Document:

Ex10.9 12_12_31

EXHIBIT 10.9

EMPLOYMENT AGREEMENT
    

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into this 19th day of December, 2012 by and between RBC Life Sciences, Inc. (“Employer”) located at 2301 Crown Court, Irving, Texas 75038 and Kevin B. Young (“Employee”), residing at 710 Green Brook Dr., Allen, Texas 75002.

W I T N E S S E T H:

WHEREAS, Employer is engaged in, among other businesses, the international distribution of nutritional supplements and personal care products through the network marketing distribution model, and the distribution of wound care and oncology care products; and 

WHEREAS, Employee is employed by Employer under an existing employment agreement that terminates by its terms December 31, 2012; and 

WHEREAS, Employer desires to employ Employee, and Employee desires to accept employment with Employer, on the terms and conditions set forth in this Agreement; 

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth in this Agreement, Employer and Employee hereby agree as follows:

		
	Section 1.  
	Effective Date and Purpose.  The effective date of this Agreement shall be January 1, 2013 (the “Effective Date”).  This Agreement sets forth the terms and conditions of Employee's employment with Employer on and after the Effective Date during the term hereof.

		
	Section 2.  
	Employment Title and Duties.  Employer shall employ Employee in the capacity of Vice President - Sales & Marketing.  In this capacity, Employee shall have the responsibility to perform all duties that are customarily performed by one holding that position in other, same, or similar businesses or enterprises as that engaged in by Employer.  Employee accepts this employment, subject to the general supervision and pursuant to the orders and direction of Employer's President (the “President”).  Employee shall also render such other and services and duties, consistent with such capacity, as may be assigned from time to time by the President.

		
	Section 3.  
	Compensation of Employee.  Employer shall pay Employee, in full payment for Employee's services and covenants under this Agreement, the following compensation:

		
	a.
	Salary.  During his employment pursuant to this Agreement, Employee's annual base salary shall be $160,000.00 payable bi-weekly in equal payments of $6,153.84 in accordance with Employer's customary payroll practices. Employee's annual base salary may be increased during the term of this Agreement subject to business conditions and Employee's performance, as recommended by the President to the Compensation Committee of the Employer's Board of Directors. Compensation Committee and the President shall review and make a joint decision in accordance with the Compensation Committee Charter. 

   
		
	b.
	Incentive Bonus.  The Board of Directors (the “Board”) will maintain a discretionary annual cash incentive bonus program each year during the term of this Agreement.  The Committee shall determine in its discretion whether any annual incentive bonus will be payable for any 

year to Employee based on business-related factors deemed appropriate by the Board for a particular year.  Any annual incentive bonus payable to Employee will be paid in a lump sum payment in the year immediately following the year to which the bonus relates and will be paid only if Employee is employed by the Company on the date the bonus is paid.

If at the end of the year in which employment is terminated, other than for “Cause”, the employee would have received a bonus, Employee will be paid a prorata share for the full months of actual employment in that year payable at the time the bonuses for that year are paid to eligible employees. 

		
	c.
	Health and Welfare Benefits.  During his employment, Employee shall be eligible to participate in the health and welfare benefit plans and programs offered from time to time by Employer for its similarly situated employees, upon the terms and subject to conditions of such plans and programs.  

		
	Section 4.  
	Best Efforts of Employee.  Employee agrees to perform all of the duties pursuant to the express and implicit terms of this Agreement to the reasonable satisfaction of Employer.  Employee further agrees to perform such duties faithfully and to the best of his ability, talent, and experience.

		
	Section 5.  
	Place of Employment.  Employee shall render such duties at 2301 Crown Court, Irving, Texas 75038 and at such other places as Employer shall in good faith require or as the interest, needs, business, or opportunity of Employer shall require.

		
	Section 6.  
	Non-Competition with Employer during Employment.  Employee shall devote all his time, attention, knowledge, and skills solely to the business and interest of Employer, and Employer shall be entitled to all of the benefits and profits arising from the work of Employee.  Employee shall not, during his employment under this Agreement, perform services for or be interested directly or indirectly, in any manner, as partner, officer, director, shareholder, advisor, consultant, employee, or in any other capacity in any other business similar to Employer's business, any allied trade, or any business offering a competing or alternative product or service. However, nothing contained in this section shall prevent or limit Employee from continuing to receive the benefits of relationships previously disclosed and approved by the President in writing or investing in the capital stock or other securities of any corporation whose stock or securities are publicly owned and traded on any public exchange, nor shall anything contained in this Section 6 prevent or limit Employee from investing in real estate.

		
	Section 7.  
	Confidentiality and Nondisclosure.  Employer promises to disclose to Employee and Employee acknowledges that in and as a result of his employment by Employer, he will receive, be making use of, acquiring, and/or adding to confidential information of a special and unique nature and value relating to such matters as Employer's trade secrets and proprietary and confidential business information, including but not limited to, its unique business methods and strategies, processes, product and design development, programs and programming codes, pricing methods, operating techniques and practices, operating and production costs, corporate financial information, customer requirements, customer and supplier information, potential customer lists and marketing techniques, systems, procedures, manuals, confidential reports, the equipment and methods used and preferred by its customers and the fees paid by them, and compilations of information, records, and specifications (all of which are referred to collectively herein as “Confidential Matters”).  Employee further agrees that if a third party (e.g., vendors, customers and manufacturers) contracts with Employer, the information obtained or received from a third party including, but not limited to, its 

patents, copyrights, proprietary information, trade secrets, systems, product development, procedures, manuals, and confidential reports will be treated in the same manner and subject to the same protection as other Confidential Matters.

Employee acknowledges that Employer does not voluntarily disclose Confidential Matters, but rather takes precautions to prevent their dissemination except pursuant to suitable confidentiality safeguards.  Employee further acknowledges that Confidential Matters (1) are secret and not known in the industry; (2) have been and will be entrusted to Employee because Employee is a fiduciary of Employer; (3) have been and will be developed by Employer and/or Employee for and on behalf of Employer through substantial expenditures of time, effort, and money and are and will be used in Employer's business; (4) give Employer an opportunity to obtain an advantage over competitors who do not know or use the Confidential Matters; and (5) are of such value and nature as to make it reasonable and necessary for Employee and Employer to protect and preserve the confidentiality and secrecy of the Confidential Matters.
Employee acknowledges and agrees that the Confidential Matters are valuable, special, and unique assets of Employer, the disclosure of which could cause substantial injury and loss of profits and good will to Employer.  The Confidential Matters to be prepared or compiled by Employee and/or Employer or furnished to Employee prior to or during Employee's term as an employee of Employer shall be the sole and exclusive property of Employer.  Upon the separation of Employee's employment with Employer, all documents and things related to Confidential Matters shall be returned to Employer as soon as practicable and none shall be retained by Employee, including any copies.
As a condition of employment and continued employment, Employee shall keep confidential all such confidential and proprietary information that Employee learns or acquires as a result of his employment with Employer, and shall not at any time except as necessary to conduct the business of Employer, directly or indirectly make known, divulge, use, furnish, or reveal to any person, firm, company, corporation, or anyone else any of the Confidential Matters or any knowledge or information with respect thereto, or otherwise use such information for any purpose whatsoever.  Employee promises that Employee will take all steps necessary to safeguard all Confidential Matters and to prevent their use, disclosure, or dissemination to any other person or entity except as necessary to conduct the business of Employer.
Employee further agrees that in the event Employee is subpoenaed, served with any legal process or notice, or otherwise requested to produce or divulge, directly or indirectly, any Confidential Matters by any entity, agency, or person in any formal or informal proceeding, including, but not limited to, any interview, deposition, administrative or judicial hearing, and/or trial, upon Employee's receipt of such subpoena, process, notice, or request, Employee shall immediately notify and deliver a copy of the subpoena, process, notice, or request to the Board.  Employee further irrevocably nominates, constitutes, and appoints Employer (specifically including any attorney retained by Employer) as Employee's true and lawful attorney-in-fact, to act in Employee's name, place, and stead to do and perform any act which Employee might perform, including to institute, prosecute, defend, quash, compromise, settle, arbitrate, release, and dispose of any and all legal, equitable, or administrative hearings, actions, suits, attachments, subpoenas, claims, levies, or other proceedings, or otherwise engage in or defend any and all litigation in connection with or relating to any request to disclose, directly or indirectly, any Confidential Matters; provided, however, that Employer shall be under no obligation to act as Employee's attorney-in-fact and may decline to do so upon written notice to Employee.

		
	Section 8.  
	Term.  This Agreement shall be effective for period of one (1) year beginning on January 1, 2013 and ending on December 31, 2013. 

 
		
	Section 9.  
	Termination of Employment. 

		
	a.
	Termination by Employer for Cause.  Employer may immediately terminate the employment of Employee under this Agreement for “Cause” (as defined below) at any time by giving written notice of termination to Employee without prejudice to any other remedy to which Employer may be entitled either at law, in equity, or under this Agreement.  In this case, Employee will be paid his monthly base salary up to the date of his termination of employment and shall not be entitled to any other compensation or benefits under this Agreement. 

 
For purposes of this Agreement, “Cause” shall mean, in each case, as reasonably determined by the Board:  (i) conviction of, or entry of a pleading of guilty or no contest by, Employee with respect to a felony or any lesser crime of which fraud or dishonesty is a material element, (ii) Employee's willful and continued failure to perform his duties with Employer, or a failure to follow the lawful direction of the Board after the Board delivers a written demand for performance and Employee neglects to cure such a failure to the reasonable satisfaction of the Board within 15 days after receipt of the demand, (iii) Employee's failure to comply with applicable laws with respect to the execution of Employer's business operations or his material breach of Sections 6 or 7 of this Agreement, (iv) Employee's theft, fraud, embezzlement, dishonesty, or similar conduct which has resulted or is reasonably likely to result in material damage to Employer or any of its affiliates or subsidiaries, or (v) Employee's habitual intoxication or continued abuse of illegal drugs which interferes with Employee's ability to perform his assigned duties and responsibilities.
		
	b.
	Termination by Employee for Good Reason or Termination by Employer Without Cause.  Employee may terminate his employment under this Agreement for “Good Reason” (as defined below) at any time by giving written notice of termination to Employer without prejudice to any other remedy to which Employee may be entitled either at law or in equity under this Agreement and Employer may terminate Employee's employment under this Agreement at any time for any reason other than Cause or as described in Section 9.c. or Section 9.d. of this Agreement by giving written notice of such termination to Employee.  If Employee's employment under this agreement is terminated by Employee for Good Reason or by Employer for a reason other than Cause or as described in Section 9.c. or Section 9.d. of this Agreement and Employee executes a general release in the form provided to Employee by the Company (the “Release”) within 30 days following the date of his termination of employment (the “Termination Date”) and does not revoke the Release during any applicable revocation period, Employee shall be paid an amount equal to the greater of (i) his monthly base salary through the last day of the term of this Agreement or (ii) his monthly base salary for a period of six (6) months as severance pay following the Termination Date payable, in each case, for a period of twelve (12) months in substantially equal payments in accordance with Employer's normal payroll practices and commencing, subject to the payment timing provisions of Section 10.b., on the first regularly scheduled payroll date of Employer following the expiration of 45 days after the Termination Date, plus an amount equal to his accrued, unused  vacation and personal time of “PTO”) paid in a single lump sum payment on the first regularly scheduled payroll date of Employer following the Termination Date.  The form of the Release will be provided to Employee by Employer not later than five (5) days following 

Employee's Termination Date.  The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 20.  No benefits, bonuses, PTO, or other forms of compensation, except for the severance payments and accrued PTO described in this Section 9.b., will be paid to Employee or accrued for the severance payment period.  Payments under this Section 9.b. shall cease if during the term of the payments Employee violates the provisions of Section 7 or Section 13.  

For purposes of this Agreement, the term “Good Reason” shall mean: (i) a material breach by Employer of this Agreement; or (ii) a material diminution of Employee's authority, duties, or responsibilities as in effect immediately after the Effective Date of this Agreement; provided, however that Employee must provide notice to Employer of the condition described in clause (i) or (ii) above, as applicable, within ninety (90) days of the initial existence of the condition, upon the notice of which Employer shall have a thirty (30) day period during which it may remedy the condition.
		
	c.
	Death of Employee.  This Agreement shall be deemed terminated as of the date of Employee's death.  In this case, Employer shall pay to employee's estate Employee's monthly base salary as provided in this Agreement up to the Termination Date, plus Employee's accrued, unused PTO, payable, in each case, in accordance with Employer's customary payroll practices. 

		
	d.
	Disability of Employee.   Should Employee be unable to perform his duties under this Agreement by reason of inability to perform the essential functions of the position for a period of six (6) months, as determined by the Board in its sole discretion, Employer shall have the right to terminate this Agreement upon written notice to Employee.  During the six-month period that Employee fails to perform his duties as a result of his inability to perform the essential functions of the position, Employer will continue to pay Employee Employee's monthly base salary based on its customary payroll practices, reduced by any disability payments received by Employee from a disability program made available by Employer, and Employee shall be treated as on a bona fide leave of absence.  On the Termination Date, Employee shall be paid his accrued, unused PTO.  The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 20.  

		
	e.
	Early Termination by Employee.  Should Employee terminate his employment prior to the end of the term of this Agreement, other than for Good Reason, death or disability, Employee shall be paid his monthly base salary and unused, accrued PTO up to the Termination Date, and shall not be entitled to any other compensation or benefits under this Agreement, including any incentive bonus.

		
	Section 10.  
	Additional Termination Provisions.

		
	a.
	Separation from Service.  Notwithstanding anything to the contrary in this Agreement, with respect to any amounts payable to Employee under this Agreement in connection with a termination of Employee's employment that would be considered “non-qualified deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), in no event shall a termination of employment be considered to have occurred under this Agreement unless such termination constitutes Employee's “separation from service” with Employer as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto (“Separation from Service”).

		
	b.
	Section 409A Compliance.  Notwithstanding anything contained in this Agreement to the Contrary, to the maximum extent permitted by applicable law, the severance payments payable to Employee pursuant to Section 9 shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9)(iii) (relating to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (relating to short-term deferrals).  However, to the extent any such payments are treated as “non-qualified deferred compensation” subject to Section 409A of the Code, and if Employee is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited payment under Section 409A(a)(2)(B)(i) of the Code, such portion of Employee's termination benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of Employee's Separation from Service or (ii) the date of Employee's death.  Upon the earlier of such dates, all payments deferred pursuant to this Section 10.b. shall be paid in a lump sum to Employee.  The determination of whether Employee is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall made by Employer in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).

