Sec Form 13D Filing - BRATTON DOUGLAS K filing for MIDWEST HOLDING INC. (MDWT) - 2020-05-04

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No.     )

 

Midwest Holding Inc.

(Name of Issuer)

Voting Common Stock, par value $0.001 per share

(Title of Class of Securities)

59833J107

(CUSIP Number)

Jesús H. Payán

Crestline Management, L.P.

201 Main Street, Suite 1900

Fort Worth, TX 76102

(817) 339-7600

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

April 24, 2020

(Date of Event Which Requires Filing of This Statement)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f), or 240.13d-1(g), check the following box.  ◻

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

 

 

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 

(1)  See Items 4 and 5 below for agreements among and the beneficial ownership of a potential Section 13(d) group formed among the Reporting Persons (as defined below) and the Vespoint Persons (as defined below).

(2)  Based on 1,023,408,553 shares of Voting Common Stock of Midwest Holdings Inc. (the “Issuer”) outstanding as of March 12, 2020, as reported in the Issuer’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020, plus the 222,222,222 shares of Voting Common Stock and 115,044,467 shares of Voting Common Stock issued by the Issuer on April 24, 2020, as reported in the Issuer’s Form 8-K filed with the SEC on April 24, 2020.

 

(1)  See Items 4 and 5 below for agreements among and the beneficial ownership of a potential Section 13(d) group formed among the Reporting Persons (as defined below) and the Vespoint Persons (as defined below).

(2)  Based on 1,023,408,553 shares of Voting Common Stock of the Issuer outstanding as of March 12, 2020, as reported in the Issuer’s Form 10-K filed with the SEC on March 13, 2020, plus the 222,222,222 shares of Voting Common Stock and 115,044,467 shares of Voting Common Stock issued by the Issuer on April 24, 2020, as reported in the Issuer’s Form 8-K filed with the SEC on April 24, 2020.

 

(1)  See Items 4 and 5 below for agreements among and the beneficial ownership of a potential Section 13(d) group formed among the Reporting Persons (as defined below) and the Vespoint Persons (as defined below).

(2)  Based on 1,023,408,553 shares of Voting Common Stock of the Issuer outstanding as of March 12, 2020, as reported in the Issuer’s Form 10-K filed with the SEC on March 13, 2020, plus the 222,222,222 shares of Voting Common Stock and 115,044,467 shares of Voting Common Stock issued by the Issuer on April 24, 2020, as reported in the Issuer’s Form 8-K filed with the SEC on April 24, 2020.

 

(1)  See Items 4 and 5 below for agreements among and the beneficial ownership of a potential Section 13(d) group formed among the Reporting Persons (as defined below) and the Vespoint Persons (as defined below).

(2)  Based on 1,023,408,553 shares of Voting Common Stock of the Issuer outstanding as of March 12, 2020, as reported in the Issuer’s Form 10-K filed with the SEC on March 13, 2020, plus the 222,222,222 shares of Voting Common Stock and 115,044,467 shares of Voting Common Stock issued by the Issuer on April 24, 2020, as reported in the Issuer’s Form 8-K filed with the SEC on April 24, 2020.

SCHEDULE 13D

ITEM 1.

SECURITY AND ISSUER

This Schedule 13D relates to the Voting Common Stock, $0.001 par value per share (“Common Stock”) of Midwest Holding Inc., a Nebraska corporation (the “Issuer”). The principal executive office of the Issuer is located at 2900 South 70th Street, Suite 400, Lincoln, Nebraska 68506.

ITEM 2.

IDENTITY AND BACKGROUND

The disclosure in Item 4 is incorporated herein by reference.

Securities Purchase Agreement

On April 24, 2020, the Issuer entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Xenith Holdings LLC (“Xenith”), Vespoint LLC (“Vespoint”), and Crestline Assurance.  Pursuant to the Securities Purchase Agreement, on April 24, 2020, Crestline Assurance purchased 222,222,222 shares of the Issuer’s Common Stock at a purchase price of $0.045 per share for an aggregate purchase price of $10 million.  The shares of Common Stock purchased pursuant to the Securities Purchase Agreement were purchased with the working capital of Crestline Assurance.  Pursuant to the Securities Purchase Agreement, the Issuer agreed that no less than $5 million of the proceeds from the sale of shares of Common Stock to Crestline Assurance would be promptly contributed to the Issuer’s life insurance subsidiary, American Life and Security Corp. (“ALSC”), which shall use such proceeds for working capital and general business purposes in accordance with the business approved and directed by ALSC’s Board of Directors and that the remainder of the proceeds may be used by the Issuer for working capital purposes.

