Exhibit 10.11
ADMINISTRATIVE SERVICES AND COST SHARING AGREEMENT
This Agreement made and entered into this 1st day of January, 2007 by UTG, INC.,
a Delaware corporation ("UTG") and UNIVERSAL GUARANTY LIFE INSURANCE COMPANY, an
Ohio life insurance company ("UG").
WHEREAS, UG is engaged in the general life insurance business;
WHEREAS, UG has as one of its primary objectives to operate in the most
efficient and profitable manner;
WHEREAS, UTG, through its officers, agents and employees, has extensive
experience and expertise in acquiring, managing and operating corporations and
other business entities engaged in the general life insurance business as well
as other financial and investment activities; and has been successful in
reducing the general expenses of such businesses;
WHEREAS, UG desires that the experience, expertise, sources of information,
advice, counseling and assistance of UTG and its officers and employees be
available to UG in the future, and to have UTG undertake certain duties and
responsibilities and perform certain services on behalf of UG, subject to the
supervision of the Board of Directors of UG, as provided herein; and,
WHEREAS, UTG is willing to undertake to render such services for UG, subject to
the supervision of the Board of Directors of UG, on the terms and conditions
herein set forth;
WHEREAS, UG is a direct subsidiary and member of the same holding company
structure of UTG.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is mutually agreed between the parties as follows:
1.
Services of UTG. During the terms of this Agreement, UTG shall consult with the
Board of Directors and executive officers of UG in connection with all
management and policy decisions to be made by such Board of Directors and
executive officers with respect to the management, operations, insurance
programs, and acquisition programs of UG. UTG shall, in conformity with such
directives of the Board of Directors of UG, perform and render at UTG's expense
(except as otherwise provided herein) all of the services necessary for UG to
carry on all of the business of UG that is currently being conducted including,
but not by way of limitation.
 
a.
provide data processing services necessary to process and administer all of the
insurance business in force of UG;
 
 
b.
provide all services and perform all functions necessary to meet regulatory
requirements, including, but not by way of limitation, requirements of state
insurance departments and requirements of the Internal Revenue Service;
 
 
c.
provide all services and perform all functions necessary to process the existing
investment portfolio and any addition to or deletion from that portfolio
mandated by the Board of Directors of UG;
 
 
 
 
 
 
d.
investigate, evaluate and assist in the selection of and participate in
consultations and negotiations with accountants, lenders, attorneys, brokers,
actuaries, underwriters, corporate fiduciaries, escrow agents, depositories,
custodians, banks and other persons acting in any other capacity deemed by the
Board of Directors of UG necessary or appropriate;
 
 
e.
advise, consult and negotiate with respect to purchases, sales, mergers,
reorganizations and other acquisitions or dispositions of assets by UG;
 
 
f.
act as attorney-in-fact or agent in purchase, sales, mergers, reorganizations
and other acquisitions or disposition of assets by UG;
 
 
g.
advise and consult in the agency operations of UG including, but not limited to,
the design of insurance products to be offered to the public, the structuring of
sales programs, conservation programs and training programs and the
establishment of commission rate schedules payable to agents and agencies;
 
 
h.
perform, advise, consult or assist in the performance of such administrative and
management functions necessary or appropriate in the management of UG as may be
agreed upon by UTG and the Board of Directors of UG;
 
 
i.
advise and consult with respect to the capital and debt structure of UG;
 
 
j.
advise, consult and negotiate with respect to any financings by UG either on a
public or private basis;
 
 
k.
advise and consult with respect to proceedings and hearings held and conducted
by regulatory agencies, including, but not limited to, insurance regulatory
hearings or proceedings; and
 
 
l.
attend, if required, meetings of the Board of Directors of UG.
 
 
 
2.
Information to UTG. UG shall, at all times, keep UTG fully informed with regard
to (i) the operations of UG, (ii) the investments and assets owned by UG, (iii)
the funds of UG available or to become available for investment, and (iv)
generally as to the condition of the affairs of UG. In particular, UG shall
notify UTG promptly of any material purchase, sale or other acquisition or
disposition of assets by UG. UG shall furnish UTG with a copy of all financial
statements of UG, a copy of each report prepared by certified public
accountants, and such other information with regard to the affairs of UG as UTG
may, from time to time, reasonably request.
 
 
3.
Officers and Employees. Officers and employees of UTG shall serve, if elected,
as directors, officers and members of committees of UG.
 
 
Fees.
 
 
 
a.
Fees.  As consideration for providing services under this Agreement UG agrees to
pay UTG, a fee equal to UG's pro rata share of the costs incurred by UTG to
provide such services including but not limited to all personnel costs and
taxes, costs to maintain UTG as a corporation in good standing and interest
costs on borrowings of UTG.
 
 
b.
Accountings.  UG shall advance to UTG on a monthly basis, the projected
estimated share of expenses allocable to UG.  Not less than quarterly, UTG shall
provide on accounting of the actual expenses allocable to UG.  Said accounting
shall be in such detail and be accompanied by substantive documentation
satisfactory to UG.  Any balance due to or from the other party as a result of
the actual accounting shall be settled within 90 (ninety) days.
 
 
c.
Allocation.  UG shall be responsible for the reimbursement of its pro rata share
of the above described costs to UTG based on; UG's percentage of the total
amount of all life insurance subsidiaries of UTG using the following formula,
the actual number of direct policies in force by policy type multiplied by the
standard base TPA pricing per policy as used from time to time by UTG and its
affiliates with outside third parties.  Said formula and resulting percentage
allocations shall be updated as UTG deems reasonable but in no event not less
than annually.
The costs shall be apportioned in accordance with SSAP No. 70, "Allocation of
Expenses."  The books, accounts and records shall be so maintained as to clearly
and accurately disclose the nature and details of the transactions including
such accounting information as is necessary to support the expenses apportioned
to the respective parties.
 
 
d.
The monthly fee to be paid to UTG by UG shall be reduced by any and all amounts
paid directly by UG for services which are to be provided by UTG.
 
 
e.
In addition to the above fees, UG shall reimburse UTG or pay directly for
expenses related to:
 
 
i.
mergers, acquisitions of new companies, or internal ownership restructuring;
 
 
ii.
changes in the products being offered for sale;
 
 
iii.
changes in the manner of soliciting new business, such as using direct mail or
other forms of advertising;
 
 
iv.
the moving of administrative offices, such as travel, severance pay, movers,
prepayment of existing leases and the like; and
 
 
v.
Legal fees of outside counsel related specifically to UG.
 
 
vi.
Third party administrative services provided by UG.  It is agreed such expense
reimbursement shall be equal to 75% of the gross revenue received by UG for such
services.
 
 
 
 
5.
Expenses.
UG hereby agrees that it shall be solely responsible for its expenses of:
 
a.
interest and other costs for borrowed money;
 
 
b.
taxes, licenses and fees;
 
 
c.
commissions of every kind;
 
 
d.
all policy benefits;
 
 
e.
all expenses and costs relating to its investment activities;
 
 
f.
all income taxes; and
 
 
g.
any other expenses not relating to insurance operations.
 
 
 
6.
Facilities and Staff. UTG shall provide its officers and employees with adequate
office space and adequate office equipment and other furniture, and clerical and
secretarial personnel for the performance of the services provided for
hereunder, and assume the expenses of same.
 
 
 
7.
Responsibility of UTG. UTG shall be responsible to render the services provided
for herein in good faith and in a reasonably competent manner. UTG shall use its
best efforts to keep itself informed as to the business and affairs of UG. UTG
shall keep accurate records of all transactions handled for UG and make those
records available at all times to UG. UTG shall use its best efforts to maintain
the confidentiality of all matters relating to the business of UG. UTG shall
indemnify and hold harmless UG from any loss, liability or expense occasioned by
UTG's failure to perform its obligations hereunder, provided, however, that
neither UTG nor any of its officers, directors or employees shall be liable to
UG or any third person hereunder unless UTG is guilty of bad faith, willful
misfeasance or gross negligence. It is expressly understood and agreed that UTG
and UG are not partners or joint venturers and nothing herein shall be construed
so as to make them partners or joint venturers or impose any liability as such
on either of them. The relationship between UTG and UG shall be that of
independent contractors.
 
 
 
8.
Freedom of Activity. Nothing in this Agreement shall otherwise limit or restrict
the right of UTG or any officer or employee of UTG to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
 
 
 
9.
Term. This agreement shall remain in full force and effect for a period of 24
months from the date hereof and may not be terminated by any party during said
term except as otherwise provided herein. Upon the expiration of the term of
this Agreement, it shall remain in full force and effect from month to month
unless terminated by any party, upon ninety (90) days' prior written notice.
 
 
 
10.
Nonassignability. This agreement shall terminate automatically in the event of
any assignment hereof by UTG. An assignment by UTG to a corporation or other
entity that is a successor to UTG shall not be deemed an assignment for purposes
hereof. This Agreement shall not be assignable by UG without the consent of UTG,
except in the case of an assignment by UG to a corporation or other entity that
is a successor, in which event such other corporation or entity shall be bound
hereunder and by the terms of such assignment in the same manner as UG is bound
hereunder.
 
 
 
11.
Termination. This Agreement shall be and become terminated immediately upon
written notice of termination from UG to UTG if any of the following events
shall occur.
 
a.
UTG shall violate any provisions of this Agreement and shall fail to cure such
default within thirty (30) days after receipt of written notice of such
violation; or
 
b.
Without consent of UG, UTG shall be adjudged bankrupt or insolvent by a court of
competent jurisdiction, or an order shall be made by a court of competent
jurisdiction for the appointment of a receiver, liquidator or trustee of UTG, or
of all or substantially all of its property by reason of the foregoing, or
approving any petition filed against UTG for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period of ninety
(90) days; or
 
c.
UTG shall institute proceedings of voluntary bankruptcy, or shall file a
petition seeking reorganization under the federal bankruptcy laws, or for relief
under any law for the relief of debtor, or shall consent to the appointment of a
receiver of UTG or of all or substantially all of its property, or shall make a
general assignment for the benefits of its creditor, or shall admit in writing
its inability to pay its debts generally as they become due.
 
If any of the events specified in subparagraphs (b) and (c) of this Section 11
shall occur, UTG shall give written notice thereof to UG within fifteen (15)
days after the happening of such event.
 
 
 
12.
Disclosure of Information.  UTG agrees all information communicated to it by or
on behalf of UG while this Agreement is in force shall be used by UTG only for
the purposes of this Agreement and during the term of this Agreement, and
thereafter.  UTG will not disclose such information to any person who is not a
Director, Officer, employee or agent of UG or of any of its affiliated
companies, except to the extent such disclosure is directly or indirectly
related to the performance of this Agreement or is otherwise required by any
applicable law, rule or regulation.
 
 
 
13.
Records and Reports.  Except as provided herein, all forms, records, statements,
reports, files and other data and information prepared, maintained or collected
by UTG in the performance of this Agreement shall become the sole property of UG
and shall be furnished to UG upon request.
 
 
 
14.
Inspection of Books and Records.  UTG shall keep proper books of account and
records relating to the services performed hereunder in which full and correct
entries will be made.  UG or its designated agents shall, upon ten (10) days
prior written notice to UTG have the right to inspect the books and records of
UTG at the offices of UTG in which said books and records are maintained during
normal business hours for any purpose related to administration performance of
this Agreement or the collection and determination of the fees required to be
paid by UG to UTG under this Agreement.
 
 
 
15.
Performance. The failure of either party to insist upon strict performance of
any provision of this Agreement shall not constitute a waiver of the right to
insist upon strict performance or the obligation to strictly perform thereafter.
 
 
 
16.
Notices. Any notice, report or other communication required or permitted to be
given hereunder shall be in writing and shall, unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, be given by being mailed by certified mail, postage prepaid,
to the following address of the parties thereto:
 
If to UTG:
UTG, Inc
 
 
Attn:  Corporate Secretary
 
 
P.O. Box 5147
 
 
Springfield, Illinois 62705
 
 
 
If to UG:
Universal Guaranty Life Insurance Company
 
 
Attn:  Corporate Secretary
 
 
P.O. Box 5147
 
 
Springfield, Illinois 62705
 
Any party may, at any time, give written notice to the other parties, changing
its address for the purposes of this Section 16.
 
 
 
17.
Entire Agreement. This Agreement contains the entire understanding of the
parties hereto and supersedes all prior agreements of the parties with respect
to the subject matter contained herein.
 
 
 
18.
Modification.                                        This Agreement shall not be
amended, changed, modified, terminated or discharged, in whole or in part,
except by an instrument, in writing, duly executed by all parties hereto or
their respective successors or assigns.
 
 
 
19.
Binding Effect.                                        This Agreement shall be
binding upon and inure to the benefit of the parties hereto and any successors
of the parties hereto.
 
 
 
20.
Applicable Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware as at the time
in effect.
 
 
 
21.
Severability. If any provisions of this Agreement shall be found to be invalid
by any court or competent jurisdiction, such findings shall not affect the
remaining provisions of this Agreement and all other provisions herein shall
remain in full force and effect.
 
 
 
22.
Titles Not to Affect Interpretation. The titles of paragraphs and subparagraphs
contained in this Agreement are inserted for convenience of reference only and
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
 
 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers thereunto duly authorized as of the day and year first above
written.
 
 
 
UTG, INC
Universal Guaranty Life Insurance Company
 
 
 
By:
/s/  James P. Rousey
 
By:
/s/  James P. Rousey
 
 
James P. Rousey
 
James P. Rousey
 
President
 
President
 
 
 
 
 
Attest:
                                                                                        
Attest:
 
/s/  Theodore C. Miller
                                            
/s/ Theodore C. Miller
 
 
Theodore C.
Miller                                                                                                                                                                                                    
 Theodore C. Miller
 
Secretary                                                                                                                                                                                                                      
Secretary