Document:

Loan Agreement

 

    
      LOAN
        AGREEMENT

       

       

               
        THIS LOAN AGREEMENT(hereinafter called “Agreement”)made and
        entered into this 8th day of December, 2006 by and between UTG,
INC (UTG). , a Delaware corporation, (hereinafter
        called
        "Borrower") and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a
        national banking association having its principal office located in Memphis,
        Tennessee ("Lender").

       

      W
        I T N E S S E T H :

       

               
        WHEREAS, the Borrower desires to borrow from Lender Eighteen Million Dollars
        ($18,000,000.00) in the form of a term note and Five Million Dollars
        ($5,000,000.00) in the form of a revolving line of credit.  NOW, THEREFORE,
        in consideration of the premises and the mutual agreements, covenants and
        conditions herein contained, the parties hereto hereby agree as follows:

       

      AGREEMENTS

       

               
        1.     COMMITMENT AND FUNDING.

       

               
        1.1   The Commitment.  Subject to the terms and conditions
        herein set out, Lender agrees and commits to make loans (the "Loans") to
        Borrower in form of term note for $18,000,000.00 and revolving line of credit
        for $5,000,000.00.  Such borrowings shall be evidenced by, and shall be
        payable in accordance with the terms and provisions of respective promissory
        notes executed by Borrower, as maker, attached hereto and incorporated herein
        by
        reference (such promissory notes together with any renewals, modifications
        and
        extensions thereof is herein referred to as the "Notes").  

       

               
        1.2   Funding.  The advance of Loan proceeds hereunder
        shall be made, upon Borrower's request, by depositing the same into a demand
        deposit account with Lender or wiring of funds per specific instructions
        of
        Borrower.  The Loans to Borrower may be made, at Borrower's request, in one
        or more advances, each of which shall be subject to the terms and conditions
        of
        this Agreement, including but not limited to Sections 2.1 and 2.2 hereof.

       

               
        1.3   Prepayments.  The Borrower may, at its option, from
        time to time, prepay any of the Loans in whole or in part.  Any Loan which
        bears interest at a fixed rate will be subject to a prepayment premium as
        set
        forth in the Note for such loan.

       

               
        1.4   Interest Rate.  The Loan indebtedness evidenced by
        the Notes shall bear interest from date at the variable or fixed rate determined
        in accordance with the terms and provisions of the Notes.

       

               
        2.     CONDITIONS OF LENDING.

       

               
        2.1   Loan Documents.  The obligation of Lender to fund
        the Loans is subject to the condition precedent that Lender shall have received
        at or before the execution of this Agreement all of the following in form
        and
        substance satisfactory to Lender provided that if any of the following shall
        not
        have been furnished to Lender at or before the date of this Agreement, the
        same
        shall be furnished promptly thereafter unless Lender shall waive any such
        requirement in writing.

       

               
        a)    The Notes;

       

      b)   
        This Loan Agreement;

       

      c)   
        Commercial Pledge Agreement covering stock in Universal Guaranty Life;

       

      d)   
        Negative Pledge Agreement on common stock of ACAP;

       

      e)   
        Current certificates of good standing for the Borrower in the State of
        Delaware.

       

      f)    Certified
        corporate resolutions of Borrower authorizing the execution, delivery and
        performance of this Loan Agreement and of the other instruments and documents
        to
        be executed and delivered in connection herewith.

       

      g)   
        A copy of Borrower’s Form 10-Q for the quarter ended June 30, 2006 and Form 10-K
        for the year ended December 31, 2005, it being understood that Lender is
        relying
        upon the audit report of Brown Smith Wallace LLC contained in the Form 10-K
        in
        entering into this Loan Agreement and June 30, 2006 Statutory statements
        for  Universal Guaranty Life Insurance Co. 

       

      h)    The
        opinion of Borrower's independent,
        third party counsel in the form approved by Lender, as to the due organization
        and valid existence of Borrower, the due authorization and execution by Borrower
        of the Loan Documents, the validity and enforceability of the Loan Documents
        against Borrower and such other matters as Lender shall require.

       

      i)      The
        Notes, this Loan Agreement, collateral pledge agreement, negative pledge
        agreement and any other documents executed by Borrower in connection herewith
        shall be referred to hereinafter as the "Loan Documents".

       

               
        2.2   Other Conditions.  The obligation of the Lender to
        fund the Loans is subject to each of the following further terms and
        conditions:

       

               
        a)    At the time of funding of any Loan advances hereunder, each
        of Borrower's warranties and representations contained herein shall be and
        remain true and correct in all material respects.  In addition, no Event of
        Default (as defined in Section 6 hereof) shall have occurred and be continuing,
        and, if requested by Lender, Borrower shall execute a certificate verifying
        each
        of such matters to be true in all respects, if such be the case.

       

               
        b) At the time the loans are closed hereunder, there shall have occurred,
        in the
        opinion of Lender, no material adverse changes in the condition, financial
        or
        otherwise, of Borrower or UG from that reflected in the financial statements
        furnished pursuant to Section 2.1 hereof.

       

      3.      
        REPRESENTATIONS AND WARRANTIES.

       

      In
        order to induce the Lender to enter into this Agreement and to make the Loans,
        the Borrower represents and warrants to the Lender (which representations
        and
        warranties shall survive the delivery of the Loan Documents and the funding
        of
        the Loan) that:

       

               
        3.1   Corporate Status.  Borrower is a corporation duly
        organized and existing under the laws of the State of Delaware, is duly
        qualified to do business and is in good standing under the laws of the State
        of
        Delaware, and has the corporate power and authority to own its properties
        and
        assets and conduct its affairs and business.

       

               
        3.2   Corporate Power and Authority.  Borrower has full
        power and authority to enter into this Agreement, to borrow funds contemplated
        herein, to execute and deliver this Agreement, the Notes and other Loan
        Documents executed and delivered by it, and to incur the obligations provided
        for herein, all of which have been duly authorized by all proper and necessary
        corporate action; and the officer executing each of the Loan Documents is
        duly
        authorized to do so by all necessary corporate action.  Any consents or
        approval of shareholders of Borrower required as a condition to the validity
        of
        any Loan Document have been obtained; and each of said Loan Documents is
        the
        valid, legal, and binding obligation of Borrower enforceable in accordance
        with
        its terms.

       

               
        3.3   No Violation of Agreements or Law.  Neither Borrower
        nor UG is in default under any indenture, agreement or instrument to which
        it is
        a party or by which it may be bound, nor in violation of any state or federal
        statute, rule, ruling, or regulation governing its operations and the conduct
        of
        its business, operations or financial condition of Borrower or UG.  Neither
        the execution and delivery of the Loan Documents nor the consummation of
        the
        transactions herein contemplated, or compliance with the provisions hereof
        will
        conflict with, or result in the breach of, or constitute a default under,
        any
        indenture, agreement or other instrument to which Borrower is a party or
        by
        which it may be bound, or result in the creation or imposition of any lien,
        charge or encumbrance upon any of the property of Borrower, or violate or
        be in
        conflict with any provision of the charter or bylaws of Borrower.

       

               
        3.4   Compliance With Law; Government Approvals.

       

               
        (a) Borrower has complied and is complying with all requirements, made all
        applications, and submitted all reports required by the appropriate state
        insurance regulatory authorities, and any regulations or rulings issued in
        connection therewith, and the transaction contemplated hereby will not violate
        any such statutes, rules, rulings, or regulations nor will the consummation
        of
        said actions and transactions cause Borrower to be in violation thereof. 
Borrower has, as required, received all governmental approvals necessary
        for the
        consummation of the transaction described herein. 

