Document:

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                                                                                                                                                                                                                       SecretaryExhibit 10.12

AGREEMENT REGARDING MORTGAGE LOANS

 BY AND BETWEEN

FIRST SOUTHERN NATIONAL BANK,

a national bank

and

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY,

an Ohio corporation

DATED AS OF JUNE 1, 2013 (the "Effective Date")

 

INDEX

	
Item Description

 

	
Page

	
1

	
Parties ...............................................................................................................................................................................................................................

 

	
1

	
2

	
General Description of Loan Activities.....................................................................................................................................................................................

 

	
1

	
3

	
UG Mortgage Loan Guidelines .............................................................................................................................................................................................

 

	
1

	
4

	
Loan Limitations .................................................................................................................................................................................................................

 

	
1

	
5

	
Representations and Warranties by FSNB .............................................................................................................................................................................

 

	
1

	
6

	
Representations and Warranties by UG ..................................................................................................................................................................................

 

	
2

	
7

	
Loan Origination Fees ..........................................................................................................................................................................................................

 

	
2

	
8

	
Loan Servicing Fees ............................................................................................................................................................................................................

 

	
2

	
9

	
Discounted Loan Fees...........................................................................................................................................................................................................

 

	
2

	
10

	
FSNB as Agent for Collection and Servicing ............................................................................................................................................................................

 

	
3

	
11

	
Termination of Agency Status ...............................................................................................................................................................................................

 

	
3

	
12

	
Additional Obligations of FSNB .............................................................................................................................................................................................

 

	
3

	
13

	
Application of the Payments .................................................................................................................................................................................................

 

	
4

	
14

 

	
Additional Loans by FSNB ....................................................................................................................................................................................................

 

	
4

	
15

 

	
Default...............................................................................................................................................................................................................................

 

	
4

	
16

 

	
Access to Records................................................................................................................................................................................................................

 

	
5

	
17

 

	
Indemnification....................................................................................................................................................................................................................

	
5

	
18

 

	
Miscellaneous......................................................................................................................................................................................................................

	
6

 

  

	
1.

	
Parties.

First Southern National Bank ("FSNB") is a national bank with its principal executive office located at 99 Lancaster Street, Stanford, KY 40484.  Universal Guaranty Life Insurance Company ("UG") is an Ohio corporation with its principal executive office located at 5250 South Sixth Street, Springfield, IL 62703.  FSNB and UG are affiliated through common ownership and control by Mr. Jesse T. Correll.

2.            General Description of Loan Activities.

UG desires to maintain an program under which UG participates in loans originated or otherwise acquired by FSNB in the ordinary course of FSNB's banking business.  With respect to each such loan, this arrangement will be effected through the use of a participation agreement between UG and FSNB.  A copy of the standard loan participation agreement is attached to this Agreement as Exhibit A for loans originated by FSNB and as Exhibit B for loans acquired by FSNB from third parties.

	
3.

	
UG Mortgage Loan Guidelines.

Mortgage loans acquired by UG under this agreement shall comply with the objectives and guidelines as outlined in the Company's investment policy relating to owning mortgage loans.

	
4.

	
Loan Limitations.

Loans acquired by UG under this agreement shall be limited to and comply with the Ohio Insurance Code, Chapter 3907.14, Investment of capital, surplus and accumulations, and other restrictions or limitations as may be agreed upon between the Ohio Commissioner and UG from time to time.

5.            Representations and Warranties by FSNB.

Loans Originated by FSNB

  FSNB makes the following representations and warranties to UG for mortgage loans originated by FSNB: (i) FSNB has provided and will provide UG with copies of all material credit and other information currently in the possession of FSNB, that were used by FSNB as a basis of and for its decision to make such loan to the borrower; (ii) FSNB will provide UG with copies of such loan documents that were executed (and/or are to be executed) by the borrower as well as by other co-makers, guarantors and endorsers under such loan.

  FSNB makes no representation or warranties, whether expressed or implied, to UG, as to the collectability of the mortgage loan, the continued solvency of the borrower, or as to the existence, sufficiency or value of the collateral securing the mortgage loan.

