm for the year ending December 31, 2023. Although ratification is not required by our
bylaws or otherwise, the Board is submitting the selection of Mazars to our stockholders for ratification as a matter of good corporate
practice.
In the event stockholders do not ratify the appointment, it will be
reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee in its discretion may select
a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests
of Midwest and our stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR”
PROPOSAL 3.
PRINCIPAL INDEPENDENT ACCOUNTANT FEES AND SERVICES
The principal independent registered public accounting firm retained
by Midwest during the years ended December 31, 2022 and 2021 was Mazars. Midwest has signed engagement letters with Mazars outlining the
expenses for both the audit work and the tax preparation which were approved by Midwest’s Board and the Audit Committee.
The Audit Committee pre-approves all audit and non-audit services provided
by Mazars. These services may include audit services, audit-related services, tax services and other services. Pre-approval may be given
as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or
on an individual case-by-case basis. All of the services described below were approved by our Audit Committee.
The aggregate fees billed by Mazars to Midwest for the years ended
December 31, 2022, and 2021, were as follows:
|
|
|
|
|
|
|
Fiscal 2022 |
|
Fiscal 2021 |
Audit Fees (1) |
|
$ |
577,039 |
|
$ |
495,230 |
Audit-Related Fees (2) |
|
|
- |
|
|
- |
Tax Fees (3) |
|
|
- |
|
|
72,235 |
All Other Fees (4) |
|
|
- |
|
|
- |
|
|
$ |
577,039 |
|
$ |
567,465 |
| 1) | Represents the aggregate fees billed and expenses for professional services rendered by Mazars for the audit of our annual financial
statements and review of interim financial statements included in our quarterly reports on Form 10-Q, and services that are normally provided
by an independent registered public accounting firm in connection with statutory or regulatory filings or engagements for those fiscal
years. |
| 2) | Represents the aggregate fees billed for assurance and related services by Mazars that are reasonably related to the performance of
the audit or review of our financial statements and are not reported under "audit fees." |
| 3) | Represents the aggregate fees billed for professional services provided by Mazars for tax compliance, tax advice and tax planning. |
| 4) | Represents fees for professional services not included in the categories above. |
STOCKHOLDER PROPOSALS
Under SEC Rule 14a-8, if a stockholder
wishes to submit a proposal to be considered for inclusion in our proxy statement for our 2024 annual meeting of stockholders, the proposal
must be received by us at our principal executive offices at 2900 South 70th Street, Suite 400, Lincoln, Nebraska 68506, Attention: Acting
Corporate Secretary by December 26, 2023, unless the date of our 2024 annual meeting of stockholders is more than 30 days from the anniversary
date of our Annual Meeting, in which case the deadline is a reasonable time before we print and mail our proxy materials for the 2024
annual meeting of stockholders. The proposals must comply with all of the requirements of Exchange Act Rule 14a-8. As the rules of the
SEC make clear, simply submitting a proposal does not guarantee its inclusion.
In addition, pursuant to our Bylaws, a stockholder who intends to nominate
a candidate for election to the Board or to propose other business for consideration at the 2024 annual meeting of stockholders must deliver
to the Company notice and certain information concerning themselves and their shareholder proposal or Director nomination not less than
45 days nor more than 75 days prior to the anniversary date of the date on which the Company first mailed its proxy materials or notice
of availability of proxy matters (whichever is earlier) for the preceding year’s annual meeting; provided, however, that, if the
annual meeting is scheduled to be held on a date more than 30 days before or more than 60 days after the date of the anniversary date
of the preceding year’s annual meeting, notice must be delivered to us not later than the close of business on the later of the
120th day prior to the scheduled date of such annual meeting and not later than the latest of (i) the 90th day prior to such annual meeting,
or (ii) the 10th day after public disclosure of the date of such annual meeting.
Accordingly, any notice given by or on behalf of a stockholder pursuant
to these provisions of our Bylaws (and not pursuant to Rule 14a-8 of the Exchange Act) must be received no earlier than February 9, 2024,
and no later than March 10, 2024. Such notice should be addressed to: Midwest Holding Inc., Acting Corporate Secretary, at 2900 South
70th Street, Suite 400, Lincoln, Nebraska 68506.
For special meetings of the stockholders, the nomination or item of
business must be received by the secretary at the principal executive offices of the corporation not later than the close of business
on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.