       

               
        (b)   Borrower has complied and is complying with all other applicable
        state or federal statutes, rules, rulings and regulations.  The borrowing
        of money as described herein and said actions and transactions will not violate
        any of such statutes, rules, rulings, or regulations.  Borrower has made
        all filings and received all governmental or regulatory approvals necessary
        for
        the consummation of the transactions described herein.

       

               
        3.5   Litigation.  There are no actions, suits or
        proceedings pending or, to the knowledge of the Borrower threatened against
        before any court, arbitrator or governmental or administrative body or agency
        which, if adversely determined, would result in any material and adverse
        change
        in the financial condition, business operation, or properties or assets of
        the
        Borrower.  

       

               
        3.6   Financial Condition.  The balance sheets and the
        related statements of income of Borrower and UG, which have been delivered
        to
        the Lender pursuant to Sections 2.1 hereof and the financial reports of Borrower
        and UG which will be delivered to Lender pursuant to Section 4.5 hereof are,
        or
        will be as of their respective dates and for the respective periods stated
        therein, complete and correctly and fairly present the financial condition
        of
        Borrower and UG, and the results of their operations, respectively, as of
        the
        dates and for the periods stated therein, and have been, or will be as of
        their
        respective dates and for the respective periods stated therein, prepared
        in
        accordance with generally accepted accounting principles consistently applied
        throughout the period involved.  There has been no material adverse change
        in the business, properties or condition of Borrower or UG since the date
        of the
        financial statement furnished to Lender pursuant to Section 2.1 hereof.

       

               
        3.7   Tax Liability.  Borrower and UG have filed all tax
        returns which are required to be filed by them, and have paid all taxes which
        have become due pursuant to such returns or pursuant to any assessments received
        by them.

       

               
        3.8   Subsidiaries.  Upon completion of the pending
        acquisition of American Capitol Insurance Company, Borrower has the following
        subsidiaries: Universal Guaranty Life Insurance Company, North Plaza of
        Somerset, Inc., Roosevelt Equity Corporation, Hampshire Plaza Garage, LLC,
        UTAG,
        Inc., ACAP Corporation, American Capitol Insurance Company, Texas Imperial,
        Inc., Texas Imperial Life Insurance Company.

       

       

               
        4.0   AFFIRMATIVE COVENANTS.  Borrower covenants and
        agrees that, until the Notes together with interest thereon are paid in full,
        unless specifically waived by the Lender in writing, Borrower will, or will
        cause Borrower and UG to:

       

               
        4.1   Business and Existence.  Perform all things
        necessary to preserve and keep in full force and effect the existence, rights
        and franchises of Borrower and to comply with all laws and regulations
        applicable to Borrower and UG, including, but not limited to, laws and
        regulations of state and federal authorities applicable to insurance holding
        companies.

       

               
        4.2   Maintain Property.  Maintain, preserve, and protect
        all properties used or useful in the conduct of Borrower's  business and
        keep the same in good repair, working order and condition.

       

               
        4.3   Insurance.  At all times keep the insurable
        properties of Borrower adequately insured and maintain in force (i) insurance,
        to such an extent and against such risks, including fire, as is customary
        with
        companies in the same or similar business, (ii) necessary workmen's compensation
        insurance, fidelity bonds and errors and omissions insurance coverage in
        amounts
        reasonably satisfactory to Lender, and (iii) such other insurance as may
        be
        required by law; and if required by Lender, deliver to the Lender a copy
        of the
        bonds and policies providing such coverage and a certificate of Borrower's
        chief
        executive officer, as the case may be, setting forth the nature of the risks
        covered by such insurance, the amount carried with respect to each risk,
        and the
        name of the insurer.

       

               
        4.4   Taxes and Liens.  Pay and discharge promptly all
        taxes, assessments, and governmental charges or levies imposed upon Borrower
        or
        upon any of their respective income and profits, or their properties, real,
        personal or mixed, or any part thereof, before the same shall become delinquent;
        provided, however, that Borrower shall not be required to pay and discharge
        or
        to cause to be paid and discharged any such tax, assessment, charge, levy
        or
        claim so long as the amount or validity thereof shall be contested in good
        faith
        by appropriate proceedings.

       

               
        4.5   Financial Reports.  Furnish to Lender (a) as soon as
        available and in any event within ninety (90) days after the end of each
        calendar year, audited GAAP financial statements of Borrower and within one
        hundred fifty (150) days after the end of each calendar year, audited SAP
        statements of UG.  In addition, Borrower and UG to provide Lender quarterly
        un-audited financial statements no later than forty five (45) days after
        end of
        each calendar quarter; and (b) promptly upon receipt, copies of all management
        letters and other assessments and recommendations, formal or informal, submitted
        by the Certified Public Accountants to Borrower or UG. 

       

               
        4.6   Regulatory Examinations. If legally permitted to do so,
        (a)  promptly notify Lender upon receipt of any material correspondence,
        report, memoranda or other written communication between any federal or state
        regulatory body or authority, with respect to the properties, loans, operations
        and/or condition of Borrower, UG or both; and (b) if required by Lender,
        fully
        and completely assist and cooperate with Lender in requesting approval by
        such
        regulatory body or authority of the furnishing to Lender of any such report,
        and
        furnish such report to Lender if such approval is given; provided, however,
        that
        Lender shall take such steps as may be necessary to assure that all such
        reports
        shall remain confidential and shall be used by Lender solely in connection
        with
        the administration of the Loan in accordance with the provisions of this
        Agreement.

       

               
        4.7   Additional Information.  Furnish such other
        information regarding the operations, business affairs and financial condition
        of Borrower and UG as Lender may from time to time reasonably request, including
        but not limited to true and exact copies of any monthly management reports
        to
        their respective directors, their respective tax returns, and all information
        furnished to shareholders.

       

               
        4.8   Right of Inspection.  Except to the extent, if any,
        prohibited by applicable law, permit any person designated by Lender, to
        inspect
        any of the properties, books and financial and other reports and records
        of
        Borrower and UG,  and to discuss their affairs; finances and accounts with
        Borrower's and UG’s principal officers, at all such reasonable times and as
        often as Lender may reasonably request.  

       

               
        4.9   Notice of Default.  At the time of Borrower's first
        knowledge or notice, furnish the Lender with written notice of the occurrence
        of
        any event or the existence of any condition which constitutes or upon written
        notice or lapse of time or both would constitute an Event of Default under
        the
        terms of this Loan Agreement.

       

               
        4.10Compliance with Insurance Regulations.  At all times be in
        compliance with, cause UG to be in compliance with, all insurance and insurance
        holding company laws, rules and regulations applicable to Borrower or UG.

       

               
        4.11Statutory Capital/Assets:  Borrower shall cause UG to maintain
        the ratio of its aggregate capital and surplus divided by the its total assets
        less “separate accounts” as defined on the SAP statements of UG at all times at
        or greater than seven percent (7.0%).

       

              
        4.12 Dividend Capacity:  UG will, within a twelve (12) month rolling
        period, maintain the financial ability under applicable law to pay to the
        Borrower, with respect to Borrower’s ownership interest in UG, a dividend of at
        least $2,500,000.00.