  FSNB makes no representations or warranties, whether expressed or implied, to UG, as to the validity and enforceability of such loan documents, other than that: (i) such loan documents are validly executed by the borrower, as well as, to the degree applicable, by the co-makers, guarantors and/or endorsers under such loan; (ii) to the extent required under applicable law, the mortgages and other recordable security instruments relating to a mortgage loan were (and/or will be) properly recorded in order to result in the valid perfection of a security interest on the collateral subject to such agreements; and (iii) to the extent required under applicable law, FSNB has taken (and/or will continue to take) whatever additional actions may be necessary and proper to validly perfect and maintain a security interest on the collateral securing such loan.

  FSNB represents and warrants to UG that FSNB has and will follow the same procedures in its loan analysis and approval process for loans participated, transferred or otherwise conveyed to UG as is the common practice of FSNB for such loans made for its own portfolio.

Loans Acquired by FSNB and Subsequently Sold to UG:

  FSNB makes the following representations and warranties to UG for loans purchased by FSNB: FSNB has provided UG with copies of all relevant credit and other information currently in the possession of FSNB.  FSNB has additionally provided UG with copies of such loan documents in the possession of FSNB.

  FSNB makes no representation or warranties, whether expressed or implied, to UG, as to the collectability of such loan, the continued solvency of the borrower, or as to the existence, sufficiency or value of the collateral securing the mortgage loan.  FSNB assumes no further responsibility and shall not be liable for any delay or failure to make collections, any act of omission with respect to the note or the collateral, or any loss resulting from any of the foregoing.

  FSNB makes no representations or warranties, whether expressed or implied, to UG, as to the validity and enforceability of such loan documents.

  Mortgage loans purchased by FSNB at a discount to the current principal balance may already be in default and UG is taking such loan "As Is, Where Is".

	
6.

	
Representations and Warranties by UG.

UG represents and warrants to FSNB that UG based its decision to purchase or decline a participation ownership interest in a mortgage loan solely upon UG's own independent evaluation of such loan, the borrower's creditworthiness and the existence, value and lien status of collateral securing such loan.

	
7.

	
Loan Origination Fees.

UG will pay FSNB a one-time fee upon closing of a mortgage loan originated or acquired through FSNB of ONE-HALF OF ONE PERCENT 00.50% of the original loan amount (example: a new mortgage loan of $1,000,000 participated to UG, origination fee would be $5,000).  This fee is to cover costs incurred by FSNB relating to the origination of such loan. There may be certain circumstances where the fee will be lower or waived. These circumstances will be determined on a loan by loan basis and only upon agreement by both parties.

	
8.

	
Loan Servicing Fees.

FSNB will service all of the mortgage loans in which UG originates through FSNB or has a participation interest with FSNB.  The rights and responsibilities of FSNB with respect to a participation will be set out in the participation agreement UG and FSNB.  FSNB will collect payments due under such loan, maintain all loan documentation and provide all required notices, and enforce the rights of the lender in the event of default by the borrower.

In consideration of its services, FSNB will be entitled to a fee at the rate of ONE QUARTER OF ONE PERCENT (0.25%) per annum based upon the outstanding gross principal balance of such loan, and shall be payable monthly.  The fee is payable only on loans in performing status.

Charges or fees for services performed shall be reasonable and in conformity with accounting principles consistently applied.  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 reasonableness of the charges or fees to the respective parties.

	
9.

	
Discounted Loan Fees.

UG recognizes that discounted loans inherently require more administration than traditional performing loans.  Therefore, UG will pay FSNB a one-time fee upon the final disposition of a discounted mortgage loan equal to TEN PERCENT (10.00%) of the net profit realized by UG.  Net profit is defined as the proceeds received, less UG's basis, less any expenses incurred, including origination fee paid, servicing fees paid and other general expenses and taxes paid relative to the specific loan or property.  Following is an example of the calculation:

	
Loan settlement net proceeds received

	
900,000

	
UG basis in settled loan

	
(300,000)

	
Origination fee paid

	
(   4,500)

	
Service fees paid

	
(  3,500)

	
Legal fees paid

	
(  10,000)

	
Other expenses paid

	
(   5,000)

	
Net profit

	
577,000

	
 

	
10%

	
 

	
 

	
Disposition fee due FSNB

	
57,700

	
10.