		
	Section 11.  
	Section 409A; Separate Payments.  This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Section 409A(a)(1)(A) of the Code or (b) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (collectively, “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties.  In no event shall Employer be required to provide a tax gross-up payment to Employee or otherwise reimburse Employee with respect to Section 409A Penalties.  For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Employee may be eligible to receive under this Agreement shall be treated as a separate and distinct payment and shall not collectively be treated as a single payment.

		
	Section 12.  
	In-kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Employee shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Employee and are not subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by employee and, if timely submitted, reimbursement payments shall be made to Employee as soon as administratively practicable following such submission, but in no event later than the last day of Employee's tax year following the taxable year in which the expense was incurred.  This paragraph shall apply only to in-kind benefits and reimbursements that would result in taxable compensation income to Employee.

		
	Section 13.  
	Post Employment Non-Compete.  As a material inducement for receiving, the trade secrets and confidential and proprietary information described in Section 7 and other good and valuable consideration, Employee agrees that during the term of his employment and for a period of twelve (12) months after the separation date of Employee's employment with Employer, for whatever reason:

		
	a.
	Employee shall not, directly or indirectly, without written approval of the President, solicit or induce, or attempt to solicit or induce, any current customer (defined as all customers of Employer within the 12 months preceding Employee's separation of employment) or employee of Employer to alter, leave or cease their relationship with Employer, for any reason whatsoever,

		
	b.
	In an executive, financial, sales, or operational capacity, Employee shall not, directly or indirectly, without written approval of the President, accept employment from or provide competitive services or assistance to any current customer of Employer with whom Employee has had any contact during his employment with Employer; and

		
	c.
	Employee shall not solicit or attempt to solicit Employer's current customers with whom Employee has had any contact during his employment with Employer to purchase services or products that are competitive with those marketed, offered for sale and/or under any stage of development by Employer as of the date of Employee's separation from Employer.

Notwithstanding the foregoing provisions, Employer shall not unreasonably restrict Employee's ability to serve on boards of directors of other companies.

		
	Section 14.  
	Indemnity.  Employer shall indemnify Employee and hold Employee harmless for any acts or decisions made by Employee in good faith and that were reasonably believed to be in the best interest of Employer while performing services for Employer.  Employer will use its reasonable best efforts, to maintain Director and Officer insurance coverage in the amount of not less than $1,000,000 for Employee under an insurance policy covering the officers and directors of Employer against lawsuits.  Employer shall pay all reasonable expenses, including attorney's fees, actually and necessarily incurred by Employee in connection with any appeal thereon, including the cost of court settlements.  Notwithstanding the preceding sentence, (i) the obligations of Employer shall be subject to the condition that the Board shall not have determined based on advice from its legal counsel that Employee would not be permitted to be indemnified under applicable law, and (ii) the obligation of Employer to make an expense or fee advance pursuant to this Section 14 shall be subject to the condition that, if, when and to the extent that the Board determines that Employee would not be permitted to be so indemnified under applicable law, Employer shall be entitled to be reimbursed by Employee (who hereby agrees to reimburse Employer) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by Employee shall be deemed to satisfy any requirement that Employee provide Employer with an undertaking to repay any advancement of fees or expenses if it is ultimately determined that Employee is not entitled to indemnification under applicable law); provided, however, that if Employee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Employee should be indemnified under applicable law, any determination made by the Board that Employee would not be permitted to be indemnified under applicable law shall not be binding and Employee shall not be required to reimburse Employer for any expense advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or have lapsed).  This undertaking by Employee to repay such expense advance shall be unsecured and interest-free.

		
	Section 15.  
	Effect of Partial Invalidity.  The invalidity of any portion of this Agreement shall not affect the validity of any other provision.  In the event that any provision of this Agreement is held to be invalid, the parties agree that the remaining provisions shall remain in full force and effect.

		
	Section 16.  
	Entire Agreement.  This Agreement contains the complete Agreement between the parties and shall supersede all other agreements, either oral or written, between the parties.  The parties stipulate that neither of them has made any representations except as are specifically set forth in this Agreement and each of the parties acknowledges that they have relied on their own judgment in entering into this Agreement.

		
	Section 17.  
	Successors and Assigns; Survival of Rights and Obligations.  

		
	a.
	Binding Agreement; Employee's Personal Agreement.  This Agreement shall be binding upon and inure to the benefit of Employee's and his heirs and legal representatives and Employer and its successors and assigns.  Employee's rights and obligations under this Agreement are personal and may not be assigned or transferred in whole or in part by Employee (except that his rights may be transferred upon his death by will, trust, or the laws of intestacy). 