The foregoing description of the Securities Purchase Agreement is qualified in its entirety by reference to the full text of the Securities Purchase Agreement, which is incorporated by reference as Exhibit B to this Schedule 13D and is incorporated herein by reference.

Stockholders Agreement

In connection with the Securities Purchase Agreement, on April 24, 2020, the Issuer entered into a stockholders agreement (the “Stockholders Agreement”) with Xenith, Vespoint, Michael Minnich, A. Michael Salem and Crestline Assurance.  Pursuant to the Stockholders Agreement, as long as Crestline Assurance and its affiliates beneficially own at least 10% of the Issuer’s outstanding Common Stock, Vespoint, Xenith and Messrs. Minnich and Salem and their affiliates and any other stockholders that become party to the Stockholders Agreement after the date thereof (the “Vespoint Stockholders”) have agreed to vote their shares of Common Stock to elect or appoint one Crestline Assurance representative to the Issuer’s Board of Directors (the “Board”) and, subject to reasonable committee member suitability standards and applicable regulatory qualification requirements, any committee thereof, with Board observer rights provided for an additional Crestline Assurance representative, and the Issuer agreed to appoint one Crestline Assurance designated member and a Crestline Assurance selected observer to the Board of Directors of ALSC.  The Issuer and the Vespoint Stockholders also agreed to include such Crestline Assurance representative in the slate of director nominees recommended by the Board at each applicable annual or special meeting of stockholders of the Issuer at which directors are to be elected, and if the Board is divided into two or more classes, the Crestline Assurance representative shall be nominated to the longest serving class (e.g. Class III if the Board is divided into three classes).  Effective April 24, 2020, Douglas K. Bratton was appointed as a member of the Board and was appointed a member of the Board of Directors of ALSC.  On April 24, 2020, the Issuer entered into a customary director’s indemnification agreement with Mr. Bratton.

In addition, pursuant to the Stockholders Agreement, Crestline Assurance agreed, so long as it and its affiliates beneficially own at least 10% of the Issuer’s Common Stock outstanding, to vote its shares of Common Stock for the election of Messrs. Minnich and Salem to the Board as long as each of them separately beneficially owns at least 3% of the outstanding shares of Common Stock and each is an executive officer of the Issuer. Further, for a period ending on the earlier of (i) 10 years following April 24, 2020 and (ii) the date on which Crestline Assurance and its affiliates own less than 5% of the outstanding shares of the Common Stock, the Vespoint Stockholders granted Crestline a right of co-sale with respect to the Issuer’s shares of Common Stock (and any derivative securities thereof) they currently own or subsequently acquire, and for a period of three years following April 24, 2020, the Vespoint Stockholders granted Crestline Assurance a right of first refusal to purchase their shares of Common Stock (and any derivative securities thereof) they currently own or subsequently acquire that they may offer to sell.  Pursuant to the Stockholders Agreement, if a Vespoint Stockholder desires to transfer or sell shares of Common Stock (and any derivative securities thereof) to a third party and to the extent such shares have not been purchased by Crestline Assurance pursuant to the right of first refusal described above but subject to the conditions indicated below, then Crestline Assurance 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 Assurance 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 Common Stock sold by such stockholder within the preceding three months of the date of such proposed transfer, 1% of the total outstanding Common Stock of the Issuer (which shall be increased to 3% of the total outstanding Common Stock in the event that the Issuer consummates a firm-commitment underwritten public offering of its Common Stock which nets at least $15 million of proceeds to the Issuer) and (ii) the Issuer’s Common Stock is listed for trading on the New York Stock Exchange or the Nasdaq Stock Market.

Pursuant to the Stockholders Agreement, Crestline Assurance granted Vespoint a proxy covering 87,515,374 shares of Common Stock acquired by Crestline Assurance pursuant to the Securities Purchase Agreement (the “Proxy Shares”) to enable Vespoint to vote (or act by written consent) in Vespoint’s sole discretion, the Proxy Shares on any matter submitted to the Issuer’s shareholders for approval.  As a result, Crestline Assurance retains voting rights with respect to only 134,706,848 shares of Common Stock acquired pursuant to the Securities Purchase Agreement (representing approximately 9.9% of outstanding Common Stock of the Issuer).  Such proxy will automatically terminate upon (a) receipt of Form A approval from the Nebraska Department of Insurance (the “Department”) with respect to Crestline Assurance owning more than 9.9% of outstanding Common Stock of the Issuer or (b) the sale or transfer of Proxy Shares by Crestline Assurance to a third party, but such termination will be only with respect to such Proxy Shares sold or transferred.

