Item 1.01 Entry Into a Material Definitive Agreement.
Effective December 17, 2021, Midwest Holding Inc. (the "Company") and A. Michael
Salem entered into a Severance Agreement and Release (the "Agreement"),
memorializing the terms of Mr. Salem's resignation of employment with the
Company previously reported by the Company in a Current Report on Form 8-K
filed with the Securities and Exchange Commission on November 22, 2021. The
following is a summary of the material terms of the Agreement and is qualified
in its entirety by reference to the full text of the Agreement, a copy of which
is filed as Exhibit 10.1 to this Report. Pursuant to the Agreement, Mr. Salem
will receive:
a. the equivalent of his annual base salary of $300,000 and a bonus of $225,000,
both of which will be payable quarterly over the 12 months following November
19, 2021 (the "Termination Date"), less applicable taxes, deductions and
withholdings (the "Severance");
b. immediate full vesting of his stock options for 74,751 shares of the Company's
voting common stock at an exercise price of $41.25 per share and otherwise
subject to the terms of the stock option agreement evidencing his options; and
c. reimbursement from the Company of the monthly premium payable to continue his
and his eligible dependents' participation in the Company's group health plan
which covers such persons for a period of 18 months following the Termination
Date, provided that he is eligible and remains eligible for COBRA coverage;
and provided, further, that in the event he obtains other employment that
offers group health benefits, such continuation of coverage by the Company
shall then cease.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 22, 2021, the Company announced the promotion of Georgette C.
Nicholas, age 57, to Chief Executive Officer of the Company effective as of
November 19, 2021. Prior to her promotion, Ms. Nicholas was the Company's
President and Chief Financial Officer. She continues to act as interim Chief
Financial Officer until the Company hires a replacement. On December 22, 2021,
the Company and Ms. Nicholas entered into an amendment and restatement to her
original employment agreement (the "Amended and Restated Employment Agreement").
The material revisions in the Amended and Restated Employment Agreement compared
to the original employment agreement are as follows:
Bonus. Ms. Nicholas has an annual target bonus percentage of 75% of the current
Base Salary, an increase from 50% ("Target Bonus"). The upper end of the actual
annual bonus range increased from 100% to 150% of the Base Salary. For 2021, her
minimum bonus has been increased from $50,000 to $100,000. For 2022, Ms.
Nicholas will be paid a minimum bonus of $250,000 if she is employed by the
Company at the end of 2022.
Additional Stock Option Grant. Ms. Nicholas was awarded additional stock options
pursuant to our 2020 Long-Term Incentive Plan for 30,000 shares of the Company's
voting common stock at an exercise price of $16.37 per share. The stock options
vest in equal installments on each of the first seven anniversaries of the
effective date.
The following is a summary of the material features of the Amended and Restated
Employment Agreement and is qualified in its entirety by reference to the full
text of it, a copy of which is filed as Exhibit 10.2 to this Report.
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The initial term of employment of Ms. Nicholas is three years from December 22,
2021 and it will be automatically extended on an annual basis thereafter for
successive one-year renewal terms unless written notice of nonrenewal is given
by either party. If a notice of nonrenewal is given, the term of employment will
end at the end of the initial term or renewal term, as the case may be, unless
terminated earlier as described below. The Amended and Restated Employment
Agreement provided certain other benefits as follows:
Base Salary. The 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
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 Ms. Nicholas.
Bonus. Ms. Nicholas will be eligible for an annual target bonus of 75% of her
current Base Salary ("Target Bonus"). However, the actual annual bonus may range
from 0% to 150% 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, Ms. Nicholas
will be paid a minimum bonus of $100,000, which will become payable on or before
March 15, 2022. For the 2022 year (if Ms. Nicholas is employed by the Company at
the end of 2022), she will be paid a minimum bonus of $250,000, which would
become payable on or before March 15, 2023. The Committee, in its discretion,
may pay a pro-rata Target Bonus if Ms. Nicholas 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.Ms. Nicholas received an additional stock option grant
summarized above under "Additional Stock Option Grant."
Benefits. The Company will provide Ms. Nicholas with retirement and other
benefits as are customarily provided to similarly situated executives of the
Company, including paid personal leave of up to four weeks, sick leave of one
week, 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 Ms. Nicholas terminates the Amended and Restated
Agreement prior to the expiration of its Term at any time upon written notice.
Effect of Termination; Severance. In the event of a termination of employment of
Ms. Nicholas due to (i) death, (ii) permanent disability, or (iii) by the
Company for Good Cause (as defined below), Ms. Nicholas will be entitled to
payment of any earned but unpaid Base Salary, Target Bonus and other benefits
through the date of termination as well as unreimbursed business expenses.
In the event of voluntary resignation of employment by Ms. Nicholas without Good
Reason (as defined below), she will be entitled to payment of her Base Salary
for a period of 12 months following her resignation and will be paid any earned
but unpaid Target Bonus for the prior year; provided, that she is in compliance
with the non-compete provisions of the Amended and Restated Employment Agreement
and executes and does not revoke the release attached as an exhibit to the
Amended and Restated Employment Agreement (the "Release").
In addition to the foregoing, if (i) the Company terminates the employment of
Ms. Nicholas other than due to death, permanent disability or Good Cause (ii)
the Company does not renew the Amended and Restated Employment Agreement, or
(iii) Ms. Nicholas terminates her employment for Good Reason (each a "Qualifying
Termination"), then provided that she is in compliance with the non-compete
provisions of the Amended and Restated Employment Agreement and executes and
does not revoke the Release, the Company will (i) pay Ms. Nicholas, on a
quarterly basis, her Base Salary and Target Bonus for 12 months following her
termination, (ii) provide continued vesting of all of her outstanding stock
options and equity awards through the 12-month severance period and (iii) to the
extent Ms. Nicholas elects to continue health coverage under our health plan
under COBRA, reimburse her for premiums she pays to extend such coverage for up
to 12 months following her termination; provided, however, that such
reimbursement shall cease if she obtains other employment that offers group
health benefits.
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Non-Competition. During her employment with the Company and for a period of 12
months thereafter, Ms. Nicholas may not directly or indirectly compete with the
Company within the United States.
Clawbacks. Ms. Nicholas' 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) willfully engaging in acts or omissions determined to constitute fraud,
breach of fiduciary duty or intentional wrongdoing or malfeasance;
(ii) conviction of, or entering a plea of guilty or nolo contendere to
charges of, any criminal violation involving fraud, theft or dishonesty;
(iii) conviction of, or entering 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 her ability to carry out her duties under the
Amended and Restated Employment Agreement or on the reputation or activities of
the Company;
(iv) habitual abuse of alcohol, illegal drugs or controlled substances or
non-prescribed prescription medicine, and such abuse materially and adversely
interferes with the performance of the duties and responsibilities;
(v) a material breach of the terms of any agreement between Ms. Nicholas and
the Company relating to her employment;
(vi) engaging in acts or omissions constituting gross negligence in the
performance (or non-performance) of her duties; or
(vii) material failure in the performance of duties and/or responsibilities on
behalf of the Company.
"Good Reason" generally means (subject to certain cure provisions):
(i) any material diminution of any duties, responsibilities, and authorities
inconsistent in any respect with Ms. Nicholas' position as Chief Executive
Officer;
(ii) any failure by the Company to comply with any of the compensation
provisions of the Amended and Restated Employment Agreement (except for
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which are remedied by the Company); or
(iii) the Company materially breaches the terms of any agreement between Ms.
Nicholas and the Company relating to her employment, or materially fails to
satisfy the conditions and requirements of the Amended and Restated Employment
Agreement.
Prior to Ms. Nicholas' employment with the Company, 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.
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Item 9.01 Financial Statements and Exhibits.
(c) The following exhibits are filed as a part of this Report:
Exhibit No. Description
10.1 Severance Agreement and Release Between Midwest Holding Inc. and
A. Michael Salem dated December 17, 2021.
10.2 Amended and Restated Executive Employment Agreement Between
Georgette C. Nicholas and Midwest Holding Inc. dated December 22,
2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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