	
FSNB as Agent for Collection and Servicing.

FSNB shall act as the disclosed agent of UG in connection with receipt and collection of UG's ownership interest in a mortgage loan and in payments to be made thereunder.  FSNB shall additionally act as the disclosed agent of UG in connection with the continued servicing of such loan.

FSNB shall exercise the same degree of care and discretion in continuing to service such loan and in collecting payments thereunder, as FSNB would ordinarily take in servicing such loan and in collecting payments thereunder solely for its own account.

FSNB may not, however, without the prior consent and concurrence of UG; (i) make or consent to any amendments in the terms and conditions of such loan, or the terms of the note or notes evidencing such loan, or in any mortgage, security agreement or other instrument securing such loan; (ii) waive or release any claim against any borrower and/or against any co-maker, guarantor or endorser under such loan; (iii) make or consent to any release, substitution or exchange of collateral; (iv) accelerate payment under such loan and/or under any note or notes evidencing such loan; (v) commence any type of collection proceeding against the borrower and/or against any co-maker, guarantor or endorser under such loan; and/or (vi) seize, sell, transfer, assign, foreclose or attempt to exercise against any collateral securing such loan.

	
11.

	
Termination of Agency Status.

FSNB's agency status as outlined above shall terminate at the election of UG upon: (i) the insolvency, closing or liquidation of FSNB; (ii) if, within the opinion of UG, FSNB should fail to comply with its obligations as provided under this Agreement; or (iii) if, FSNB and UG are unable to mutually agree as to a course of action to be taken with regard to collection of a mortgage loan following the borrower's default.

Upon termination of FSNB's agency status, UG shall have the right to immediately notify the borrower, directing the borrower to forward principal and interest payments under such loan directly to UG, in sufficient amounts to satisfy UG's then percentage ownership interest in such loan.  FSNB shall join in this notice to the borrower upon request by UG.

Unless otherwise provided herein, the remaining terms and conditions of this Agreement shall survive the termination of FSNB's agency status.  Such remaining terms and conditions of this Agreement shall continue to apply until such time as such loan is paid in full or otherwise settled.

12.            Additional Obligations of FSNB.

FSNB shall promptly notify UG should FSNB learn or have actual knowledge of the following: (i) any change in the financial condition of the borrower, or any co-maker, guarantor or endorser under a mortgage loan, which may have a material adverse effect upon continuation of the payments under such loan or such loan's ultimate collectability; (ii) any material change in the value of collateral securing such loan; (iii) any change in lien status as affecting the collateral; (iv) any request by the borrower, or by any co-maker, guarantor or endorser under such loan, for any change in the terms and conditions of such loan, or in the terms of any note or notes evidencing such loan, or in any mortgage, security agreement or other instrument securing such loan; (v) any request by the borrower, or by any co-maker, guarantor or surety under such loan, or the release, substitution or exchange of any collateral securing such loan; (vi) any request of the borrower, or by any co-maker, guarantor or endorser under such loan, for the release of any personal obligations of any such party under such loan; (vii) any request by FSNB for any change in the terms and conditions of such loan, or in the terms of any note or notes evidencing such loan, or in any mortgage, security agreement or other instrument securing such loan; (viii) any request by FSNB for an increase in and/or substitution or exchange of collateral securing such loan; (ix) any failure by the borrower to pay principal and/or interest payments under such loan when due; and/or (x) the occurrence of any other event, which with the passage of time and/or failure to cure, would constitute an event of default under such loan or under any note or notes evidencing such loan, or under any mortgage, security agreement or other instrument securing such loan.

