Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On September 7, 2021,
Midwest Holding Inc. (the “Company”) announced the appointment of Georgette C. Nicholas, age 57, as President and Chief Financial
Officer of the Company effective as of September 8, 2021. The Company and Ms. Nicholas entered into an employment agreement
(the “Employment Agreement”) effective as of September 8, 2021.
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 through 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 beginning in 2005. Ms. Nicholas also worked in
public accounting, including as a firm director with Deloitte.
The following is a summary
of the material features of the Employment Agreement and is qualified in its entirety by reference to the full text of the Employment
Agreement, a copy of which is filed as Exhibit 10.1 to this Report on Form 8-K. Capitalized terms used but not defined in this
Report on Form 8-K shall have the meanings given to them in the Employment Agreement.
The initial term of the Employment
Agreement is three years but it contains an “evergreen” feature under which it is automatically extended on an annual basis
for a one year renewal term unless written notice of nonrenewal is given by either party. If a notice of nonrenewal is given, the term
of employment then ends at the end of the initial term or renewal term, as the case may be, unless terminated earlier as described below.
The Employment Agreement provides for the Executive to receive a base salary, potential cash bonus, equity compensation, and certain other
benefits, which are summarized below.
Base Salary. The
Executive’s initial annual base salary is $300,000 (“Base Salary”). However, the Base Salary may be renegotiated
by the parties each calendar year based on periodic performance reviews, although the Company retains sole and absolute discretion to
maintain or modify the Base Salary. The Base Salary is payable for up to six months in case of illness or temporary disability of the
Executive.
Bonus. The
Executive will be eligible for an annual target bonus of 50% of the current Base Salary (“Target Bonus”). Notwithstanding,
the actual annual bonus may range from 0% to 100% of the Base Salary and will be determined based upon achievement of performance goals
set by the Compensation Committee of the Board of Directors of the Company (the “Committee”). For the 2021 performance year,
the Executive will be paid a minimum bonus of $50,000, which becomes payable upon filing of a Form 10-K with the U.S. Securities
and Exchange Commission in March 2022. The Committee, in its discretion, may pay a pro-rata Target Bonus if the Executive is not
employed at the end of a calendar year, except that if her employment ceases due to death or disability, a pro-rata target bonus must
be paid.
Equity
Compensation. The Employment Agreement provides for the grant to the Executive of a stock option for 43,000 shares
of voting common stock. Such grant shall be subject to the terms and conditions set forth in the Midwest Holding Inc. 2020 Long-Term
Incentive Plan, as in effect and as amended from time to time (the “Incentive Plan”), together with the Stock Option
Agreement between the Company and Executive. The stock options will have an exercise price of $41.25 and expire 10 years from the
date of grant. The stock options will vest in equal installments 60 days after each of the first seven anniversaries of the date of
grant, subject to Executive’s continuous employment with the Company through the applicable vesting date, subject to
acceleration as described herein and in connection with certain events as specified under the terms of the Incentive Plan and the
Stock Option Agreement.
Benefits. The
Company will provide the Executive retirement and other benefits as are customarily provided to similarly situated executives of the Company,
including paid vacation, coverage under the Company’s medical, life, disability and other insurance plans, and reimbursement for
all reasonable business expenses in accordance with the Company’s expense reimbursement policy.
Termination. The Company
or Executive may terminate the Agreement prior to the expiration of its Term at any time upon written notice.
Effect
of Termination; Severance.
In
the event of voluntary resignation of employment by Executive without Good Reason (as defined below) or in connection with her retirement,
Executive shall be entitled to payment of her Base Salary for a period of 12 months following her resignation and shall be paid any earned
but unpaid Target Bonus for the prior year; provided, that Executive is in compliance with the non-compete provisions of the Employment
Agreement.
In
the event of a termination of employment due to (i) death, (ii) permanent disability, (iii) by the Company for Good Cause
(as defined below), or (iv) by Executive with Good Reason (as defined below), Executive shall be entitled to payment of any earned
but unpaid Base Salary, Target Bonus and other benefits and unreimbursed business expenses.
In addition to the foregoing,
if (i) the Company terminates Executive’s employment except for death, permanent disability or for Good Cause, or (ii) Executive
terminates her employment for Good Reason (a “Qualifying Termination”), then provided that Executive executes and does not
revoke the release attached as an exhibit to the Employment Agreement (the “Release”), the Company has agreed to (i) pay
Executive, on a quarterly basis, her Base Salary and Target Bonus for 12 months following her termination, (ii) continued vesting
of all of her outstanding stock options and equity awards through the 12-month severance period and (iii) to the extent Executive
elects to continue health coverage under our health plan under COBRA, reimburse her for premiums she pays to extend such coverage for
up to 18 months following her termination; provided, however, that such reimbursement shall cease if she obtains other employment that
offers group health benefits.
Non-Competition. During
her employment with the Company and for a period of 12 months thereafter, Executive may not directly or indirectly compete with the Company
within the United States.
Clawbacks. Executive’s
incentive compensation will be subject to clawback regulations in effect under applicable law or stock exchange listing standards.
“Good Cause” generally includes
(subject to certain cure provisions):
(i) Executive
willfully engages in acts or omissions determined to constitute fraud, breach of fiduciary duty or intentional wrongdoing or malfeasance;
(ii) Executive
is convicted of, or enters a plea of guilty or nolo contendere to charges of, any criminal violation involving fraud,
theft or dishonesty;
(iii) Executive
is convicted of, or enters a plea of guilty or nolo contendere to charges of, any non-vehicular felony which has or is
substantially likely to have a material adverse effect on Executive’s ability to carry out her duties under the Employment Agreement
or on the reputation or activities of the Company;
(iv) Executive
habitually abuses alcohol, illegal drugs or controlled substances or non-prescribed prescription medicine, and such abuse materially and
adversely interferes with the performance of the Executive’s duties and responsibilities to the Company;
(v) Executive
materially breaches the terms of any agreement between Executive and the Company relating to Executive’s employment;
(vi) Executive
engages in acts or omissions constituting gross negligence by Executive in the performance (or non-performance) of her duties; or
(vii) Executive
materially fails in the performance of her duties and/or responsibilities on behalf of the Company.
“Good Reason”
generally means (subject to certain cure provisions):
(i) the
diminution of any duties, responsibilities, and authorities inconsistent in any respect with the Executive’s position as a President
and Chief Financial Officer;
(ii) any
failure by the Company to comply with any of the compensation provisions of the Employment Agreement (except for isolated, insubstantial
and inadvertent failure not occurring in bad faith and which are remedied by the Company);
(iii) the
Company materially breaches the terms of any agreement between the Executive and the Employer relating to the Executive’s employment,
or materially fails to satisfy the conditions and requirements of the Employment Agreement; or