Messrs. Minnich and Salem are the Issuer’s Executive Chairman and Chief Executive Officer, respectively, and are the founders and principals of Vespoint and Xenith.  Xenith, a wholly-owned subsidiary of Vespoint, owns 1,000,534,789 shares of the Issuer’s Common Stock, which represented approximately 97.8% of the Issuer’s outstanding shares of Common Stock immediately prior to the issuances of Common Stock pursuant to the Securities Purchase Agreement and the additional issuances of 115,044,467 shares of Common Stock that took place on April 24, 2020.  Pursuant to the Stockholders Agreement, Xenith agreed that it will distribute its shares of Issuer Common Stock to its members as soon as reasonably practicable but no later than six months from the date of the Stockholders Agreement.

Further, pursuant to the Stockholders Agreement, for a period of three years following the date of the Stockholders Agreement, (i) the Issuer granted Crestline Assurance a pro rata preemptive right to purchase equity securities the Issuer may issue, and (ii) Crestline Assurance granted the Issuer a right of first refusal to purchase Common Stock of the Issuer owned by Crestline Assurance (including shares it may subsequently acquire) that it may offer to sell. The Issuer also granted customary demand and piggyback registration rights to Crestline Assurance and the Vespoint Stockholders to register future public sales of their Common Stock subject to certain terms and conditions.

Consistent with its  planned corporate structure going forward, the Issuer agreed in the Stockholders Agreement that it will seek stockholder approval to (i) reincorporate in Delaware, (ii) amend its articles of incorporation to have authorized capital stock of 20,000,000 shares of Common Stock, 2,000,000 million shares of non-voting common stock and 2,000,000 shares of preferred stock, and (iii) effect a reverse split of the Common Stock at a ratio of 500 existing shares for one share of new Common Stock, and (iv) classify, or “stagger” the Board into three classes with three, two and two members, respectively, each elected for three-year terms. The Issuer intends to bring these proposals to a vote of its stockholders at its next annual meeting, and the parties to the Stockholders Agreement have agreed to vote their shares in favor of these restructuring proposals.

The foregoing description of the Stockholders Agreement is qualified in its entirety by reference to the full text of the Stockholders Agreement, which is incorporated by reference as Exhibit C to this Schedule 13D and is incorporated herein by reference.

Crestline Management, ALSC and Seneca Reinsurance Company, LLC, a subsidiary of the Issuer (“Seneca Re”), plan to submit for regulatory approval with the Department and the Vermont Department of Financial Regulation a reinsurance agreement under which ALSC will cede 25% of its premium volume to companies formed by Crestline Assurance and Seneca Re arising under multi-year guaranteed annuity and fixed-index annuity contracts of ALSC for an initial three-year period. Upon such approval, such entities will finalize the reinsurance agreement.

Subject to the foregoing, none of the Reporting Persons have a present plan or proposal that relates to or would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D. However, each of the Reporting Persons reserves the right to propose or participate in future transactions which may result in one or more of such actions, including but not limited to, an extraordinary corporate transaction, such as a merger, reorganization or liquidation, sale of a material amount of assets of the Issuer, or other transactions which might have the effect of causing shares of Common Stock to become eligible for termination of registration under Section 12(g) of the Act. The Reporting Persons also retain the right to change their investment intent at any time, to acquire additional shares of Common Stock or other securities of the Issuer from time to time, or to sell or otherwise dispose of all or part of the shares of Common Stock beneficially owned by them in any manner permitted by law.

 

The disclosure in Item 4 is incorporated herein by reference.

The Securities Purchase Agreement is incorporated by reference as Exhibit B hereto and is incorporated herein by reference.

The Stockholders Agreement is incorporated by reference as Exhibit C hereto and is incorporated herein by reference.

 

SIGNATURE

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

 

Exhibit A

AGREEMENT REGARDING JOINT FILING OF STATEMENT ON SCHEDULE 13D

Each of the undersigned hereby acknowledges and agrees, pursuant to the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit, and any amendments thereto, with respect to the beneficial ownership of the undersigned of shares of Voting Common Stock of Midwest Holding Inc., will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned.