SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Regan Holding Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement If Other Than The Registrant)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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REGAN HOLDING CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held August 22, 1997
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders of
Regan Holding Corp. (the "Company"), to be held at Embassy Suites, 101 McInnis
Parkway, San Rafael, California 94903, on August 22, 1997 at 8:00 a.m. Pacific
time, to consider and act upon the matters listed below:
(1) Election of four (4) Directors to hold office until the Annual Meeting
of Shareholders in 1998 and until their successors are duly elected;
(2) Approval of the Regan Holding Corp. 1998 Stock Option Plan;
(3) Ratification of the appointment of Coopers & Lybrand, L.L.P. as the
Company's independent auditors for the year ended December 31, 1997;
and
(4) Consideration of any other matters which may properly come before the
meeting or any adjournments of the meeting.
Shareholders of record at the close of business on July 15, 1997 are
entitled to notice of and to vote at the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN
PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE
MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
1179 N. McDowell Boulevard
Petaluma, California 94954
July 16, 1997
REGAN HOLDING CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held August 22, 1997
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Regan Holding Corp., a California
corporation, with its principal executive offices located at 1179 N. McDowell
Boulevard, Petaluma, California 94954 (the "Company"), for use at the Annual
Meeting of Shareholders to be held at Embassy Suites, 101 McInnis Parkway, San
Rafael, California 94903, on August 22, 1997 at 8:00 a.m. Pacific time.
Accompanying this Proxy Statement is the Board of Directors' Proxy for the
Annual Meeting which you may use to indicate your vote on the proposals
described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will
unless otherwise directed be voted in accordance with the recommendations of the
Board of Directors set forth in this Proxy Statement. A shareholder may revoke
his or her Proxy at any time before it is voted either by filing with the
Secretary of the Company, at its principal executive offices, a written notice
of revocation or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and expressing a desire to vote his or her shares in person.
The close of business on July 15, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof. As of the record date, the Company
had outstanding 26,280,188 shares of Common Stock-Series A, no par value (the
"Series A Stock"), and 609,574 shares of Common Stock-Series B, no par value
(the "Series B Stock"). As of the date of this Proxy Statement, the Company is
not in arrears in dividends or in default in principal or interest with respect
to any of its outstanding securities. The shares of Series A Stock and Series B
Stock are collectively referred to herein as "Common Stock" and the holders of
shares of Common Stock vote together as a single class. Commencing approximately
July 31, 1997, the Company is mailing its Annual Report on Form 10-K for the
year ended December 31, 1996, together with this Proxy Statement and the
enclosed Proxy, to holders of shares of Common Stock as of the record date.
The shares of Common Stock are the only outstanding voting securities of
the Company. A holder of a share of Common Stock is entitled to cast one vote
for each share held of record on the record date on all matters to be considered
at the Annual Meeting. As explained under Item 1 of this Proxy Statement,
cumulative voting will be permitted with respect to the election of Directors.
The holders of a majority of the votes entitled to be cast, present either
in person or by proxy, shall constitute a quorum for purposes of the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum is present on any matter. For actions requiring
approval based on a percentage of votes cast, abstentions and broker non-votes
will not affect the outcome of the vote. For actions requiring approval based on
the number of shares outstanding, abstentions and broker non-votes will have the
same effect as a negative vote.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of Directors to be elected at
four (4). The Board of Directors has nominated the persons identified below to
serve as Directors until the next Annual Meeting of Shareholders and until their
respective successors shall be elected and shall qualify. Three of the nominees
are currently Directors of the Company. The fourth nominee, Ute Scott-Smith, is
not currently a Director.
Name Principal Occupation Director Since
Lynda L. Regan Ms. Regan, born in 1948, has served as 1990
Chairman and Chief Executive Officer of
the Company since 1992. She was Senior
Vice President and Treasurer from 1990
to 1992.
R. Preston Pitts Mr. Pitts, born in 1951, has served as 1995
Chief Financial Officer of the Company
since 1994 and as President and
Secretary of the Company since February
of 1997. Prior to joining the Company,
he owned Pitts Company, a CPA firm
specializing in services for insurance
companies, served as financial officer
for United Family Life Insurance Company
and American Security Insurance Group,
both Fortis-owned companies, and was
audit manager for Ernst & Young.
Steve C. Anderson Mr. Anderson, born in 1948, has been a 1990
partner in Hoalst Anderson, an
independent insurance agency, since
1983. He is a member of the National
Association of Life Underwriters and CLU
Society.
Ute Scott-Smith Ms. Scott-Smith, born in 1960, served as --
Senior Vice-President of the Company
from 1990 to April of 1997.
Although it is not contemplated that the nominees will decline or be unable
to serve, the Proxies will be voted by the Proxy holders at their discretion for
another person if such a contingency should arise. Unless otherwise directed in
the accompanying Proxy, or as specified above, the Proxies will be voted FOR the
election of nominees named above.
A plurality vote is required for election of Directors. The Bylaws provide
that each shareholder is entitled to cumulate such shareholder's votes and give
one nominee a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
normally entitled, or distribute the shareholder's votes on the same principle
among as many nominees as the shareholder considers appropriate. This cumulative
voting right may not be exercised unless the nominee's name have been placed in
nomination prior to the voting and one or more shareholders has given notice at
the meeting prior to the voting of the shareholder's intent to cumulate such
shareholder's vote. The proxy holders may exercise this cumulative voting right
at their discretion.
Under an insurance brokerage agreement among the Company, Lynda Regan and
Moody Insurance Group ("MIG"), Lynda Regan has agreed that, so long as the
brokerage agreement remains in effect, she will vote her shares in favor of the
election of Robert Moody, Jr., MIG's president and sole shareholder, as a
Director of the Company should he wish to be elected. However, at the present
time, MIG engages in business activities that compete with the Company.
Therefore, in order to avoid any issue as to the propriety of Mr. Moody's
serving on the Company's Board, Mr. Moody has agreed to relinquish his right to
serve on the Board for a period of one year in return for nominal consideration
from the Company. The termination of the brokerage agreement with MIG would not
have a material effect on the Company.
Executive Officers
In addition to the Directors who serve as executive officers of the Company
and who are identified above, H. Lynn Stafford has served as Vice President of
the Operations of the Company since 1995. Prior to that time, he served as the
Chief Operating Officer for Lincoln Liberty Life Insurance Company and First
Delaware Life Insurance Company.
Beneficial Share Ownership of Directors and Executive Officers
The following table shows the number of shares and the percentage of the
shares of the Company's Class A Stock beneficially owned by each of the
Directors and executive officers of the Company as of June 30, 1997. No Director
or officer owns any Series B Common Stock.
Name Position Total Percent
Steve C. Anderson Director 69,714 *
Ashley A. Penney Director 145,318 *
R. Preston Pitts Director, President &
Chief Financial Officer 800,000 3.0%
Lynda L. Regan Director, Chairman
& Chief Executive
Officer 11,379,122 41.2% (1)
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Directors and
officers as a group 12,394,154 44.9%
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* Indicates that the percentage of the outstanding shares beneficially owned
is less than one percent (1%).
(1) Includes 900 shares owned as custodian for her daughter.
Certain Shareholders
The Company knows of no person who is the beneficial owner of more than
five percent of any class of the Company's outstanding Common Stock other than
Ms. Regan, Chairman and Chief Executive Officer of the Company, whose ownership
is listed above.
Committees
The Company has an Audit Committee consisting of Steve C. Anderson and
Ashley A. Penney, both of whom are outside Directors. The Audit Committee
oversees management's discharge of its financial reporting responsibilities and
recommends appointment of the Company's independent auditors. During 1996, the
Audit Committee held two meetings. Each of the members of the Audit Committee
attended all of these meetings.
The Company does not currently have a nominating or compensation committee.
The functions normally performed by these committees are performed by the entire
Board of Directors. Director's Attendance
During the fiscal year ended December 31, 1996, three meetings of the Board
of Directors of the Company were held. Each of the incumbent Directors attended
all of these meetings.
Director's Compensation
The Company compensates outside Directors for attending board and committee
meetings at $2,000 per meeting. Currently, Steve C. Anderson and Ashley A.
Penney are the only outside directors of the Company. The other Directors are
otherwise employed by the Company and are not compensated for serving as
Directors or attending Board or committee meetings.
Executive Compensation
The following Summary Compensation Table sets forth the compensation of the
Company's Chief Executive Officer and all other executive officers for services
in all capacities to the Company and its subsidiaries during 1996, 1995 and
1994.
Summary Compensation Table
Annual Annual All Other
Name and Position Year Salary Bonus (1) Other Compensation
- ----------------- ---- ------ --------- ----- ------------
Lynda L. Regan, 1996 $408,894 $ 52,290 $ 4,750 (2) $ --
Chief Executive Officer 16,824 (5)
1995 408,067 181,534 4,620 (2) --
11,216 (5)
1994 281,909 80,000 4,620 (2) --
10,583 (5)
R. Preston Pitts, 1996 $300,000 $ 72,290 $ 4,750 (2) $ --
President and Chief 1995 300,000 81,534 4,620 (2) --
Financial Officer 1994 63,462 6,400 (4) -- --
Ute Scott-Smith, (6) 1996 $177,318 $ 47,290 $ 4,750 (2) $ --
Senior Vice President 1995 175,000 56,534 4,620 (2) 80,313 (3)
1994 155,658 35,000 2,251 (2) 70,000 (3)
Lynn Stafford, 1996 $130,059 $ 31,790 $ 4,750 (2) $ --
Vice President of 1995 50,000 32,368 -- --
Operations
(1) Includes bonuses in the year in which they were earned.
(2) The Company matches contributions made to its 401(k) plan at a rate of $.50
for every $1.00 deferred, up to 6% of total annual salary.
(3) Compensation related to the payment of personal income taxes due to the
exercise of stock options in 1991.
(4) Stock awards were issued to R. Preston Pitts (then serving as a consultant
to the Company) effective January 1, 1994. These awards had a market value
at the time of issuance, as determined for purposes of preparing the
Company's financial statements, of approximately $.008 per share.
(5) The Company pays interest on debt related to a split dollar life insurance
policy under which Lynda L. Regan is the beneficiary.
(6) Ms. Scott-Smith resigned effective April 4, 1997.
Report on Executive Compensation
The Company does not have a compensation committee. The Board of Directors
develops and administers the Company's executive compensation policies and
programs. These policies and programs are generally intended to (i) relate the
compensation of the Company's executives to the success of the Company and the
creation of shareholder value; and (ii) attract, motivate and retain highly
qualified managers. In establishing a level of compensation, the Board considers
a number of factors, including: (i) the financial condition and performance of
the Company; (ii) the compensation levels of executives in comparable positions
at companies in industries in which the Company competes for executives,
primarily the financial services and insurance industries; and (iii) the
abilities of the executives and their contributions to the Company's goals and
performance.
Each year, the Board of Directors reviews the Company's executive
compensation policies and programs with respect to the linkage between executive
compensation and the creation of shareholder value, as well as the
competitiveness of the compensation programs. In conducting this review, the
Board considers changes in the Company's mission and goals and evaluates the
competitiveness of its compensation program based on published surveys, proxy
statement analysis and advice of consultants.
Compensation for executives consists of two components: base pay and
bonuses. Base pay for executives is determined based on the factors set forth
above. It is the Board's policy to position executive salaries in general in the
second quartile (i.e. the top 51% to 75%) of compensation levels for comparable
positions in the market, although individual salaries may be higher or lower
based on the considerations discussed above.
For 1996, the chief executive was eligible to receive a cash bonus of up to
40% of base salary and each of the other executive officers was eligible to
receive a cash bonus of up to 20% of base salary. Achievement of this bonus was
contingent upon the individual executive achieving performance goals designed to
increase shareholder value. Examples of performance goals for 1996 included (i)
implementation of multifunctional producer service teams, (ii) identification of
money managers that are acceptable to one of the insurance carriers for which
the Company markets insurance products, and (iii) implementation of the initial
phase of a Company-wide cost accounting project.
In addition to the salary based bonuses described above, each executive
officer received a bonus based on the performance of the Company during 1996. An
amount equal to 5% of the Company's net income for 1996 was allocated equally
among the four individuals who served as executive officers of the Company
during 1996. One third of the amount allocated to each officer was paid in
February of 1997. The remaining two-thirds will be paid in equal installments in
February of 1998 and 1999, contingent upon net income growth for the Company of
12% per year in 1997 and 1998, and provided that such individual is employed
with the Company on the date that the installment is to be paid.
In determining Lynda Regan's level of compensation for 1996, the Board
considered her success in maintaining relationships with key distribution groups
and insurance carriers with which the Company contracts. The Board also
considered the compensation level of Ms. Regan compared to that of individuals
holding similar positions in companies operating in comparable industries. Based
on these considerations, the Board approved Ms. Regan's base salary and bonus
for 1996 at $408,894 and $52,290, respectively.
During the second quarter of 1997, the Board hired an independent
compensation consulting firm to conduct a review of the Company's executive
compensation policies and programs. This consulting firm concluded, based on its
review and analysis, that the amount of compensation paid by the Company to its
executive officers during 1996 was consistent with the amount of compensation
paid to executive officers by comparable companies.
Respectfully submitted,
Lynda L. Regan
Steve C. Anderson
Ashley A. Penney
R. Preston Pitts
Performance Data
The Company's Common Stock became subject to the Securities Exchange Act of
1934 (the "Exchange Act") in November of 1991 as a result of the issuance of
shares of Common Stock in connection with the acquisition of LifeSurance
Company, a Delaware corporation. Since that time, there has been no active
trading in the Common Stock and accordingly, information as to market price per
share is not available. Prior to 1996, the only available measure of the value
of the shares of Common Stock was book value based on the financial statements
of the Company. However, beginning in 1992, the Company suffered a series of
significant adverse events, including the resignations of two outside accounting
firms hired by the Company, which prevented the Company from being able to
prepare any financial statements for the period from the time the Company became
subject to the Exchange Act through August of 1993. The book value of each share
of Common Stock (including redeemable Common Stock) was negative $.0027 as of
December 31, 1993 compared with $.20 as of December 31, 1994, $.38 as of
December 31, 1995, and $.48 as of December 31, 1996. In 1996, the Company began
repurchasing the stock of certain shareholders entitled to sell their stock to
the Company. The price paid for such stock, which was based on an independent
appraisal conducted on behalf of the Company for the purpose of such
repurchases, was $.55 per share commencing December 31, 1995, $.70 per share
commencing June 30, 1996, and $.78 per share commencing December 31, 1996. The
Company has paid no dividends on the Common Stock since becoming subject to the
Exchange Act.
Compensation Committee Interlocks and Insider Participation
As noted above, the Company does not have a compensation committee. The
compensation of executive officers is determined by the Board of Directors.
Lynda Regan, who is the Chief Executive Officer of the Company, is also Chairman
of the Board of Directors and R. Preston Pitts, who is President and Chief
Financial Officer, is also a Director. None of the executive officers of the
Company serve as a director or member of the compensation committee of an
entity, any of whose executive officers serves as a Director of the Company.
Certain Relationships and Related Transactions
The Company paid Ashley A. Penney, a Director, $140,100 for services
provided as a human resource consultant during 1996.
Pursuant to a salary continuation agreement related to the Company's former
Chief Executive Officer, John Regan, bi-weekly payments equal to Mr. Regan's
salary at the time of his death were payable by the Company to his estate
through April 6, 1996. Payments totaling $87,688 were made during 1996 in
accordance with this agreement.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the year ended December 31, 1996, and Forms 5
and amendments thereto furnished to the Company with respect to the year ended
December 31, 1996, no reports required by Section 16(a) of the Exchange Act with
respect to the Company were delinquent during the year ended December 31, 1996.
ITEM 2
APPROVAL OF THE REGAN HOLDING CORP. 1998 STOCK OPTION PLAN
The Board of Directors is submitting to the shareholders for approval, the
Company's 1998 Stock Option Plan (the "Plan"). The Board of Directors believes
that the success of the Company depends largely on its continued ability to
attract and retain Directors and employees with relevant and beneficial
experience who are motivated to exert their best efforts on behalf of the
Company. The Plan is designed to accomplish these objectives by granting equity
interests in the Company to Directors and employees and thereby align the
interests of Directors and employees with those of the shareholders of the
Company.
Description of Plan
The following is a summary of the material features of the Plan and is
qualified in its entirety by the full text of the Plan which is set forth in
Appendix A hereto.
Participation/Types of Awards. The Plan will provide for grants of options
to purchase shares of the Company's Series A Common Stock ("Shares") to
Directors and employees of the Company and certain of its affiliates. Under the
Plan, employees and employee-Directors of the Company and of certain of its
affiliates (currently approximately 182 individuals) may be granted incentive
stock options ("ISOs") as well as non-qualified stock options ("Non-Qualified
Options"). Non-employee Directors of the Company and of certain of its
affiliates (currently 2 individuals), may only be granted Non-Qualified Options
under the Plan. (ISOs and Non-Qualified Options collectively referred to herein
as "Options.")
Administration. The Plan will be administered by a committee (the
"Committee") consisting of three or more officers of the Company designated by
the Board of Directors, provided that a special committee consisting of two or
more non-employee Directors of the Company designated by the Board, each of whom
is a "disinterested person" under Rule 16b-3 of the Securities Exchange Act of
1934 (the "Exchange Act"), shall administer the Plan for the purposes of Rule
16b-3 with respect to employees and Directors who are subject to Section 16 of
the Exchange Act. Subject to the provisions of the Plan, the Committee shall
have authority to select the Directors and employees to whom Options may be
granted and determine the terms of each Option, including (i) the number of
Shares covered by the Option, (ii) when the Option becomes exercisable, (iii)
the Option exercise price, which, in the case of an ISO, must be equal to at
least 100% of the fair market value of the Shares on the date of grant and 110%
of such fair market value for an ISO granted to an employee or
employee-Director, who, at the time of grant, owns stock of the Company
possessing more than 10% of the voting power of all classes of stock of the
Company or a subsidiary thereof (a "Ten Percent Shareholder"), and (iv) the
duration of the Options (which for ISOs may not exceed 10 years or, for ISOs
granted to Ten Percent Shareholders, may not exceed 5 years). The Committee
shall also have authority to interpret the Plan, to prescribe, amend, and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of agreements evidencing the grant of Options, and to make all other
determinations necessary or advisable for the administration of the Plan.
Term and Termination. The Plan shall become effective, subject to the
approval of the Shareholders of the Company, on January 1, 1998. The Board may,
at any time, alter, amend, suspend, discontinue, or terminate the Plan, provided
that no such action shall adversely affect the right of any holder of an Option
previously granted under the Plan.
Shares Subject to the Plan. The total number of Shares underlying Options
to be awarded during the term of the Plan may not exceed 1.5 million in the
aggregate. In the event of any change in capitalization affecting the Shares,
including without limitation, a stock dividend or other distribution, stock
split, reverse stock split, recapitalization, consolidation, subdivision,
split-up, spin-off, split-off, combination or exchange of shares or other form
of reorganization or recapitalization, or any other change affecting the Shares,
the Board shall authorize and make such proportionate adjustments to the
Options, if any, as the Board deems appropriate to reflect such change. Pursuant
to the Plan, the Board has reserved 1.5 million Shares for issuance upon
exercise of Options.
There is no active trading in the Shares and, accordingly, information as
to market price per Share is not available. At December 31, 1996, the estimated
fair market value of each Share, based on an independent appraisal conducted on
behalf of the Company, was $.78. Prior to the development of an active trading
market for the Shares, the fair market value of the Shares shall be determined
by the Board of Directors in good faith.
Payment of Exercise Price. The purchase price for Shares subject to an
Option shall be payable upon exercise of an Option in cash or by check, bank
draft or postal or express money order, or, in the discretion of the Committee,
in Shares.
Termination of Employment/Director Status. If the employment with the
Company or the status as a Director of the Company of the holder of an Option is
terminated as a result of retirement at or after age 62, or by reason of
disability (as defined in the Plan) or death, all unexercised Options except
those which were exercisable at the date of termination shall expire. Options
which were exercisable at the date of termination may be exercised following
termination provided that such Options are exercised by the earlier of 3 months
after the date of termination, or the date the Option would otherwise expire,
and any such Options which are not exercised during the 3-month period
immediately following the date of termination shall be forfeited. If the
employment with the Company or the status as a Director of the Company of a
holder of an Option is terminated for cause (as defined in the Plan) or by the
holder of an Option other than as a result of retirement at or after age 62, or
by reason of disability or death, all unexercised Options held by the holder on
the date of such termination shall be forfeited.
Grant Information. As of the date of this Proxy Statement, no Director or
employee has been selected for participation in the Plan. The number of
Directors and employees who will be selected for awards under the Plan in the
future will vary from year to year. It is not possible to determine awards that
will be made pursuant to the Plan in the future.
The Plan limits the number of Shares that may be subject to ISOs granted to
any individual which ISOs become exercisable for the first time during a
particular calendar year. If the fair market value of Shares subject to one or
more ISOs which become exercisable for the first time during a particular
calender year, combined with the fair market value of shares under ISOs granted
to such individual under other plans of the Company or of it affiliates,
determined at the time of grant, exceeds $100,000, the Shares in excess of such
amount will be treated as having been granted pursuant to Non-Qualified Options.
Federal Income Tax Aspects of the Plan
Optionholders
Grant. There are no federal income tax consequences to the holder of an
Option solely by reason of the grant of an ISO or a Non-Qualified Option under
the Plan, provided that, in the case of a Non-Qualified Option, the Option does
not have a readily ascertainable fair market value at the date of grant.
Exercise. The exercise of an ISO is not a taxable event for regular federal
income tax purposes. However, such exercise may give rise to an alternative
minimum tax liability.
Upon the exercise of a Non-Qualified Option, the holder of the Option will
generally recognize ordinary income in an amount equal to the excess of the fair
market value of the Shares at the time of exercise over the amount paid as the
exercise price. The ordinary income recognized in connection with the exercise
by a holder of an Option of a Non-Qualified Option will be subject to both wage
and employment tax withholding.
The holder's tax basis in the Shares acquired pursuant to the exercise of
an Option will be the amount paid upon exercise plus, in the case of a
Non-Qualified Option, the amount of ordinary income recognized by the
optionholder upon exercise.
Qualifying Disposition. If an optionholder disposes of Shares acquired upon
exercise of an ISO in a taxable transaction, and such disposition occurs more
than two years from the date on which the Option is granted and more than one
year after the date on which the Shares are transferred to the optionholder, the
optionholder will recognize long-term capital gain or loss equal to the
difference between the amount realized upon such disposition and the
optionholder's adjusted basis in such Shares (generally the option exercise
price.)
Disqualifying Disposition. If an optionholder disposes of Shares acquired
upon exercise of an ISO (other than in certain tax-free transactions) within two
years from the date on which the ISO is granted or within one year after the
transfer of the Shares to the optionholder, then at the time of disposition the
optionholder will generally recognize ordinary income equal to the lesser of (a)
the excess of such Shares' fair market value on the date of exercise over the
exercise price paid by the optionholder or (b) the optionholder's actual gain
(i.e., the excess, if any, of the amount realized on the disposition over the
exercise price paid by the optionholder). If the amount realized on a taxable
disposition of the Shares obtained pursuant to the exercise of an ISO exceeds
the fair market value of such Shares on the date of the exercise, then the
optionholder will recognize a capital gain in the amount of such excess. If the
optionholder incurs a loss on such a disposition (i.e., if the amount realized
is less than the exercise price paid by the optionholder), then the loss will be
a capital loss. The capital gain or loss will be long-term or short term
depending on whether the Shares were held for more than one year from the date
such Shares were transferred to the optionholder.
Other Disposition. If an optionholder disposes of Shares acquired upon
exercise of a Non-Qualified Option in a taxable transaction, the optionholder
will recognize capital gain or loss in an amount equal to the difference between
the optionholder's basis (as discussed above) in the Shares sold and the amount
realized upon disposition. Any such capital gain or loss (and any capital gain
or loss recognized on a disqualifying disposition of Shares acquired upon
exercise of ISOs as discussed above) will be long-term or short-term depending
on whether the Shares were held for more than one year from the date such Shares
were transferred to the optionholder.
Alternative Minimum Tax. The exercise of ISOs (but not Non-Qualified
Options) will generally result in an upward adjustment to the optionholder's
alternative minimum taxable income ("AMTI") in the year of exercise by an amount
equal to the excess, if any, of the fair market value of the Shares on the date
of exercise over the exercise price. The basis of the Shares acquired, for
alternative minimum tax purposes, will equal the exercise price increased by the
prior upward adjustment of the taxpayer's AMTI due to the exercise of the ISO.
This will result in a corresponding downward adjustment to the optionholder's
AMTI in the year the Shares are disposed.
Consequences to the Company
There are no federal income tax consequences to the Company by reason of
the grant of ISOs or Non-Qualified Options or the exercise of ISOs (other than
disqualifying dispositions).
At the time the optionholder recognizes ordinary income from the exercise
of a Non-Qualified Option, the Company will be entitled to a federal income tax
deduction in the amount of the ordinary income so recognized (as described
above), provided that the Company satisfies its withholding obligations
described below. To the extent the optionholder recognizes ordinary income by
reason of a disqualifying disposition of the Shares acquired upon exercise of
ISOs, the Company will be entitled to a corresponding deduction in the year in
which the disqualifying disposition occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by any optionholder by reason of the exercise of a
Non-Qualified Option or a disqualifying disposition of an ISO. The Company will
be required to withhold income and employment taxes (and pay the employer's
share of employment taxes) with respect to ordinary income recognized by the
optionholder upon the exercise of Non-Qualified Options or a disqualifying
disposition of an ISO.
Other Tax Consequences
The foregoing discussion is not a complete description of the federal
income tax aspects of ISOs and Non-Qualified Options under the Plan. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, the foregoing
discussion does not address state or local tax consequences.
Required Vote For Approval
The approval of the Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and voting.
The Board of Directors recommends that the shareholders vote FOR the approval of
the Regan Holding Corp. 1998 Stock Option Plan, and your proxy will be so voted
unless you specify otherwise.
ITEM 3
RATIFICATION OF APPOINTMENT OF PRINCIPAL INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Coopers & Lybrand, L.L.P.
as principal independent auditors for the Company for the year ended December
31, 1997. Representatives of Coopers & Lybrand, L.L.P. are expected to be
present at the Annual Meeting and will be available to respond to appropriate
questions. Those representatives will have the opportunity to make a statement
if they desire to do so.
The approval of this appointment requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and voting.
The Board of Directors recommends that the shareholders vote FOR
ratification of the appointment of Coopers & Lybrand, L.L.P. as principal
independent auditors for the year ended December 31, 1997, and your proxy will
be so voted unless you specify otherwise.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the next Annual
Meeting of shareholders for inclusion in the Company's Proxy Statement and Proxy
form relating to such meeting must submit such proposal by January 31, 1998 to
the Company at its principal executive offices.
OTHER MATTERS
Management knows of no other matters other than as set forth in this Proxy
Statement which are to be considered at the meeting. If any other business shall
properly come before the meeting, the proxy holders will, as to such items, vote
the shares represented by management proxies in accordance with their best
judgment.
SOLICITATION OF PROXIES
It is expected that the solicitation will be primarily by mail. The cost of
solicitation by management will be borne by the Company. The Company will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their reasonable disbursements in forwarding solicitation material to
such beneficial owners. Proxies may also be solicited by certain of the
Company's directors and officers, without additional compensation, personally or
by mail, telephone, facsimile, telegram or otherwise.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 is being furnished to the shareholders concurrently with this
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
July 16, 1997
APPENDIX A
REGAN HOLDING CORP.
1998 STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN AND DEFINITIONS
1. Purpose. The purpose of the Regan Holding Corp. 1998 Stock Option Plan
is to provide an incentive to Employees and Directors of Regan Holding Corp. and
its Affiliates who are in a position to contribute materially to the long-term
success of the Corporation and/or its Affiliates, to increase their interest in
the welfare of the Corporation and its Affiliates and to aid in attracting and
retaining Employees and Directors of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:
a. "Affiliate" shall mean any parent or subsidiary of the Corporation
which meets the requirements of Section 425 of the Code.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Cause" shall mean repeated failure to properly perform assigned
duties, gross negligence, insubordination, commission of a felony or any
act injurious to the Corporation or an Affiliate involving dishonesty or
breach of any duty of confidentiality or loyalty.
d. "Change of Control" shall mean the happening of any of the
following events:
(i) the Corporation receives a report on Schedule 13D filed with
the Securities and Exchange Commission pursuant to Section 13(d) of
the Exchange Act disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or indirectly, of
thirty percent or more of the total combined voting power of all
classes of stock of the Corporation;
(ii) any person (as such term is defined in Section 13(d) of the
Exchange Act), group, corporation or other entity other than the
Corporation or a wholly-owned subsidiary of the Corporation, purchases
shares of any common stock of the Corporation (or securities
convertible into common stock) pursuant to a tender offer or exchange
offer for cash, securities or any other consideration, provided that
after consummation of the offer, the person, group, corporation or
other entity in question is the beneficial owner (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of thirty percent or more of the total combined voting power of all
classes of stock of the Corporation (calculated as provided in
paragraph (d) of Rule 13d-3 under the Exchange Act in the case of
rights to acquire common stock);
(iii) the shareholders of the Corporation approve (a) any
consolidation or merger of the Corporation in which the Corporation is
not the continuing or surviving corporation or pursuant to which
shares of Stock would be converted into cash, securities or other
property, or (b) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation; or
(iv) there shall have been a change in a majority of the members
of the Board of Directors of the Corporation within a 24 month period
unless the election or nomination for election by the Corporation's
shareholders of each new Director was approved by the vote of
two-thirds of the Directors then still in office who were in office at
the beginning of the 24 month period.
e. "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
f. "Committee" shall mean a committee designated by the Board which
committee shall administer the Plan as set forth in Section 4 of this
Article I of the Plan.
g. "Corporation" shall mean Regan Holding Corp., a California
corporation.
h. "Director" shall mean any individual who is a member of the Board
and/or a member of the Board of Directors of an Affiliate.
i. "Disability" shall mean a medically determinable physical or mental
condition which entitles the Employee or Director to benefits under the
Corporation's Long-Term Disability Plan.
j. "Employee" shall mean any employee, including officers, of the
Corporation or any of its Affiliates.
k. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
l. "Fair Market Value" shall mean on any date, (i) if the Stock is not
listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"),
the fair market value of the Stock on that date as determined by the Board,
or (ii) if the Stock is listed on a national securities exchange or is
quoted on Nasdaq, the closing price reported on the composite tape for
issues listed on such exchange on such date, or the closing price or the
average of the closing dealer "bid" and "asked" prices of the Stock on the
date of grant as quoted by Nasdaq, or if no trades shall have been reported
for such date, on the next preceding date on which there were trades
reported; provided, however, that if no quotations shall have been made
within the 10 business days preceding such date, the Fair Market Value
shall be determined by the Board as provided in clause (i) above.
m. "Grantee" shall mean an Employee or Director who has been granted a
Stock Option under the Plan.
n. "Incentive Stock Option" shall mean a Stock Option granted pursuant
to the Incentive Stock Option provisions as set forth in Article II of the
Plan.
o. "Non-Qualified Stock Option" shall mean a Stock Option granted
pursuant to the Non-Qualified Stock Option provisions as set forth in
Article III of the Plan.
p. "Option Period" shall mean the term of a Stock Option as fixed by
the Committee.
q. "Plan" shall mean the Regan Holding Corp. 1998 Stock Option Plan as
set forth herein and as amended from time to time.
r. "Stock" shall mean authorized but unissued shares of the Series A
Common Stock of the Corporation, no par value, or reacquired shares of the
Corporation's Series A Common Stock.
s. "Stock Option" shall mean an option, which shall include
Non-Qualified Stock Options and Incentive Stock Options, granted pursuant
to the Plan to purchase shares of Stock.
t. "Stock Option Agreement" shall mean the written instrument
evidencing the grant of one or more Stock Options under the Plan and which
shall contain the terms and conditions applicable to such grant.
u. "Ten Percent Shareholder" shall mean an Employee or Director who at
the time a Stock Option is granted thereto owns stock possessing more than
10% of the total combined voting power of all stock of the Corporation or
of its Affiliates.
3. Shares of Stock Subject to the Plan. There are hereby reserved for
issuance under the Plan 1,500,000 shares of Stock. Subject to the provisions of
Section 1 of Article IV, the Stock which may be issued pursuant to Stock Options
authorized to be granted under the Plan and the Stock which is subject to
outstanding but unexercised Stock Options under the Plan shall not exceed
1,500,000 shares of Stock in the aggregate. If a Stock Option shall expire and
terminate for any reason, in whole or in part, without being exercised, the
number of shares of Stock as to which such expired or terminated Stock Option
shall not have been exercised may again become available for the grant of Stock
Options.
There shall be no terms and conditions in a Stock Option which provide that
the exercise of an Incentive Stock Option reduces the number of shares of Stock
for which an outstanding Non-Qualified Stock Option may be exercised; and there
shall be no terms and conditions in a Stock Option which provide that the
exercise of a Non-Qualified Stock Option reduces the number of shares of Stock
for which an outstanding Incentive Stock Option may be exercised.
4. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the Committee shall
have authority to determine the eligibility of Employees and Directors to
participate in the Plan, to grant Stock Options under the Plan and to determine
whether Stock Options granted under the Plan shall be Non-Qualified Stock
Options or Incentive Stock Options, to interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to the Plan, to determine the terms
and provisions of Stock Option Agreements and to make all other determinations
necessary or advisable for the administration of the Plan. Any controversy or
claim arising out of or related to the Plan shall be determined unilaterally by
and at the sole discretion of the Committee. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Grantees and all person(s) claiming under or
through any Grantees.
There shall be 2 Committees under the Plan. Solely with respect to the
participation in the Plan of Employees and Directors who are subject to Section
16 of the Exchange Act or any successor statute ("Section 16"), a special
Committee comprised solely of 2 or more "non-employee directors" (as such term
is defined in Rule 16b-3(d)(1) promulgated by the Securities and Exchange
Commission under the Exchange Act) shall administer the Plan solely for purposes
of the Plan and the Stock Options granted under the Plan to satisfy the
applicable requirements of Rule 16b-3 promulgated by the Securities Exchange
Commission under the Exchange Act ("Rule 16b-3") with respect to such Employees
and Directors. For all other purposes of the Plan, a committee comprised of 3 or
more officers of the Corporation designated by the Board shall serve as the
Committee. Notwithstanding anything contained in this Section 4 to the contrary,
no member of the Committee shall have the authority to render any decision with
respect to his or her participation in or entitlement to benefits under the
Plan.
5. Amendment or Termination. The Board may, at any time, alter, amend,
suspend, discontinue, or terminate the Plan; provided, however, that no such
action shall adversely affect the right of any Grantee under any Stock Option
previously granted thereto hereunder.
6. Effective Date of Plan. The Plan shall become effective on January 1,
1998, subject to the approval by the shareholders of the Corporation.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
a. Solely Employees of the Corporation or its Affiliates shall be
eligible to receive Incentive Stock Options under the Plan.
b. When granting an Incentive Stock Option, the Committee shall
determine the purchase price of the Stock subject thereto, provided, that
the purchase price of each share of Stock subject to an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of a share of
the Stock on the date the Incentive Stock Option is granted; and provided,
further, that the purchase price of each share of Stock subject to an
Incentive Stock Option granted to a Ten Percent Shareholder shall not be
less than 110% of the Fair Market Value of a share of the Stock on the date
the Incentive Stock Option is granted.
c. No Incentive Stock Option shall be exercisable more than 10 years
from the date the Incentive Stock Option was granted; provided, however,
that an Incentive Stock Option granted to a Ten Percent Shareholder shall
not be exercisable more than 5 years from the date the Incentive Stock
Option was granted.
d. The Committee shall determine and shall designate from time to time
those Employees who are to be granted Incentive Stock Options and shall
specify the number of shares of Stock subject to each Incentive Stock
Option.
e. Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the option is granted) of Stock with
respect to which Incentive Stock Options are exercisable for the first time
by an Employee during any calendar year (under all such plans of the
Corporation and its Affiliates) shall not exceed $100,000.
f. The Committee, in its sole discretion, shall determine whether any
particular Incentive Stock Option shall become exercisable in one or more
installments, shall specify the installment dates, and, within the
limitations herein provided, shall determine the total period during which
the Incentive Stock Option is exercisable. Further, the Committee may make
such other provisions as may appear generally acceptable or desirable to
the Committee or necessary to qualify its grants under the provisions of
Section 422 of the Code.
g. The Committee may grant at any time new Incentive Stock Options to
an Employee who has previously received Incentive Stock Options or other
options whether such prior Incentive Stock Options or other options are
still outstanding, have previously been exercised in whole or in part or
are canceled in connection with the issuance of new Incentive Stock
Options. The purchase price of the new Incentive Stock Options may be
established by the Committee without regard to the existing Incentive Stock
Options or other options.
2. Exercise of Incentive Stock Options. The purchase price of Stock subject
to an Incentive Stock Option shall be payable on exercise of the Option in cash
or by check, bank draft or postal or express money order. The Committee, in its
discretion, may permit a Grantee to make partial or full payment of the purchase
price by the surrender of Stock owned by the Grantee prior to the date of
exercise. Shares of Stock surrendered in payment of the purchase price as
provided above shall be valued at the Fair Market Value thereof on the date of
exercise. Surrender of such stock shall be evidenced by delivery of the
certificate(s) representing such shares in such manner, and endorsed in such
form, or accompanied by stock powers endorsed in such form, as the Committee may
determine.
3. Termination of Employment. Except as provided otherwise in the
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this Section 3):
a. If a Grantee's employment with the Corporation or an Affiliate is
terminated, including termination by reason of retirement at or after age
62, or by reason of Disability (other than for Cause or voluntary
termination prior to retirement at or after age 62 or death) only those
Incentive Stock Options held by the Grantee which were immediately
exercisable at the date of the termination of the Grantee's employment
shall be exercisable by the Grantee following the termination of the
Grantee's employment. Such Incentive Stock Options must be exercised within
3 months after such termination of employment (but in no event after
expiration of the Option Period) or they shall be forfeited.
b. If a Grantee's employment with the Corporation or an Affiliate is
terminated for Cause or if the Grantee shall have voluntarily terminated
such employment other than by retirement at or after age 62, all then
outstanding Incentive Stock Options held by the Grantee shall expire
immediately and such Incentive Stock Options shall not be exercisable after
the date of the termination of Grantee's employment.
c. If a Grantee's employment with the Corporation or an Affiliate is
terminated by death, only those Incentive Stock Options held by the Grantee
which were immediately exercisable at the date of the Grantee's death shall
be exercisable by the representative of the Grantee's estate or
beneficiaries thereof to whom the Incentive Stock Options have been
transferred. Such Incentive Stock Options must be exercised by the earlier
of (i) 3 months from the date of the Grantee's death or (ii) the expiration
of the Option Period, or they shall be forfeited.
III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Non-Qualified Stock Options.
a. Employees and Directors of the Corporation or its Affiliates shall
be eligible to receive Non-Qualified Stock Options under the Plan.
b. The Committee shall determine and shall designate from time to time
those Employees and Directors who are to be granted Non-Qualified Stock
Options and shall specify the number of shares of Stock subject to each
Non-Qualified Stock Option.
c. The Committee may grant at any time new Non-Qualified Stock Options
to an Employee or Director who has previously received Non-Qualified Stock
Options or other options, whether such prior Non-Qualified Stock Options or
other options are still outstanding, have previously been exercised in
whole or in part or are canceled in connection with the issuance of new
Non-Qualified Stock Options.
d. When granting a Non-Qualified Stock Option, the Committee shall
determine the purchase price of the Stock subject thereto.
e. The Committee, in its sole discretion, shall determine whether any
particular Non-Qualified Stock Option shall become exercisable in one or
more installments, specify the installment dates and, within the
limitations herein provided, determine the total period during which the
Non-Qualified Stock Option is exercisable. Further, the Committee may make
such other provisions as may appear generally acceptable or desirable to
the Committee.
2. Exercise of Non-Qualified Stock Options. The purchase price of Stock
subject to a Non-Qualified Stock Option shall be payable on exercise of the
Option in cash or by check, bank draft or postal or express money order. The
Committee, in its discretion, may permit a Grantee to make partial or full
payment of the purchase price by the surrender of Stock owned by the Grantee
prior to the date of exercise. Shares of Stock surrendered in payment of the
purchase price as provided above shall be valued at the Fair Market Value
thereof on the date of exercise, surrender of such to be evidenced by delivery
of the certificates(s) representing such shares in such manner, and endorsed in
such form, or accompanied by stock powers endorsed in such form, as the
Committee may determine.
3. Termination of Employment or Director Status. Except as provided
otherwise in the applicable Stock Option Agreement (in which case the provisions
of the Stock Option Agreement shall control over the provisions of this Section
3):
a. If a Grantee's employment with the Corporation or an Affiliate or
status as a Director is terminated, including termination by reason of
retirement at or after age 62 or by reason of Disability (other than for
Cause or voluntary termination prior to retirement at or after age 62 or
death), only those Non-Qualified Stock Options held by the Grantee which
were immediately exercisable at the date of the termination of the
Grantee's employment or status as a Director shall be exercisable by the
Grantee following the termination of the Grantee's employment or status as
a Director. Such Non-Qualified Stock Options must be exercised within 3
months after such termination of employment or status as a Director (but in
no event after expiration of the Option Period) or they shall be forfeited.
b. If a Grantee's employment or status as a Director is terminated for
Cause or if the Grantee shall have voluntarily terminated such employment
or status as a Director other than by retirement at or after age 62, all
then outstanding Non-Qualified Stock Options held by the Grantee shall
expire immediately and such Non-Qualified Stock Options shall not be
exercisable after the date of the termination of the Grantee's employment
or status as a Director.
c. If a Grantee's employment with the Corporation or an Affiliate or
status as a Director is terminated by death, only those Non-Qualified Stock
Options held by the Grantee which were immediately exercisable at the date
of death shall be exercisable by the representative of the Grantee's estate
or beneficiaries thereof to whom the Non-Qualified Stock Options have been
transferred. Such Non-Qualified Stock Options must be exercised by the
earlier of (i) 3 months from the date of the Grantee's death or (ii) the
expiration of the Option Period, or they shall be forfeited.
IV. GENERAL PROVISIONS
1. Recapitalization Adjustments.
a. In the event of any change in capitalization affecting the Stock,
including, without limitation, a stock dividend or other distribution,
stock split, reverse stock split, recapitalization, consolidation,
subdivision, split-up, spin-off, split-off, combination or exchange of
shares or other form of reorganization or recapitalization, or any other
change affecting the Stock, the Board shall authorize and make such
proportionate adjustments, if any, as the Board deems appropriate to
reflect such change, including, without limitation, with respect to the
aggregate number of shares of Stock for which Stock Options in respect
thereof may be granted under the Plan, the number of shares of Stock
covered by each outstanding Stock Option, and the purchase price per share
of Stock in respect of outstanding Stock Options.
b. Any provision hereof to the contrary notwithstanding, in the event
the Corporation is a party to a merger or other reorganization, outstanding
Stock Options shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Stock Options by the surviving corporation or its
parent, for their continuation by the Corporation (if the Corporation is a
surviving corporation) for accelerated vesting and accelerated expiration
or for settlement in cash.
2. General.
a. Each Stock Option shall be evidenced by a Stock Option Agreement.
b. The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to be
retained as an Employee or Director, and all Employees and Directors shall
remain subject to discharge or removal to the same extent as if the Plan
were not in effect.
c. No Employee or Director, and no beneficiary or other person
claiming under or through him or her, shall have any right, title or
interest by reason of any Stock Option to any particular assets of the
Corporation, or any shares of Stock allocated or reserved for the purposes
of the Plan or subject to any Stock Option except as set forth herein. The
Corporation shall not be required to establish any fund or make any other
segregation of assets to assure the exercise of any Stock Option.
d. No Stock Option or right under the Plan shall or may be sold,
exchanged, assigned, pledged, encumbered, or otherwise hypothecated or
disposed of except by will or the laws of descent and distribution, and a
Stock Option shall be exercisable during the Grantee's lifetime only by the
Grantee or his conservator.
e. Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Option, and
the transferability of Stock acquired by exercise of a Stock Option, shall
be subject to all of the following conditions:
(1) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in effect
of any such registration or other qualification which the Board shall,
in its absolute discretion upon the advice of counsel, deem necessary
or advisable;
(2) The obtaining of any other consent, approval, or permit from
any state or federal governmental agency which the Board shall, in its
absolute discretion upon the advice of counsel, determine to be
necessary or advisable; and
(3) Each stock certificate issued pursuant to a Stock Option
shall bear such legends which the Corporation shall determine, in its
absolute discretion, are necessary or advisable, or which in the
opinion of counsel to the Corporation are required under applicable
federal or state securities laws.
f. All payments to Grantees or to their legal representatives shall be
subject to any applicable tax, community property, or other statutes or
regulations of the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the Corporation the amount
of any withholding taxes which the Committee, in its sole discretion, deems
necessary to be withheld in order to comply with any applicable statutes or
regulations with respect to a Stock Option or its exercise. In the event
that such payment is not made when due, the Corporation shall have the
right to deduct, to the extent permitted by law, from any payment or
settlement of any kind otherwise due to such person all or part of the
amount required to be withheld. If the Committee, in its sole discretion,
permits shares of Stock to be used to satisfy any such tax withholding,
such Stock shall be valued based upon the Fair Market Value of such Stock
as of the date the tax withholding is required to be made, such date to be
determined by the Committee. The Corporation shall not be required to issue
Stock until such obligations are satisfied.
g. In the case of a grant of a Stock Option to any Employee or
Director of an Affiliate of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares, if any, covered by the
Stock Option to the Affiliate, for such lawful consideration as the
Committee may specify, upon the condition or understanding that the
Affiliate will transfer the shares to the Employee or Director in
accordance with the terms of the Stock Option specified by the Committee
pursuant to the provisions of the Plan.
h. A Grantee entitled to Stock as a result of the exercise of an
Option shall not be deemed for any purpose to be, or have rights as, a
shareholder of the Corporation by virtue of such exercise, except to the
extent a stock certificate is issued therefor and then only from the date
such certificate is issued. No adjustments shall be made for dividends or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as otherwise provided herein.
The Corporation shall issue any stock certificates required to be issued in
connection with the exercise of a Stock Option with reasonable promptness
after such exercise.
i. The Plan and the grant or exercise of Stock Options granted under
the Plan shall be subject to, and shall in all respects comply with,
applicable California law.
j. Should the participation of any Employee or Director in the Plan be
subject to Section 16, it is the express intent of the Corporation that the
Plan and the Stock Options granted under the Plan satisfy and be
interpreted in a manner to achieve the result that the applicable
requirements of Rule 16b-3 shall be satisfied with respect to such
Employees and Directors, with the result that such Employees and Directors
shall be entitled to the benefits of Rule 16b-3 or other applicable
exemptive rules under Section 16. If any provision of the Plan or of any
Stock Option would otherwise frustrate or conflict with the intent of the
Corporation expressed in the immediately preceding sentence, to the extent
possible, such provision shall be interpreted and deemed amended so as to
avoid such conflict, and, to the extent of any remaining irreconcilable
conflict with such intent, the provision shall, solely with respect to
Employees and Directors subject to Section 16, be deemed void.
REGAN HOLDING CORP.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Regan Holding Corp. (the "Company") hereby
appoints Lynda L. Regan and R. Preston Pitts or any one of them (with full power
to act alone and to designate substitute) Proxies of the undersigned, with
authority to vote and act with respect to all shares of Common Stock of the
Company which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders to be held on August 22, 1997 at 8:00 a.m., Pacific time, at
Embassy Suites, 101 Melonis Parkway, San Rafael, California, and any adjournment
thereof, with all the powers the undersigned would possess if personally
present, upon matters noted below (each of which is being proposed by the
Company) and upon such other matters as may properly come before the meeting.
The shares represented by this Proxy shall be voted as follows:
1. Election of the following four (4) nominees as Directors to hold office
until the Annual Meeting of Shareholders in 1998 and until their successors
are duly elected: Steve C. Anderson, Ute Scott-Smith, R. Preston Pitts,
Lynda L. Regan. (Note: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name. Unless authority to vote
for all the foregoing nominees is withheld, this Proxy will be deemed to
confer authority to vote for every nominee whose name is not struck.)
____ FOR ALL FOREGOING NOMINEES ____ WITHHOLD AUTHORITY TO VOTE FOR ALL
NOMINEES
2. Approval of the Regan Holding Corp. 1998 Stock Option Plan.
____ FOR ____ AGAINST ____ ABSTAIN
3. Ratification of the appointment of Coopers & Lybrand, L.L.P. as the
Company's independent auditors for the year ended December 31, 1997.
____ FOR ____ AGAINST ____ ABSTAIN
4. Consideration of any other matters which may properly come before the
meeting or any adjournments of the meeting.
____ FOR ____ AGAINST ____ ABSTAIN
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" EACH PROPOSITION LISTED ON THE
REVERSE UNLESS OTHERWISE INDICATED. The Proxy is solicited on behalf of the
Board of Directors of Regan Holding Corp. and may be revoked prior to its
exercise.
___________________________ ______________________________ _________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER DATE
I do ____ do not ____ plan to attend the Annual Meeting.
Number attending: __________
NOTE: Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE.