 
		
	b.
	Employer's Successor.  Employer will require any successor to all or substantially all of the business and assets of Employer (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place; except that no such assumption and agreement will be required if the successor is bound by operation of law to perform this Agreement.  In this Agreement, “Employer” shall include any successor to Employer's business and assets that assumes and agrees to perform this Agreement (either by agreement or by operation of law).

		
	c.
	Survival.  The respective rights and obligations of Employer and Employee under this Agreement (including Sections 7, 9, 10, 11, 13, 14 and 17) shall survive the expiration or termination of the Agreement to the extent necessary to give full effect to those rights and obligations.

		
	Section 18.  
	Notices.  All notices, requests, demands, and other communications shall be in writing and shall be given by registered or certified mail, postage prepaid, to the addresses shown on the first page of this Agreement, or to such subsequent addresses as the parties shall so designate in writing.

		
	Section 19.  
	Dispute Resolution.  

		
	a.
	Arbitration.  The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement (including its expiration or termination) or the expiration or termination of Employee's employment hereunder (“Disputes”) shall be arbitration held in Dallas, Texas.  Nevertheless, although disputes or questions arising out of or relating to Sections 6, 7 and 13 shall be subject to arbitration, Employer shall not be precluded from also seeking and obtaining injunctive relief from any court of proper jurisdiction to enforce or protect its rights under Sections 6, 7 and 13. Any arbitration may be requested or initiated by a party to the Dispute by written notice to the other party or parties to the Dispute specifying the subject of the requested arbitration and preparing the name of an arbitrator (“Arbitration Notice”).  

		
	b.
	Arbitrators.  Arbitration shall be before a single arbitrator agreed upon by Employer and Employee (collectively, the “Parties”).  If the Parties are unable to agree upon the selection of an arbitrator, then the Parties shall request that the American Arbitration Association in Dallas, Texas appoint an arbitrator.

		
	c.
	Award and Costs.  The arbitration proceeding shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.  The costs of arbitration (exclusive of the expense of a party to the Dispute in obtaining and presenting evidence and attending the arbitration and of the fees and expenses of legal counsel to a party to the dispute, all of which shall be borne by that party to the Dispute) shall be borne by Employer if Employee receives substantially the relief sought by him in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne one-half by Employer and one-half by Employee.  The arbitration determination or award shall be final and conclusive on the parties to the Dispute, and judgment upon such award may be entered and enforced in any court of competent jurisdiction.

		
	Section 20.  
	Tax Withholding.  Employer shall be entitled to deduct and withhold from payments made under this Agreement all amounts required to satisfy its withholding obligations with respect to income, employment and any other applicable taxes.  

		
	Section 21.  
	Limitation on Payments.  Notwithstanding anything in this Agreement to the contrary, if the total of the payments and benefits under this Agreement, together with any other payments or benefits received by Employee from Employer, will be an amount that would cause them to be a “parachute payment” within the meaning of Section 280G(b)(2)(A) of the Code (the “Parachute Payment Amount”), then such payments under this Agreement shall be reduced so that the total amount thereof is $1 less than the Parachute Payment Amount.

		
	Section 22.  
	Attorney's Fees.  If any arbitration proceeding or any action for injunctive or declaratory relief is brought to enforce or interpret the provisions of this Agreement, attorney's fees shall be borne by Employer if Employee is the prevailing party (or receives substantially the relief sought by Employee), otherwise each party will be responsible for its own attorney's fees.

		
	Section 23.  
	Additional Obligations.  During and after the term of this Agreement, Employee shall, upon reasonable notice from Employer, furnish Employer with such information as may be in Employee's possession, and cooperate with Employer as may reasonably be requested by Employer, in connection with any legal or governmental proceedings in which Employer or any of its affiliates is or may become a party.  The Company shall reimburse Employee for his reasonable expenses in fulfilling his obligations under this Section 23 promptly, but in no event later than the last day of the calendar year following the calendar year in which Employee incurs the expense.

		
	Section 24.  
	Amendment.  Any modification, amendment or change of this Agreement will be effective only if it is in a writing signed by both parties.

		
	Section 25.  
	Governing Law; Interpretation.  This Agreement, and all transactions contemplated by this Agreement, shall be governed by, construed, and enforced in accordance with the laws of the State of Texas.  This Agreement shall be construed and interpreted by the Board and such determination shall be final, binding and conclusive on all parties.

		
	Section 26.  
	Headings.  The titles to the Sections and the paragraphs of this Agreement are solely for the convenience of the parties and shall not affect in any way the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on this 19th day of December, 2012.

EMPLOYEE:                        EMPLOYER:

RBC LIFE SCIENCES, INC.

/s/  Kevin B. Young_________            By: /s/ Steven E. Brown________
Kevin B. Young                            Steven E. Brown
PresidentExhibit 10.20

COMMERCIAL PLEDGE AGREEMENT

	
  Principal

  $8,000,000.00

	
  Loan Date

 

	
  Maturity

 

	
  Loan No.

  72957158

	
  Call/Coll

 

	
  Account

  40000

	
  Officer

  MRD

	
  Initials

 

	
 

	
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations.

 

	
 

	
 

	
 

	
 

	
Grantor:

	
UTG, Inc.

	
Lender:

	
Illinois National Bank

	
 

	
5250 S. Sixth St.

	
 

	
Main Branch

	
 

	
Frontage Rd. East

	
 

	
322 E. Capitol

	
 

	
Springfield, IL  62703

	
 

	
Springfield, IL  612701

	
 

	
 

	
 

	
 

	
Company:

	
Universal Guaranty Life Insurance Company

	
 

	
 

	
5250 S. Sixth St.

	
 

	
 

	
 

	
Frontage Rd. East

	
 

	
 

	
 

	
Springfield, IL  62703

	
 

	
 

	
 

THIS COMMERCIAL PLEDGE AGREEMENT dated November 20, 2012, is made and executed between UTG, Inc. ("Grantor'), Universal Guaranty Life Insurance Company ("Company"), and Illinois National Bank ("Lender").

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 this Agreement means Grantor's present and future rights, title and interest in and to the following described investment property, together with any and all present and future additional thereto, substitutions therefore, and replacements thereof, together with any and all present and future certificates and/or instruments evidencing any stock and further together with all income and Proceeds as described herein:

400,000 shares of Universal Guaranty Life Insurance Company stock, Certificate Numbers 111

Grantor has delivered to Lender the certificates representing all of the shares of stock, together with undated stock powers executed in blank.

CROSS-COLLATERALIZATION. In addition to the Line of Credit, 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 Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, whether Grantor 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 statute of 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 holds jointly with someone else and 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.  Grantor represents and warrants to Lender that:

 

 

COMMERCIAL PLEDGE AGREEMENT

	
Loan No.___________

	
(Continued)

	
Page 2

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.

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 or this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party.

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 such 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 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.

Company Stock.  The Collateral is all of the issued stock of the Company, which is presently owned or controlled by Grantor.  If Grantor at any time owns or controls any other shares of stock of the Company, all such stock shall without further act or deed be subject to all of the terms and conditions of this Agreement and Grantor must immediately take such action to perfect Lender's lien and security interest as Lender may request, including executing undated blank stock powers and delivering the stock certificate(s) representing such shares.

Options. There are no options or other rights to purchase or otherwise acquire the Collateral outstanding at this time.

Issued Stock.  All of the outstanding shares of stock of the Company have been duly and validly issued by the Company, and they are fully paid and nonassessable.

Pledge.  There are no existing agreements with respect to the Collateral between Grantor and any other person or entity (other than the Lender).

No Adverse Changes.  Grantor represents and warrants that neither Grantor, nor any of its partially or wholly owned subsidiaries, have experienced any materially adverse changes in (i) its financial condition since 8/22/12, and (ii) the character of the Collateral since 8/22/12.

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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.  When applicable law provides more than one method of perfection of Lender's security interest, Lender may choose the method(s) to be used.  If the Collateral consists of stock, bonds or other investment property for which no certificate has been issued, Grantor agrees, at Lender's request, either to request issuance of an appropriate certificate or to give instructions on Lender's forms to the issuer, transfer agent, mutual fund company, or broker, as the case may be, to record on its books or records Lender's security interest in the Collateral.  Grantor also agrees to execute any additional documents, including but not limited to, a control agreement, necessary to perfect Lender's security interest as Lender may desire.

Income and Proceeds from the Collateral.  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, This will be the case whether or not the office or branch where Grantor obtained Grantor's loan knows about the Collateral or relies upon the Collateral as security.

Collection of Collateral.  Lender at lender's option may, but need not, collect the income and Proceeds directly from the Obligors.  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 far 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.

 

 

 

 

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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 hook-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.  This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in full and even though for a period of time Grantor may not be indebted to Lender,

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 nay under this Agreement or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Larder 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 Note 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 Note 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 Note; 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 tar 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 maturates, 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 doomed to have knowledge of such matters. Except as provided above, Lender shall have no liability for depreciation or deterioration of the Collateral.

REINSTATEMENT OF SECURITY INTEREST.  If payment is made by Grantor, whether voluntarily or otherwise, or by guarantor or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of the: payment (A) to Grantor's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, (B) by reason of any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of Lender's property, or (C) by reason of any settlement or compromise of any claim made by lender with any claimant (including without limitation Grantor), the Indebtedness shall be considered unpaid for the purpose of enforcement of this Agreement and this Agreement shall continue to be effective or shall be reinstated, as the case may be, notwithstanding any cancellation of this Agreement or of any note or other instrument or agreement evidencing the indebtedness and the Collateral will continue to secure the amount repaid or recovered to the same extent as if that amount never had been originally received by Lender, and Grantor shall be bound by any judgment, decree, order, settlement or compromise relating to the Indebtedness or to this Agreement.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

Payment Default.  Grantor fails to make any payment when due under the Indebtedness.

 

 

 

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Other Defaults.  Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Grantor.

Default in Favor of Third Parties.  Any guarantor or Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of any guarantor's or Grantor's property or ability to perform their respective obligations under this Agreement or any of the Related Documents.