       

               
        4.13  Maximum Funded Debt to Cash Flow:  Borrower will maintain
        the ratio of funded debt divided by cash flow of no greater than 4.5:1 (For
        purposes of this ratio, Funded debt shall be defined as direct obligations
        for
        borrowed money of Borrower, less any subordinated debt and cash flow shall
        be
        defined as Borrower’s consolidated EBITDA for the trailing 4-quarters.)

       

               
        4.14Compliance Certificate Furnish Lender a certificate of compliance
        duly certified by the chief financial officer of Borrower within thirty (30)
        days after the end of each calendar quarter stating that Borrower and UG
        are in
        compliance with all terms, covenants and conditions of this Loan Agreement
        and
        all related Loan Documents.

       

                      
        5.0          NEGATIVE
        COVENANTS.  Borrower agrees that, until the indebtedness evidenced by
        the Notes, together with interest, is paid in full, without the prior consent
        of
        lender, which shall not be unreasonably withheld:

       

                      
        5.1         
Indebtedness.  Neither Borrower nor its subsidiaries shall create,
        incur, assume or suffer to exist, contingently or otherwise, any indebtedness,
        except for the following indebtedness:

       

                                    
        i)          the indebtedness of
        Borrower under the Loans;

       

      ii)         operating
        expenses, trade payables and leases incurred by Borrower or its subsidiaries
        in
        the ordinary course of business;

       

                                    
        iii)         indebtedness owed by the
        Borrower to any other subsidiary;

       

      iv)        
        indebtedness reflected on Borrower's financial statements dated as of June
        30,
        2006;

       

                                      
        v)       borrowings under UG’s working capital
        line of credit

       

       

                      
        5.2          Merger,
        Dissolution, Acquisition of Assets, Affiliates and Subsidiaries. 
Borrower will not enter into, or permit UG to enter into, any transaction
        of
        merger or consolidation, or any reorganization, reclassification of stock,
        change in capital structure; or acquire, or permit UG to acquire, all of
        the
        stock, property or assets of any other corporation, partnership or other
        entity,
        except for the following:

       

                                    
        i)          the pending acquisition
        of American Capitol Insurance Company

       

      Borrower
        agrees to notify Lender before the consummation of  any type of transaction
        referenced in this section of Loan Agreement.  Lender will submit its
        written response to Borrower no later than five (5) business days of the
        date of
        original notification.  If Lender does not submit its written denial or
        consent for any notification within the specified time, Borrower may interpret
        said non-response as consent.   

       

                      
        5.3          Dividends,
        Redemptions and Other Payments.  Borrower will not, without consent of
        Lender, which shall not be unreasonably withheld, declare or pay any dividends
        if an Event of Default has occurred and is continuing under this Agreement
        or
        the payment of a dividend would create an Event of Default. 

       

                      
        5.4          Capital
        Expenditures.  Neither Borrower nor UG will make or become committed to
        make, directly or indirectly, during any calendar year, capital expenditures
        which for Borrower and UG exceed amounts deemed acceptable to applicable
        regulatory authorities.

       

                      
        5.5          Sale of
        Assets.  Neither Borrower nor UG will sell, lease, transfer or dispose
        of all or any substantial part of its assets, including the assets of any
        of its
        subsidiaries other than in the normal course of business.

       

                      
        6.0          DEFAULT AND
        REMEDIES.

       

                      
        6.1          Events of
        Default.  Any one or more of the following events shall constitute a
        default (which, if not cured within the applicable cure period, if any, shall
        constitute an "Event of Default") under the terms of this Agreement:

       

                      
        (a)          Default in the payment
        when due of the principal of or interest on the Notes.

       

                      
        (b)          Default in the
        performance of any provisions or breach of any covenant of this Agreement
        or any
        other Loan Document.

       

                      
        (c)          If any representation
        or warranty or any other statement of fact contained herein, in any other
        Loan
        Document, or in any writing, certificate, or report or statement at any time
        furnished to Lender pursuant to or in connection with this  Agreement shall
        prove to be false or misleading in any material respect.

       

      (d)          
        If  Borrower should default under any loan, extension of credit, security
        agreement, purchase or sales agreement, or any agreement,

      or
        any other agreement, in favor of any other creditor or persons that may
        materially affect any of Borrower’s property or Borrower’s ability to repay the
        indebtedness or perform their respective obligations under this Agreement
        or any
        of the Related Documents.

       

                      
        (e)          This Agreement or any
        of the Related Documents ceases to be in full force and effect (including
        failure of any collateral document to create a valid and perfected security
        interest or lien) at any time and for any reason.     

       

                      
        (f)           If Borrower or
        UG file a petition in bankruptcy or seeks reorganization or arrangements
        under
        the Bankruptcy Code (as it now exists or as amended); is unable or admits
        in
        writing its inability to pay its debts as they become due or is not generally
        paying its debts as they come due; makes an assignment for the benefit of
        creditors; has a receiver, custodian or trustee appointed voluntarily or
        involuntarily, for its property; or is adjudicated bankrupt; or if an
        involuntary petition is filed in bankruptcy, for reorganization or arrangements,
        or for the appointment of a receiver, custodian or trustee of Borrower or
        UG on
        their respective properties and if Borrower or UG either acquiesce therein
        or
        fails to have such petition dismissed within sixty (60) days of the filing
        thereof.

       

       

                      
        (g)          If there shall at any
        time occur without the prior written approval of Lender a change in control
        of
        Borrower.

       

       

                      
        6.2          Remedies. 
If an Event of Default shall occur, at any time thereafter so long
        as such Event
        of Default continues uncured, Lender may, at its option without demand or
        notice
        (except as otherwise provided herein), the same being expressly waived, declare
        the Loan, with interest thereon, to be immediately due and payable, and may
        proceed to exercise all rights and remedies available under the Loan Documents,
        at law or in equity, concurrently or sequentially, in such order as Lender
        may
        elect, all such rights and remedies being cumulative. If any default, other
        than
        a default on indebtedness, is curable and if Borrower has not been given
        a
        notice of a similar default within the preceding 12 months, it may be cured
        within 30 days or if the cure requires more than 30 days, Borrower shall
        initiate steps to cure said default. 

       

                      
        7.0         
MISCELLANEOUS.

       

                      
        7.1         
Amendments.  The provisions of this Loan Agreement and the other
        Loan Documents may be amended or modified only by an instrument in writing
        signed by the parties thereto.

       

                      
        7.2          Notices. 
All notices and other communications provided for hereunder shall
        be in writing
        and shall be mailed, certified mail, return receipt requested or delivered,
        if
        to the Borrower, at 5250 South Sixth Street, Springfield, IL, 62703, and
        if to
        the Lender, to it at 845 Crossover Lane,

      Suite
        150, Memphis, Tennessee, 38117, Attention: Correspondent Services; or as
        to any
        such person at such other address as shall be designated by such person in
        a
        written notice to the other parties hereto complying as to delivery with
        the
        terms of this Section 7.2.  All such notices and other communications shall
        be effective (i) if mailed, when received or three business days after mailing,
        whichever is earlier; or (ii) if delivered, upon delivery.