These requirements are separate from and in addition to the SEC’s
requirements described in the first paragraph of this section relating to including a proposal in our proxy statements.
COMMUNICATIONS WITH THE BOARD
Because of our relatively small size,
to date we have not developed formal processes by which stockholders or other interested parties may communicate directly with members
of our Board. Until formal procedures are developed and posted on our website, any communication to one or more members of our Board may
be made by sending them in care of Acting Corporate Secretary, Midwest Holding Inc., 2900 South 70th Street, Suite 400,
Lincoln, Nebraska 68506. Stockholders should clearly note on the mailing envelope that the letter is a “Stockholder-Board Communication.”
All such communications will be forwarded to the intended recipients.
ADDITIONAL INFORMATION
A copy of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the Notice of the 2023 Annual Meeting along with this proxy
statement and our shareholder letter are available at www.edocumentview.com/MDH. We
will promptly provide to any stockholder, upon written request and without charge, a copy (without exhibits, unless otherwise requested)
of our Annual Report on Form 10-K as filed with the SEC for the fiscal year ended December 31, 2022. Any such request should be directed
to Midwest Holding Inc., Attn: Acting Corporate Secretary, 2900 South 70th Street, Suite 400, Lincoln, Nebraska 68506 or by
calling (402) 489-8266.
The Company is subject to the requirements
of the Exchange Act and files with the SEC annual, quarterly and current reports, proxy statements and other documents. You may review
and obtain copies of each such document filed by the Company with the SEC at the SEC’s address or website described in the following
paragraph. However, the annual, quarterly and current reports, proxy statements and other documents filed by the Company with the SEC
are not incorporated by reference into this proxy statement.
Statements
made in this proxy statement regarding the contents of any contract or other documents are summaries of the material terms of the contract
or document. The SEC maintains a website that contains reports, proxy and information statements and other documents that are filed with
the SEC through the SEC’s EDGAR System. The website can be accessed at http://www.sec.gov.
Dated: April 20, 2023
|
By Order of
the Board of Directors |
|
|
|
|
/s/ |
Georgette
Nicholas |
|
Name: |
Georgette
Nicholas |
|
Title: |
Chief Executive Officer |
| 01 - Georgette Nicholas 02 - Mike Minnich
For Against Abstain For Against Abstain
1UPX
Using a black ink pen, mark your votes with an X as shown in this example.
Please do not write outside the designated areas.
03T2CD
+
+
A Proposals — The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3.
1. Election of directors.
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below.
q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
2023 Annual Meeting Proxy Card — Voting Common Stock
3. Ratification of appointment of Mazars USA LLP as our
independent registered public accounting firm for the year
ending December 31, 2023
2. Advisory vote on executive compensation of named executive
officers
For Against Abstain
NOTE: We will transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
For Against Abstain
000004
MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6
ENDORSEMENT_LINE______________ SACKPACK_____________
1234 5678 9012 345
MMMMMMMMM
MMMMMMMMMMMMMMM
576913
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
C 1234567890 J N T
C123456789
MMMMMMMMMMMM
MMMMMMM
000000000.000000 ext
000000000.000000 ext
000000000.000000 ext
000000000.000000 ext
000000000.000000 ext
000000000.000000 ext
If no electronic voting,
delete QR code and control #
Δ ≈
Online
Go to www.envisionreports.com/MDH or
scan the QR code — login details are
located in the shaded bar below.
Save paper, time and money!
Sign up for electronic delivery at
www.envisionreports.com/MDH
Phone
Call toll free 1-800-652-VOTE (8683) within
the USA, US territories and Canada
You may vote online or by phone instead of mailing this card.
Votes submitted electronically must be
received by June 6, 2023 at 1:00 A.M.,
Eastern Time.
Your vote matters – here’s how to vote! |
| Midwest Holding Inc.
Change of Address — Please print new address below. Comments — Please print your comments below.
C Non-Voting Items
+
+
Notice of 2023 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting — June 6, 2023
Georgette Nicholas and Mike Minnich, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Midwest Holding Inc. to
be held on June 6, 2023 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted in accordance with the directions of the shareholder. If no such directions are indicated, the Proxies will have
authority to vote FOR the election of the Director nominees stated herein and FOR Proposals 2 and 3.
Please note that the proposal numbers stated on the reverse side correspond to the proposal numbers used in the proxy statement.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting.
(Items to be voted appear on reverse side) |
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