False Statements.  Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Defective Collateralization.  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.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by a creditor of Grantor or by any governmental agency against any collateral securing the indebtedness.  This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender.  However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Grantor.  Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or Guarantor dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

Adverse Change.  A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity.  Lender in good faith believes itself insecure.

Cure Provisions.  If any default, other than a default in payment 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 Lender sends written notice to Grantor demanding cure of such default:  (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) 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.

COMPANY OBLIGATIONS.  The following provisions are additionally binding upon Company as a part of this Agreement:

Authorized Pledge.  The Agreement constitutes an Authorized Pledge by Grantor.  As used herein, Authorized Pledge means a Pledge of Shares approved by the Company before any default in the indebtedness secured by such pledge.

Claims and Liens.  Company attests that at the time of execution of this Agreement, that there are no claims or liens against the Collateral other than to Lender to its knowledge.  The records of Company reflect no other claims or liens against the Collateral.

 

 

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Debt of Grantor.  Lender shall not be liable for any indebtedness or obligations of Grantor to the Company or any other person or entity.

Information.  Upon written request by Lender from time to time, the Company will furnish information relating to the Collateral to the extent such information is generally available to Non-Voting Shareholders and may be acquired or furnished by the Company without unreasonable effort or expense.

Issued Shares.  The Company warrants and represents that 400,000 of common voting shares have been issued by the Company, which shares are fully paid and nonassessable.  Grantor holds 100% of the Company's issued common voting shares as of the date of this Agreement.  The records of the Company reflect no issued shares exist other than those issued to Grantor.  During the terms of the Line of Credit and/or this Agreement, the Company shall not issue any new shares, of any kind, to anyone, at anytime, without the prior express written agreement and approval of Lender.

Dividends and Distributions.  During the term of the Line of Credit and/or this Agreement, unless prior express written approval has been provided by Lender, the Company shall not pay a dividend or distribution of cash or other property if the fair market value thereof, together with that of other dividends or distributions made in the preceding 12 months, exceeds the greater of (1) 10% of statutory-basis policyholders' surplus as of the prior December 31, or (2) the statutory-basis net income of the Company for the prior year.  As of this date, this is defined as an "Extraordinary Dividend."

Domiciliary.  The Company's present domiciliary is the State of Ohio.  During the term of the Line of Credit and/or this Agreement, the Company shall not change its domiciliary state without the prior express written approval of Lender.

Signatures.  It is a condition precedent to the effectiveness of this Agreement that it be signed not only by the Company in the space indicated below, but also by Grantor and Lender in the spaces indicated below.

ONGOING BUSINESS OF GRANTOR AND COMPANY.  The following provisions are made a part of this Agreement:

Business Affairs of Grantor and Company. During the term of the Line of Credit and/or this Agreement, without Lender's prior approval, neither Grantor nor Company shall, or shall permit the other to:

	
(i)

	
Sell, liquidate or otherwise transfer any of the Grantor's and/or Company's assets, or transfer all or substantially all of its insurance risk, outside the ordinary course of its business;

	
(ii)

	
Merge or consolidate with another entity or entities;

	
(iii)

	
Issue, sell, grant, transfer or otherwise dispose of any shares of Company's stock; or

	
(iv)

	
Amend, repeal or otherwise modify its articles of incorporation or bylaws or Grantor and/or Company

DEBT TO EQUITY RATIO.  The following provisions are made a part of this Agreement:

Grantor Debt to Equity.  Company's debt to equity ratio shall not exceed 13.00x on a statutory basis during the term of the Line of Credit and/or this Agreement.  If Company's debt to equity ratio ever exceeds 13.0x during the term of the Line of Credit and/or this Agreement, it shall be deemed on Event of Default.

Company Debt to Equity.  Grantor's debt to equity ratio shall not exceed 9.00x on a consolidated basis during the term or the Line of Credit and/or this Agreement.  If Grantor's debt to equity ratio ever exceeds 9.0x during the term of the Line of Credit and/or this Agreement, it shall be deemed on Event of Default.

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

Accelerate Indebtedness.  Declare all lndebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice of any kinds 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 ten (10) 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 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.  This provision is expressly agreed to by Lender, Grantor, and the Company.

Sell Securities.  Sell any securities included in the Collateral in a manner consistent with applicable federal and state securities 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, to one or more persons or to a restricted group of persons, 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, not 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.