       

                      
        7.3          No Waiver,
        Cumulative Remedies.  No failure to exercise and no delay in
        exercising, on the part of the Lender, any right, power or privilege hereunder,
        shall operate as a waiver thereof, nor shall any single or partial exercise
        of
        any right, power or privilege hereunder preclude any other or further exercise
        thereof or the exercise of any other right, power or privilege.  Waiver of
        any right, power, or privilege hereunder or under any instrument or document
        now
        or hereafter evidencing or securing the Loan is a waiver only as to the
        specified item.  The rights and remedies herein provided are cumulative and
        not exclusive of any rights or remedies provided by law.

       

                      
        7.4          Binding
        Effect.  This Loan Agreement shall be binding upon, and inure to the
        benefit of the parties hereto and their respective heirs, successors, and
        assigns, except that Borrower shall not have the right to assign its rights
        hereunder or any interest therein without the prior written consent of
        Lender.

       

                      
        7.5          Governing
        Law.  This Loan Agreement shall be governed and construed in accordance
        with the laws of the State of Tennessee; except that the provisions hereof
        which
        relate to the payment of interest shall be governed by (i) the laws of the
        United States or, (ii) the laws of the State of Tennessee, whichever permits
        the
        Lender to charge the higher rate, as more particularly set out in the
        Notes.

       

                      
        7.6          Venue of
        Actions.  As an integral part of the consideration for the making of
        the Loan hereunder, it is expressly understood and agreed that no suit or
        action
        shall be commenced by the Borrower, or by any successor, personal representative
        or assignee of it, with respect to the Loan contemplated hereby, or with
        respect
        to any of the Loan Documents, other than in a state court of competent
        jurisdiction in and for the County of the State in which the principal place
        of
        business of the Lender is situated, or in the United States District Court
        for
        the District in which the principal place of business of the Lender is situated,
        and not elsewhere.  Nothing in this paragraph contained shall prohibit
        Lender from instituting suit in any court of competent jurisdiction for the
        enforcement of its rights hereunder or under any other Loan Document, but
        the
        parties stipulate and agree that the courts specified in the preceding sentence
        of this section shall be an appropriate forum for any such suit.

       

                      
        7.7          Terminology;
        Section Headings.  All personal pronouns used in this Loan Agreement
        whether used in the masculine, feminine, or neuter gender, shall include
        all
        other genders; and the singular of any such pronoun or of any term defined
        herein shall include the plural, and vice versa.  Section headings are for
        convenience only and neither limit nor amplify the provisions of this Loan
        Agreement.

       

                      
        7.8          Enforceability of
        Agreement.  Should any one or more of the provisions of this Loan
        Agreement be determined to be illegal or unenforceable, all other provisions
        nevertheless, shall remain effective and binding on the parties hereto.  In
        the event that the provisions of the Note or this Loan Agreement governing
        the
        determination of the rate of interest on the Loan should be construed by
        a court
        of competent jurisdiction not to constitute a valid, enforceable designation
        of
        a rate of interest or method of determining the same, the Loan indebtedness
        shall bear interest at the maximum effective variable contract rate which
        may be
        charged by Lender under applicable law from time to time in effect.

       

                      
        7.9          Interest
        Limitations.  It is the intention of the parties hereto to comply
        strictly with all applicable usury laws; and, accordingly, in no event and
        upon
        no contingency shall Lender ever be entitled to receive, collect, or apply
        as
        interest any interest, fees, charges or other payments equivalent to interest,
        in excess of the maximum rate for which Borrower may lawfully contract under
        applicable law, from time to time in effect.  Any provision hereof, or of
        any other agreement executed by Borrower that would otherwise operate to
        bind,
        obligate or compel Borrower to pay interest in excess of such maximum lawful
        rate shall be construed to require the payment of the maximum rate only. 
The provisions of this paragraph shall be given precedence over any other
        provisions contained herein or in any other agreement applicable to the Loan,
        that is in conflict with the provisions of this paragraph.

       

                      
        7.10        Non-Control.  In no
        event shall Lender's rights hereunder be deemed to indicate that Lender is
        in
        control of the business, management or properties of Borrower or UG or has
        power
        over the daily management functions and operating decisions made by Borrower
        or
        UG.

       

                      
        7.11        Fees and Expenses. 
Borrower agrees to pay Lender a fee of Ten Thousand Dollars ($10,000.00)
        for
        actual out-of-pocket expenses, including due diligence expenses and legal
        fees
        incurred by Lender in connection with the development, preparation, execution,
        recording of loan and loan documents.  Any expenses related to future
        amendment, administration or enforcement of, or the preservation of any rights
        under this Loan Agreement and the other Loan Documents, or the collection
        of the
        Loan therefore will also be at the expense of the Borrower.  

       

                      
        7.12        Indemnification. 
Borrower hereby agrees to indemnify Lender against, and hold Lender
        harmless
        from, any and all claims, suits and damages asserted against Lender by any
        person or entity [including, but not limited to, shareholders and former
        shareholders of UTG, Inc.] arising out of or asserted with respect to the
        transactions contemplated by this Loan Agreement and shall pay all attorneys'
        fees and costs in connection with the defense of any such claim.

       

                      
        7.13        Waiver of Right to Trial by
        Jury.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
        TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING
        UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
        OR
        DELIVERED IN CONNECTION HEREWITH  OR (B) IN ANY WAY CONNECTED WITH OR
        RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
        WITH
        RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
        EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
        HERETO
        OR THERETO, IN EACH WHETHER NOW EXISTING OR HEREAFTER ARISING: AND EACH PARTY
        HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
        ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY
        TO
        THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
        WITH
        ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
        WAIVER
        OF THEIR RIGHT TO TRIAL BY JURY.

       

                 
7.14                 
Confidentiality. (a) Lender agrees to maintain the confidentiality of the
        Information (as defined below), except that Information may be disclosed
        (i) to
        its and its affiliates' directors, officers, employees and agents, including
        accountants, legal counsel and other advisors (it being understood that the
        persons to whom such disclosure is made will be informed of the confidential
        nature of such Information and instructed to keep such Information
        confidential), (ii) to the extent requested by any regulatory authority,
        (iii)
        to the extent required by applicable laws or regulations or by any subpoena
        or
        similar legal process, (iv) in connection with the exercise of any remedies
        hereunder or any suit, action or proceeding relating to this Agreement or
        the
        enforcement of rights hereunder, (v) subject to an agreement containing
        provisions substantially the same as those of this Section, to [1] any assignee
        of or participant in, or any prospective assignee of or participant in, any
        of
        Lender’s rights or obligations under this Agreement or [2] any actual or
        prospective counterparty (or its advisors) to any swap or derivative transaction
        relating to the Borrower and its obligations, (vi) with the consent of the
        Borrower or (vii) to the extent such Information [1] becomes publicly available
        other than as a result of a breach of this Section or [2] becomes available
        to
        Lender on a nonconfidential basis from a source other than the Borrower.
        For the
        purposes of this Section, "Information" means all information received
        from the Borrower relating to the Borrower or its business, other than any
        such
        information that is available to Lender on a nonconfidential basis prior
        to
        disclosure by the Borrower; provided that, in the case of information
        received from the Borrower after the date hereof, such information is clearly
        identified at the time of delivery as confidential. Lender shall be considered
        to have complied with its obligation to maintain the confidentiality of
        Information hereunder if Lender has exercised the same degree of care to
        maintain the confidentiality of such Information as Lender would accord to
        its
        own confidential information.

       

      (b)
      
Lender
        acknowledges that
        Information as defined in this section furnished to it pursuant to this
        Agreement may include material non-public information concerning the Borrower
        and its related parties or their respective securities, and confirms that
        it has
        developed compliance procedures regarding the use of material non-public
        information and that it will handle such material non-public information
        in
        accordance with those procedures and applicable law, including federal and
        state
        securities laws. 

       

       

      IN
        WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be duly
        executed by their respective officers thereunto duly authorized as of the
        day
        and year first above written.

       

       

       

       

       

      UTG,
        INC. (“Borrower”)

       

       

      By:_/s/
        Theodore C. Miller___________

       

      Title:_Sr.
        Vice President     __________

       

       

      FIRST
        TENNESSEE BANK NATIONAL ASSOCIATION (“Lender”)

       

       

      By:_/s/
        G. Porter Robinson__________

       

      Title:_Sr.
        Vice President____________Commercial Pledge Agreement

 

    
       

      COMMERCIAL
        PLEDGE AGREEMENT

       

      Principal Amount:  A) $18,000,000.00

                             
        B) $  5,000,000.00

       

      Grantor:    UTG, Inc.

                       
5250 South Sixth St.

                       
Springfield, IL 62703

                     

      Lender:    First Tennessee Bank
        National Association

                     
Financial Institutions

                     
845 Crossover Lane, Ste. 150

                     
Memphis, TN 38117

       

      THIS COMMERCIAL PLEDGE AGREEMENT dated
        December 8, 2006, is made and executed between UTG, Inc. (“Grantor”) and First
        Tennessee Bank National Association (“Lender”) in connection with Lender’s
        extension of credit to Grantor in the original principal amount of A)
        $18,000,000.00 and B) $5,000,000.00 evidenced by the Notes and further evidenced
        by Loan Agreement between Lender and Grantor (“Loan Agreement”) of even date
        herewith.  Unless otherwise defined in this Agreement, capitalized terms
        used herein shall have the meanings ascribed to them in the Loan
        Agreement.

      GRANT OF SECURITY INTEREST. For valuable
        consideration, Grantor grants to Lender a security interest in the Collateral
        to
        secure the Indebtedness and agrees that Lender shall have the rights stated
        in
        this Agreement with respect to the Collateral, in addition to all other rights
        which Lender may have by law.

      COLLATERAL DESCRIPTION. The word “Collateral”
as used in the Agreement means Grantor’s present and future rights, title
        and interests in and to (together with any and all present and future additions
        thereto, substitutions therefore, and replacements thereof, together with
        any
        and all present and future certificates and/or instruments evidencing) the
        Stock
        described below, together with all Income and Proceeds as described
        herein:

       

      One hundred percent (100%) of the issued and
        outstanding common shares (400,000) of Universal Guaranty Life Insurance
        Company  (the “Company”), being evidenced by Stock Certificate No.
        111.

       

      CROSS-COLLATERALIZATION.  In addition to
        the Notes, this Agreement secures all obligations, debts and liabilities,
        plus
        interest thereon, of Grantor to Lender, or any one or more of them, as well
        as
        all claims by Lender against Grantor  or any one or more of them, whether
        now existing or hereafter arising, whether related or unrelated to the purpose
        of the Notes, whether voluntary or otherwise, whether due or not due, direct
        or
        indirect, determined or undetermined, absolute or contingent, liquidated
        or
        unliquidated whether Borrower may be liable individually or jointly with
        others,
        whether obligated as guarantor, surety, accommodation party or otherwise,
        and
        whether recovery upon such amounts may be or hereafter may become barred
        by any
        statue or limitations, and whether the obligation to repay such amounts may
        be
        or hereafter may become otherwise unenforceable.

       

       RIGHT OF SETOFF. To the extent permitted
        by applicable law, Lender reserves a right of setoff in all Grantor’s accounts
        with Lender (whether checking, savings, or some other account). This includes
        all accounts Grantor may open in the future. However, this does not include
        any
        IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Grantor authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the Indebtedness against
        any and all such accounts, and, at Lender’s option, to administratively freeze
        all such accounts to allow Lender to protect Lender’s charge and setoff rights
        provided in this paragraph.

       

      REPRESENTATIONS AND WARRANTIES WITH RESPECT
        TO
        THE COLLATERAL. Grantor represents and warrants to Lender that:

      Ownership. Grantor is the lawful owner of
        the
        Collateral free and clear of all security interests, liens, encumbrances
        and
        claims of others except as disclosed to and accepted by Lender in
        writing prior to execution of this Agreement.

      Right to Pledge. Grantor has the full right,
        power and authority to enter into this Agreement and to pledge the
        Collateral.

      Authority; Binding Effect. Grantor has the
        full
        right, power and authority to enter into this Agreement and to grant a security
        interest in the Collateral to Lender. This Agreement is binding upon Grantor
        as
        well as Grantor’s successors and assigns, and is legally enforceable in
        accordance with its terms. The foregoing representations and warranties,
        and all
        other representations and warranties contained in this Agreement are and
        shall
        be continuing in nature and shall remain in full force and effect until such
        time as this Agreement is terminated or cancelled as provided herein.

      Valid Issuance of Stock. The Stock has been
        duly
        and validly issued and is fully paid and nonassessable.

      Ownership of Stock. Unless otherwise previously
        disclosed to Lender in writing, the shares of Stock subject to this Agreement
        constitute shares owned by Grantor of the issued and outstanding shares of
        the
        capital stock of the Company.

      Free Transferability of Stock. Unless otherwise
        previously disclosed to Lender in writing, and subject to compliance with
        applicable securities and insurance laws, all of the shares of Stock are
        freely
        transferable and subject to sale without being subject to limitations,
        restriction, stock legends, or prohibitive covenants under any agreements,
        or
        otherwise under which Grantor or the issuer of any such Stock may be bound
        or
        obligated.

      Stock Dividend; Stock Split. In order to prevent
        Lender’s collateral position from becoming diluted by any stock dividends or
        stock splits, Grantor agrees to notify Lender immediately when knowledge
        of any
        such transaction or transactions becomes known, and to deliver all of the
        stock
        certificates to Lender for pledging within five (5) days of receipt of the
        stock
        dividend and/or stock split together with appropriately executed stock
        powers.

      No Further Assignment. Grantor has not, and
        shall not, sell, assign, transfer, encumber or otherwise dispose of any of
        Grantor’s rights in the Collateral except as provided in this Agreement.

      No Defaults. There are no defaults existing
        under the Collateral, and there are no offsets or counterclaims to the same.
        Grantor will strictly and promptly perform each of the terms, conditions,
        covenants and agreements, if any, contained in the Collateral which are to
        be
        performed by Grantor.

      No Violation. The execution and delivery of
        this
        Agreement will not violate any law or agreement governing Grantor or to which
        Grantor is a party, and its certificate or articles of incorporation and
        bylaws
        do not prohibit any term or condition of this Agreement.

      Financing Statements. Grantor authorizes Lender
        to file a UCC financing statement, or alternatively, a copy of this Agreement
        to
        perfect Lender’s security interest. At Lender’s request, Grantor additionally
        agrees to sign all other documents that are necessary to perfect, protect,
        and
        continue Lender’s security interest in the Property. Grantor will pay all filing
        fees, title transfer fees, and other fees and costs involved unless prohibited
        by law or unless Lender is required by law to pay such fees and costs. Grantor
        irrevocably appoints Lender to execute documents necessary to transfer title
        if
        there is a default. Lender may file a copy of this Agreement as a financing
        statement. If Grantor changes Grantor’s name or address, or the name or address
        of any person granting a security interest under this Agreement changes,
        Grantor
        will promptly notify the Lender of such change.

      LENDER’S RIGHTS AND OBLIGATIONS WITH RESPECT TO
        THE COLLATERAL. Lender may hold the Collateral until all Indebtedness has
        been
        paid and satisfied. Thereafter Lender may deliver the Collateral to Grantor
        or
        to any other owner of the Collateral. Lender shall have the following rights
        in
        addition to all other rights Lender may have by law:

      Maintenance and Protection of Collateral.
        Lender
        may, but shall not be obligated to, take such steps as it deems necessary
        or
        desirable to protect, maintain, insure, store, or care for the Collateral,
        including paying of any liens or claims against the Collateral. This may
        include
        such things as hiring other people, such as attorneys, appraisers or other
        experts. Lender may charge Grantor for any cost incurred in so doing.

      Income and Proceeds from the Collateral. From
        and after the occurrence of an Event of Default, Lender may receive all Income
        and Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender
        immediately upon receipt, in the exact form received and without commingling
        with other property, all Income and Proceeds from the Collateral which may
        be
        received by, paid, or delivered to Grantor or for Grantor’s account, whether as
        an addition to, in discharge of, in substitution of, or in exchange for any
        of
        the Collateral.

      Application of Cash. At Lender’s option, Lender
        may apply any cash, whether included in the Collateral or received as Income
        and
        Proceeds or through liquidation, sale, or retirement, of the Collateral,
        to the
        satisfaction of the Indebtedness or such portion thereof as Lender shall
        choose,
        whether or not matured.

      Transactions with Others. Lender may (1) extend
        time for payment or other performance, (2) grant a renewal or change in terms
        or
        conditions, or (3) compromise, compound or release any obligation, with any
        one
        or more Obligors, endorsers, or Guarantors of the Indebtedness as Lender
        deems
        advisable, without obtaining the prior written consent of Grantor, and no
        such
        act or failure to act shall affect Lender’s rights against Grantor or the
        Collateral.

      All Collateral Secures Indebtedness. All
        Collateral shall be security for the Indebtedness, whether the Collateral
        is
        located at one or more offices or branches of Lender. 

      Collection of Collateral. From and after the
        occurrence of an Event of Default, Grantor authorizes and directs the Obligors,
        if Lender decides to collect the income and Proceeds, to pay and deliver
        to
        Lender all income and Proceeds from the Collateral and to accept Lender’s
        receipt for the payments.

      Power of Attorney. Grantor irrevocably appoints
        Lender as Grantor’s attorney-in-fact, with full power of substitution, (a) to
        demand, collect, receive, receipt for, sue and recover all Income and Proceeds
        and other sums of money and other property which may now or hereafter become
        due, owing or payable from the Obligors in accordance with the terms of the
        Collateral; (b) to execute, sign and endorse any and all instruments, receipts,
        checks, drafts and warrants issued in payment for the Collateral; (c) to
        settle
        or compromise any and all claims arising under the Collateral, and in the
        place
        and stead of Grantor, execute and deliver Grantor’s release and acquittance for
        Grantor; (d) to file any claim or claims or to take any action or institute
        or
        take part in any proceedings, either in Lender’s own name or in the name of
        Grantor, or otherwise, which in the discretion of Lender may seem to be
        necessary or advisable; and (e) to execute in Grantor’s name and to deliver to
        the Obligors on Grantor’s behalf, at the time and in the manner specified by the
        Collateral, any necessary instruments or documents.

      Perfection of Security Interest. Upon Lender’s
        request, Grantor will deliver to Lender any and all of the documents evidencing
        or constituting the Collateral. When applicable law provides more than one
        method of perfection of Lender’s security interest, Lender may choose the
        method(s) to be used. Upon Lender’s request, Grantor will sign and deliver any
        writings necessary to perfect Lender’s security interest. If any of the
        Collateral consists of securities for which no certificate has been issued,
        Grantor agrees, at Lender’s option, either to request issuance of an appropriate
        certificate or to execute appropriate instructions on Lender’s forms instructing
        the issuer, transfer agent, mutual fund company, or broker, as the case may
        be,
        to record on its books or records, by book-entry or otherwise, Lender’s security
        interest in the Collateral. Grantor hereby appoints Lender as Grantor’s
        irrevocable attorney-in-fact for the purpose of executing any documents
        necessary to perfect, amend, or to continue the security interest granted
        in
        this Agreement or to demand termination of filings of other secured
        parties.

      Distributions; Voting Rights.  Unless an
        Event of Default shall then exist, Grantor shall be permitted to receive
        distributions paid and to exercise all voting rights with respect to the
        Collateral, provided that no vote shall be cast which, in Lender’s reasonable
        judgment, would impair the Collateral or which would be inconsistent with
        or
        result in any violation of any provision of this Agreement or any of the
        Related
        Documents.

      LENDER’S EXPENDITURES. If any action or
        proceeding is commenced that would materially affect Lender’s interest in the
        Collateral or if Grantor fails to comply with any provision of this Agreement
        or
        any Related Documents, including but not limited to Grantor’s failure to
        discharge or pay when due any amounts Grantor is required to discharge or
        pay
        under this Agreement or any Related Documents, Lender on Grantor’s behalf may
        (but shall not be obligated to) take any action that Lender deems appropriate,
        including but not limited to discharging or paying all taxes, liens, security
        interests, encumbrances and other claims, at any time levied or placed on
        the
        Collateral and paying all costs for insuring, maintaining and preserving
        the
        Collateral. All such expenditures incurred or paid by Lender for such purposes
        will then bear interest at the rate charged under the Notes from the date
        incurred or paid by Lender to the date of repayment by Grantor. All such
        expenses will become a part of the Indebtedness and, at Lender’s option, will
        (A) be payable on demand; (B) be added to the balance of the Notes and be
        apportioned among and be payable with any installment payments to become
        due
        during either (1) the term of any applicable insurance policy; or (2) the
        remaining term of the Notes; or (C) be treated as a balloon payment which
        will
        be due and payable at the Note’s maturity. The Agreement also will secure
        payment of these amounts. Such right shall be in addition to all other rights
        and remedies to which Lender may be entitled upon Default.

      LIMITATIONS ON OBLIGATIONS OF LENDER. Lender
        shall use ordinary reasonable care in the physical preservation and custody
        of
        the Collateral in Lender’s possession, but shall have no other obligation to
        protect the Collateral or its value. In particular, but without limitation,
        Lender shall have no responsibility for (A) any depreciation in value of
        the
        Collateral or for the collection or protection of any Income and Proceeds
        from
        the Collateral, (B) preservation of rights against parties to the Collateral
        or
        against third persons, (C) ascertaining any maturities, calls, conversions,
        exchanges, offers, tenders, or similar matters relating to any of the
        Collateral, or (D) informing Grantor about any of the above, whether or not
        Lender has or is deemed to have knowledge of such matters. Except as provided
        above, Lender shall have no liability for depreciation or deterioration of
        the
        Collateral.

       

      Cure Provisions. If an Event of Default, other
        than a default  in payment or failure to satisfy Lender’s requirement in
        the Insufficient Market Value of Securities section is curable and if Grantor
        has not been given a notice of a breach of the same provision of this Agreement
        within the preceding twelve (12) months,  it may be cured if Grantor, after
        receiving written notice from Lender demanding cure of such default: (1)
        cures
        the default within 30 days; or (2) if the cure requires more than 30 days,
        immediately initiates steps which Lender deems in Lender’s sole discretion to be
        sufficient to cure the default and thereafter continues and completes all
        reasonable and necessary steps sufficient to produce compliance as soon as
        reasonably practical.

      RIGHTS AND REMEDIES ON DEFAULT. If an Event
        of
        Default occurs under this Agreement, at any time thereafter so long as the
        Event
        of Default continues uncured, Lender may exercise any one or more of the
        following rights and remedies:

      Accelerate Indebtedness. Declare all
        Indebtedness, including any prepayment penalty which Grantor would be required
        to pay, immediately due and payable, without notice of any kind to
        Grantor.

      Collect the Collateral. Collect any of the
        Collateral and, at Lender’s option and to the extent permitted by applicable
        law, retain possession of the Collateral while suing on the Indebtedness.

      Sell the Collateral. Sell the Collateral,
        at
        Lender’s discretion, as a unit or in parcels, at one or more public or private
        sales. Unless the Collateral is perishable or threatens to decline speedily
        in
        value or is of a type customarily sold on a recognized market, Lender shall
        give
        or mail to Grantor, and other persons as required by law, notice at least
        thirty
        (30) days in advance of the time and place of any public sale, or of the
        time
        after which any private sale may be made. However, no notice need be provided
        to
        any person who, after an Event of Default occurs, enters into and authenticates
        an agreement waiving that person’s right to notification of sale. Grantor agrees
        that any requirement of reasonable notice as to Grantor is satisfied if Lender
        mails notice by ordinary mail addressed to Grantor at the last address Grantor
        has given Lender in writing. If a public sale is held, there shall be sufficient
        compliance with all requirements of notice to the public by a single publication
        in any newspaper of general circulation in the county where the Collateral
        is
        located, setting forth the time and place of sale and a brief description
        of the
        property to be sold. Lender may be a purchaser at any public sale.

      Sell Securities. Sell any securities included
        in
        the Collateral in a manner consistent with applicable federal and state
        securities and insurance laws. If, because of restrictions under such laws,
        Lender is unable, or believes Lender is unable, to sell the securities in
        an
        open market transaction, Grantor agrees that Lender will have no obligation
        to
        delay sale until the securities can be registered. Then Lender may make a
        private sale to one or more persons or to a restricted group of persons in
        compliance with such laws, even though such sale may result in a price that
        is
        less favorable than might be obtained in an open market transaction. Such
        a sale
        will be considered commercially reasonable. If any securities held as Collateral
        are “restricted securities” as defined in the Rules of the Securities and
        Exchange Commission (such as Regulation D or Rule 144) or the rules of state
        securities departments under state “Blue Sky” laws, or if Grantor or any other
        owner of the Collateral is an affiliate of the issuer of the securities,
        Grantor
        agrees that neither Grantor, nor any member of Grantor’s family, nor any other
        person signing this Agreement will sell or dispose of any securities of such
        issuer without obtaining Lender’s prior written consent.

      Foreclosure. Maintain a judicial suit for
        foreclosure and sale of the Collateral.

      Specific Performance. Lender may, in addition
        to
        or in lieu of the foregoing remedies, in Lender’s sole discretion, commence an
        appropriate action against Grantor seeking specific performance of any covenant
        contained in this Agreement or in aid of the execution or enforcement of
        any
        power in this Agreement granted.

      Transfer Title. Effect transfer of title upon
        sale of all or part of the Collateral. For this purpose, Grantor irrevocably
        appoints Lender as Grantor’s attorney-in-fact to execute endorsements,
        assignments and instruments in the name of Grantor and each of them (if more
        than one) as shall be necessary or reasonable.

      Other Rights and Remedies. Have and exercise
        any
        or all of the rights and remedies of a secured creditor under the provisions
        of
        the Uniform Commercial Code, at law, in equity, or otherwise.

      Application of Proceeds. Apply any cash which
        is
        part of the Collateral, or which is received from the collection or sale
        of the
        Collateral, to reimbursement of any expenses, including any costs for
        registration of securities, commissions incurred in connection with a sale,
        attorneys’ fees and court costs, whether or not there is a lawsuit and including
        any fees on appeal, incurred by Lender in connection with the collection
        and
        sale of such Collateral and to the payment of the Indebtedness of Grantor
        to
        Lender, with any excess funds to be paid to Grantor as the interests of Grantor
        may appear. Grantor agrees, to the extent permitted by law, to pay any
        deficiency after application of the proceeds of the Collateral to the
        Indebtedness.

      Election of Remedies. Except as may be
        prohibited by applicable law, all of Lender’s rights and remedies, whether
        evidenced by this Agreement, the Related Documents, or by any other writing,
        shall be cumulative and may be exercised singularly or concurrently. Election
        by
        Lender to pursue any remedy shall not exclude pursuit of any other remedy,
        and
        an election to make expenditures or to take action to perform an obligation
        of
        Grantor under this Agreement, after Grantor’s failure to perform, shall not
        affect Lender’s right to declare a default and exercise its remedies.

      EXCLUSION FROM INDEBTEDNESS. Excluded from
        indebtedness shall be any indebtedness governed by the Federal Truth in Lending
        Act.

      MISCELLANEOUS PROVISIONS.  The following
        miscellaneous provisions are a part of this Agreement:

      Amendments. This Agreement, together with
        any
        Related Documents, constitutes the entire understanding and agreement of
        the
        parties as to the matters set forth in this Agreement. No alteration of or
        amendment to this Agreement shall be effective unless given in writing and
        signed by the party or parties sought to be charged or bound by the alteration
        or amendment.

      Attorneys’ Fees; Expenses. Grantor agrees to pay
        upon demand all of Lender’s costs and expenses, including Lender’s attorneys’
fees and Lender’s legal expenses, incurred in connection with the enforcement of
        this Agreement. Lender may hire or pay someone else to help enforce this
        Agreement, and Grantor shall pay the costs and expenses of such enforcement.
        Costs and expenses include Lender’s attorneys’ fees and legal expenses whether
        or not there is a lawsuit, including attorneys’ fees and legal expenses for
        bankruptcy proceedings )including efforts to modify or vacate any automatic
        stay
        or injunction), appeals, and any anticipated post-judgment collection services.
        Grantor also shall pay all court costs and such additional fees as may be
        directed by the court.

      Caption Headings. Caption headings in this
        Agreement are for convenience purposes only and are not to be used to interpret
        or define the provisions of this Agreement.

      No Waiver by Lender. Lender shall not be deemed
        to have waived any rights under this Agreement unless such waiver is given
        in
        writing and signed by Lender. No delay or omission on the part of Lender
        in
        exercising any right shall operate as a waiver of such right or any other
        right.
        A waiver by Lender of a provision of this Agreement shall not prejudice or
        constitute a waiver of Lender’s right otherwise to demand strict compliance with
        that provision or any other provision of this Agreement. No prior waiver
        by
        Lender, nor any course of dealing between Lender and Grantor, shall constitute
        a
        waiver of any of Lender’s rights or of any of Grantor’s obligations as to any
        future transactions. Whenever the consent of Lender is required under this
        Agreement, the granting of such consent by Lender in any instance shall not
        constitute continuing consent to subsequent instances where such consent
        is
        required and in all cases such consent may be granted or withheld in the
        sole
        discretion of Lender.