As long as UG continues to have an ownership interest in such loan, FSNB agrees to regularly provide UG with complete and current credit related and other information concerning the borrower, such loan and the collateral securing such loan including without limitations, copies of: (i) current financial statements of the borrower, as well as of all co-makers, guarantors and sureties under such loan; (ii) any officer's certificates, financial and other statements and information submitted by the borrower to FSNB in connection with such loan; (iii) the records of FSNB reflecting the amounts and dates of receipt of principal and interest payments under such loan; (iv) any information and/or documents in possession of FSNB bearing upon the continuing creditworthiness of the borrower.

	13.	Application of the Payments.

FSNB and UG shall each share in all principal and interest payments and other collections under a mortgage loan in proportion to their respective percentage ownership interests in such loan (with appropriate provisions made for differences in interest rates between FSNB and UG).

	14.	Additional Loans by FSNB.

UG recognizes and agrees that FSNB may have other existing mortgage loans and in the future may make additional mortgage loans to the borrower and/or to other co-makers, guarantors, and sureties under such loan, which other and/or additional mortgage loans may not be participated to UG.

UG further recognizes and agrees that FSNB shall have no obligation to attempt to collect payments under such loan in preference and priority over the collection and/or enforcement of any other and/or additional loans by FSNB as referenced above.

FSNB, however, agrees that the proceeds of all collateral directly securing repayment of a mortgage loan shall be applied first to the payment of such loan as provided in "Application of the Payments" above.  Any excess proceeds may be applied by FSNB to the payment of any other and/or additional loans then owing to FSNB that may be indirectly secured by such collateral as a result of the inclusion of "cross-collateralization" provisions in the mortgage, security agreements or other instruments executed in connection with such loan in favor of FSNB.

The parties hereto further agree that UG shall have no interest in any other property of the borrower or any co-maker, guarantor or endorser, taken as security for any other and/or additional loan or loans made by FSNB, or acquired by FSNB or in any property now or hereafter in the possession or control of FSNB, which other property may indirectly secure repayment of such loan by reason of "cross-collateralization"; except that, if any such other property or the proceeds thereof is applied to the reduction of such loan, then UG shall be entitled to share in such an application of payment or payments as provided in "Application of the Payments" of this Agreement.

15.            Default.

Upon the occurrence of any event of default under a mortgage loan which shall be serviced by FSNB for the account of UG or in which UG shall have purchased a participation, FSNB and UG shall consult as to a mutually agreed upon course of action to pursue in order to collect the amounts then owed under such loan.

If UG and FSNB cannot mutually agree upon what course of action to take, or if FSNB should fail for any reason to take such mutually agreed upon action or actions to the satisfaction of UG, the parties hereto unconditionally agree that either FSNB or UG may then elect, upon written notice to the other, to accelerate payment under such loan and/or under any note or notes evidencing such loan, and to institute such legal proceedings as are necessary and appropriate, within the sole opinion of the instituting entity, to collect the indebtedness then due under such loan, to enforce the security therefore, and to protect and preserve the respective rights and interests of the parties to the extent permitted by applicable law.  To that end, the entity instituting such proceedings shall make the other entity and any other interested party as applicable a party thereto and each entity shall bear the costs and expenses of such proceedings in proportion to their respective percentage interest in such loan existing at the time of the default.

In the event that UG elects to accelerate payment of such loan and to institute legal proceedings or upon FSNB's failure, insolvency and/or closing: (i) FSNB unconditionally agrees to immediately forward the original loan documents (including, without limitation, the original of the borrower's note or notes evidencing such loan and all security agreements and instruments therefore) to UG, together with such other documents, files and records as may be necessary, within the opinion of UG and its counsel, to permit UG to institute appropriate collection and/or foreclosure proceedings under such loan and/or against the collateral securing such loan; (ii) FSNB shall further turn over any secured collateral in its possession to UG; (iii) FSNB additionally agrees to join in any demand letter or other communications forwarded by UG to the borrower and/or to any co-makers, guarantors or endorsers under such loan; (iv) FSNB further agrees to execute such additional documents in favor of UG as may be deemed to be necessary and proper by UG and its counsel to permit UG to foreclose against collateral securing such loan under applicable state law procedures.