Rights and Remedies with Respect to Investment Property, Financial Assets and Related Collateral.  In addition to other rights and remedies granted under this Agreement and under applicable law, Lender may exercise any or all of the following rights and remedies: (I) register with any issuer or broker or other securities intermediary any of the Collateral consisting of investment property or financial assets (collectively herein, "investment property") in Lender's sole name or in the name of Lender's broker, agent or nominee; (2) cause any issuer or broker or other securities intermediary to deliver to Lender any of the Collateral consisting of securities, or investment property capable of being delivered; (3) enter into a control agreement or power of attorney with any issuer or securities intermediary with respect to any Collateral consisting of investment property, on such terms as Lender may deem appropriate, in its sole discretion, including without limitation, an agreement granting to Lender any of the rights provided hereunder without further notice to or consent by Grantor; (4) attorney-in-fact, coupled with an interest, for the purpose of executing such control agreement on Grantor's behalf; (5) exercise any and all rights of Lender under any such control agreement or power of attorney; (6) exercise any voting, conversion, registration, purchase, option, or other rights with respect to any Collateral; (7) collect, with or without legal action, and issue receipts concerning any notes, checks, drafts, remittances or distributions that are paid or payable with respect to any Collateral consisting of investment property.  Any control agreement entered with respect to any investment property shall contain the following provisions, at Lender's discretion.  Lender shall be authorized to instruct the issuer, broker or other securities intermediary to take or to refrain from taking such actions with respect to the investment property as Lender may instruct, without further notice to or consent by Grantor.  Such actions may include without limitation the issuance of entitlement orders, account instructions, general trading or buy or sell orders, transfer and redemption orders, and stop loss orders.  Lender shall be further entitled to instruct the issuer, broker or securities intermediary to sell or to liquidate any investment property, or to pay the cash surrender or account

 

 

 

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termination value with respect to any and all investment property, and to deliver all such payments and liquidation proceeds to Lender.  Any such control agreement shall contain such authorizations as are necessary to place Lender in "control" of such investment collateral, as contemplated under the provisions of the Uniform Commercial Code, and shall fully authorize Lender to issue "entitlement orders" concerning the transfer, redemption, liquidation or disposition of investment collateral, in conformance with the provisions of the Uniform Commercial Code.

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

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.

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.

Governing Law.  This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Illinois without regard to its conflicts of law provisions.  This Agreement has been accepted by Lender in the State of Illinois.

 

  

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Choice of Venue.  If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of Sangamon County, State of Illinois.

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.

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.

Communications.  Grantor acknowledges that Lender shall have legitimate reasons to communicate with Company regarding the Indebtedness, before and after a default.  Grantor consents to all communications between Lender and Company regarding the Collateral, the Indebtedness, and other matters relating to the subject matter of this Agreement.

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.

Successors and Assigns.  Subject to any limitations stated in this Agreement on transfer of Grantor's interest, this Agreement shall be finding 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 waiver 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:

 

 

 

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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.

Borrower.  The word "Borrower" means UTG, Inc. and includes all co-signers and co-makers signing the Note and all its successors and assigns.

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.

Company.  The word "Company" means Universal Guaranty Life Insurance Company and all of its successors and assigns.

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" mean any of the events of default set forth in this Agreement in the default section of this Agreement, and elsewhere.

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.

Guaranty.  The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Income and Proceeds.  The words "Income and Proceeds" means all present and future income, proceeds, earnings, increases, and substitutions from or for the Collateral of every kinds 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, investment property, and general intangibles.

Indebtedness.  The word "Indebtedness" means the indebtedness evidenced by the Line of Credit 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.  Specifically, without limitation, indebtedness includes all amounts that may be indirectly secured by the Cross-Collateralization provision of this Agreement.

Line of Credit.  The words "Line of Credit" mean the operating line of credit executed by UTG, Inc. in the amount of $8,000,000.00 dated November 20, 2012, together with all renewals of, extensions of, modifications of, refinancing of, consolidations of, and substations of the operating line of credit.

Lender.  The word "Lender" means ILLINOIS NATIONAL BANK, its successors and assigns.

Obligor.  The word "Obligor" means without limitation any and all persons obligated to pay money or to perform some other act under the Collateral.

Property.  The word "Property" means all of Grantor's right, title and interest in and to all the Property as described in the "Collateral Description" section of this Agreement.

 

 

COMMERCIAL PLEDGE AGREEMENT

	
Loan No.___________

	
(Continued)

	
Page 10

Related Documents.  The words "Related Documents" mean all promissory notes, credit agreements, lines of credit, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether not or hereafter existing, executed in connection with the Indebtedness.

GRANTOR AND COMPANY HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREE TO ITS TERMS.  THIS AGREEMENT IS DATED November 20, 2012.

	
GRANTOR:

 

UTG, INC.

	
 

	
COMPANY:

 

UNIVERSAL GUARANTY LIFE INSURANCE COMPANY

	
/s/ James P. Rousey

	
 

	
/s/ James P. Rousey

	
JAMES P. ROUSEY, President

	
 

	
JAMES P. ROUSEY, President

	
 

/s/ Theodore C. Miller

	
 

	
 

/s/ Theodore C. Miller

	
THEODORE C. MILLER, CFO/Secretary

	
 

	
THEODORE C. MILLER, CFO/Secretary

	
 

LENDER:

 

ILLINOIS NATIONAL BANK

	
 

	
 

	
 

By:

	
 

/s/ Mark Donovan

	
 

	
 

	
 

	
MARK R DONOVAN, Vice President

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