      Non-Liability of Lender. The relationship
        between Grantor and Lender created by this Agreement is strictly a debtor
        and
        creditor relationship and not fiduciary in nature, nor is the relationship
        to be
        construed as creating any partnership or joint venture between Lender and
        Grantor. Grantor is exercising Grantor’s own judgement with respect to Grantor’s
        business. All information supplied to Lender is for Lender’s protection only and
        no other party is entitled to rely on such information. There is no duty
        for
        Lender to review, inspect, supervise or inform Grantor of any matter with
        respect to Grantor’s business. Lender and Grantor intend that Lender may
        reasonably rely on all information supplied by Grantor to Lender, together
        with
        all representations and warranties given by Grantor to Lender, without
        investigation or confirmation by Lender and that any investigation or failure
        to
        investigate will not diminish Lender’s right to so rely.

      Notices. Any notice required to be given under
        this Agreement shall be given in writing, and shall be effective when actually
        delivered, when actually received by telefacsimile (unless otherwise required
        by
        law), when deposited with a nationally recognized overnight courier, or,
        if
        mailed, when deposited in the United States mail, as first class, certified
        or
        registered mail postage prepaid, directed to the addresses shown near the
        beginning of this Agreement. Any party may change its address for notices
        under
        this Agreement by giving formal written notice to the other parties, specifying
        that the purpose of the notice is to change the party’s address. For notice
        purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
        current address. Unless otherwise provided or required by law, if there is
        more
        than one Grantor, any notice given by Lender to any Grantor is deemed to
        be
        notice given to all Grantors.

      Severability. If a court of competent
        jurisdiction finds any provision of this Agreement to be illegal, invalid,
        or
        unenforceable as to any circumstance, that finding shall not make the offending
        provision illegal, invalid, or unenforceable as to any other circumstance.
        If
        feasible, the offending provision shall be considered modified so that it
        becomes legal, valid and enforceable. If the offending provision cannot be
        so
        modified, it shall be considered deleted from this Agreement. Unless otherwise
        required by law, the illegality, invalidity, or unenforceability of any
        provision of this Agreement shall not affect the legality, validity or
        enforceability of any other provision of this Agreement.

      Sole Discretion of Lender. Whenever Lender’s
        consent or approval is required under this Agreement. the decision as to
        whether
        or not to consent or approve shall be in the sole and exclusive discretion
        of
        Lender and Lender’s decision shall be final and conclusive.

      Successors and Assigns. Subject to any
        limitations stated in this Agreement on transfer of Grantor’s interest, this
        Agreement shall be binding upon and inure to the benefit of the parties,
        their
        successors and assigns. If ownership of the Collateral becomes vested in
        a
        person other than Grantor, Lender, without notice to Grantor, may deal with
        Grantor’s successors with reference to this Agreement and the Indebtedness by
        way of forbearance or extension without releasing Grantor from the obligations
        of this Agreement or liability under the Indebtedness.

      Time Is of the Essence. Time is of the essence
        in the performance of this Agreement.

      Waive Jury. All parties to this Agreement
        hereby
        waive the right to any jury trial in any action. proceeding. or counterclaim
        brought by any party against any other party.

      DEFINITIONS. The following capitalized words
        and
        terms shall have the following meanings when used in this Agreement. Unless
        specifically stated to the contrary, all references to dollar amounts shall
        mean
        amounts in lawful money of the United States of America. Words and terms
        used in
        the singular shall include the plural, and the plural shall include the
        singular, as the context may require. Words and terms not otherwise defined
        in
        this Agreement shall have the meanings attributed to such terms in the Uniform
        Commercial Code:

      Agreement. The word “Agreement” means this
        Commercial Pledge Agreement, as this Commercial Pledge Agreement may be amended
        or modified from time to time, together with all exhibits and schedules attached
        to this Commercial Pledge Agreement from time to time.

      Collateral. The word “Collateral” means all of
        Grantor’s right, title and interest in and to all the Collateral as described in
        the Collateral Description section of this Agreement.

      Default. The word “Default” means the Default
        set forth in this Agreement in the section titled “Default”.

      Event of Default. The words “Event of Default”
have the meaning set forth in the Loan Agreement..

      Grantor. The word “Grantor” means UTG,
        Inc.

      Guarantor. The word “Guarantor” means any
        guarantor, surety, or accommodation party of any or all of the Indebtedness,
        and, in each case, Grantor’s successors, assigns, heirs, personal
        representatives, executors and administrators of any guarantor, surety, or
        accommodation party.

      Guaranty. The word “Guaranty” means the guaranty
        from Guarantor, or any other guarantor, endorser, surety, or accommodation
        party
        to Lender, including without limitation a guaranty of all or part of the
        Note.

      Income and Proceeds. The words “Income and
        Proceeds” mean all present and future income, proceeds, earnings, increases, and
        substitutions from or for the Collateral of every kind and nature, including
        without limitation all payments, interest, profits, distributions, benefits,
        rights, options, warrants, dividends, stock dividends, stock splits, stock
        rights, regulatory dividends, subscriptions, monies, claims for money due
        and to
        become due, proceeds of any insurance on the Collateral, shares of stock
        of
        different par value or no par value issued in substitution or exchange for
        shares included in the Collateral, and all other property Grantor is entitled
        to
        receive on account of such Collateral, including accounts, documents,
        instruments, chattel paper, and general intangibles.

      Indebtedness. The word “Indebtedness” means the
        indebtedness evidenced by the Notes or Related Documents, including all
        principal and interest together with all other indebtedness and costs and
        expenses for which Grantor is responsible under this Agreement or under any
        of
        the Related Documents. 

      Lender. The word “Lender” means First Tennessee
        Bank National Association, its successors and assigns.

      Notes. The word “Notes” means the Notes executed
        by UTG, Inc. in the principal amount of A) $18,000,000.00 dated December
        8,
        2006, and B) $5,000,000.00 dated December 8, 2006, together with all renewals
        of, extensions of, modifications of, refinancings of, consolidations of,
        and
        substitutions for the note or credit agreement.

      Obligor. The word “Obligor” means individually,
        collectively and interchangeably without limitation any and all persons
        obligated to pay money or to perform some other act under the Collateral.

      Related Documents. The words “Related Documents”
mean all promissory notes, credit agreements,
        loan agreements, environmental
        agreements, guaranties, security agreements, mortgages, deeds of trust, security
        deeds, collateral mortgages, and all other instruments, agreements and
        documents, whether now or hereafter existing, executed in connection with
        the
        Indebtedness.

      Stock. The word “Stock” means individually,
        collectively and interchangeably Grantor’s stock, and other securities to pledge
        under this Agreement, together with any and all additions thereto, substitutions
        therefor or replacements thereof.

      GRANTOR HAS READ AND UNDERSTOOD ALL THE
        PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREES TO ITS TERMS.

       

      GRANTOR:

      UTG, INC.

       

      By:_/s/ Theodore C.
        Miller___________________________

       

      Title:_Sr. Vice
        President_____________________________

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