16.            Access to Records.

All records pertaining to any participated mortgage loan or under this Agreement shall be made available to UG, its auditors, regulators or other designees, during normal business hours and at any other time on reasonable notice, for review, inspection, examination and reproduction.  Notwithstanding any provision herein to the contrary, FSNB will maintain adequate books and records of all transactions pertaining to such participated loans with UG for the duration of this Agreement and follow industry standard requirements regarding record retention.

17.            Indemnification.

Indemnification of UG.  FSNB shall, to the fullest extent permitted by law, indemnify, defend and hold harmless UG and its officers, employees, agents, representative, successors and permitted assigns (each, a "UG Indemnified Person") and against, any losses sustained or incurred by or asserted against, any UG Indemnified Person which arise out of (a) any intentional or willful act or gross negligence of FSNB in performing the services under this Agreement, (b) any breach of or inaccuracy in the representations and warranties made by FSNB in Section 5 of this Agreement and (c) any enforcement of this indemnity; provided, however, that FSNB shall not indemnify any UG Indemnified Person for losses to the extent that such losses arise from acts or omissions of FSNB taken at the specific direction of UG.  "Losses" refers to any loss, liability, claim, damage, and expense (including reasonable attorneys' fees) resulting from a third party claim.

Indemnification of FSNB. UG shall, to the fullest extent permitted by law, indemnify and hold harmless FSNB and its directors, officers, employees, representatives, affiliates, representatives, successors and permitted assigns (each, a "FSNB Indemnified Person") from and against all losses sustained or incurred by, or asserted against, any FSNB Indemnified Person which arise out of this Agreement, including the enforcement of its indemnity obligations under this Section, except to the extent such losses are the result of a FSNB Indemnified Person's intentional misconduct or gross negligence.

Notice of Claim. As soon as reasonably possible, but in no event subsequent to THIRTY (30) calendar days after receipt by an indemnified party hereunder of written notice of any demand, claim or circumstances which, upon the lapse of time, would give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an "Indemnity Claim") that may result in a loss, such indemnified party shall give notice thereof ("Claims Notice") to the indemnifying party or parties. The Claims Notice shall describe the Indemnity Claim in reasonable detail, and shall indicate the amount (estimated, if necessary) of the loss that has been or may be suffered by such indemnified party. The failure of the indemnified party to give the Claims Notice within the time provided for herein shall not affect the indemnifying party's or parties' obligation under this section, except if, and then only to the extent that, such failure materially prejudices either the indemnifying party or parties or the ability to defend such Indemnity Claim by such indemnifying party or parties.

	18.	Miscellaneous

Sale of Interest.  UG may not sell, pledge, assign, sub-participate or otherwise transfer its percentage ownership interest under such loan without first obtaining the prior written consent of FSNB, which consent shall not unreasonably be withheld.

Governing Law.  This Agreement shall be governed and construed under the internal laws of the State of Ohio.

Binding.  This Agreement shall be binding upon the parties hereto, as well as their respective legal representatives, successors and assigns.

Notices.  All notices under this Agreement shall be in writing and mailed to the respective parties at the address given herein.

Invalid Provisions.  Should any provision of this Agreement be deemed invalid or unenforceable as contrary to applicable law, the parties hereto agree that such provision shall automatically be deemed to be reformed as to be consistent with applicable law.

Termination.  This Agreement may be terminated by either party upon THIRTY (30) days prior written notice, provided that the terms of this Agreement with respect to the then outstanding loans subject to this Agreement will remain in effect unless mutually agreed otherwise by both parties.

NOTICE OF FINAL AGREEMENT.  THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMETNS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

	
 

	
FIRST SOUTHERN NATIONAL BANK

 

 

	
 

	
Signature

	
/s/ Tommy Roberts

	
 

	
 

Printed Name

	
 

Tommy Roberts

	
 

	
 

Title

	
 

CEO

	
 

 

 

 

	
 

	
 

	
 

	
UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

 

 

	
 

	
Signature

	
/s/ Thoeodore C. Miller

	
 

	
 

Printed Name

	
 

Thoedore C. Miller

	
 

	
 

Title

	
 

Sr. Vice President

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