REGAN HOLDING CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 27, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Regan Holding
Corp. (the "Company"), to be held at Embassy Suites, 101 McInnis Parkway, San
Rafael, California, on May 27, 1998, at 9:00 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 1999 and until their successors are
duly elected;
(2) Ratification of the appointment of Coopers & Lybrand, L.L.P. as
the Company's independent auditors for the year ended December
31, 1998; and,
(3) 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 March 31, 1998, 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
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1179 N. McDowell Boulevard
Petaluma, California 94954
April 22, 1998
REGAN HOLDING CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held May 27, 1998
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, on May 27, 1998, at 9:00 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prior to the Annual Meeting, and which have not been revoked, will unless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 March 31, 1998, 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 26,077,963 shares of Common Stock-Series A, no par value (the
"Series A Stock"), and 600,618 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
April 22, 1998, the Company is mailing its Annual Report on Form 10-K for the
year ended December 31, 1997, together with this Proxy Statement and the
enclosed Proxy, to holders 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
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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.
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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. All four of the
nominees are currently Directors of the Company.
Director
Name Principal Occupation Since
Lynda L. Regan Ms. Regan, born in 1948, has served 1990
as Chairman and Chief Executive
Officer of the Company since 1992. She
was Senior Vice President and Treasurer
from 1990 to 1992.
Steve C. Anderson Mr. Anderson, born in 1948, has been 1990
a partner in Hoalst Anderson, an
independent insurance agency, since 1983.
He is a member of the National
Association of Life Underwriters and CLU
Society.
R. Preston Pitts Mr. Pitts, born in 1951, has served 1995
as Chief Financial Officer of the
Company since 1994, as President and
Secretary of the Company since
February 1997, and as Chief
Operating Officer of the Company
since April, 1998. 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.
Ute Scott-Smith Ms. Scott-Smith, born in 1960, 1997
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.
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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 has 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 L. Regan
and Moody Insurance Group ("MIG"), Ms. 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, the following individuals serve as officers of the
Company:
H. Lynn Stafford served as Vice President of Operations of the Company from
1995 to July, 1997, and as Information Systems Officer since August, 1997. Prior
to that time, he served as Chief Operating Officer for Lincoln Liberty Life
Insurance Company and First Delaware Life Insurance Company.
Gregory C. Egger has served as Chief Marketing Officer of the Company since
August, 1997. Prior to that time, Mr. Egger was Executive Vice President for
American Security Group.
David A. Skup has served as Chief Financial Officer of the Company since
July, 1997. Previously, Mr. Skup was Vice President in charge of Internal Audit
for Independent Insurance Group, Inc. and was Senior Audit Manager for Deloitte,
Haskins & Sells.
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 March 31, 1998. No
Director or officer owns any Series B Common Stock.
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<TABLE>
<CAPTION>
Name Position Total Percent
<S> <C> <C> <C>
Lynda L. Regan Director, Chairman &
Chief Executive Officer 11,379,922 42.7% (1)
R. Preston Pitts Director, President &
Chief Operating Officer 800,000 3.0%
Ute Scott-Smith Director 441,739 1.7%
Steve C. Anderson Director
69,714 *
Directors and 12,691,375 47.6%
Officers as a ========== =========
group
</TABLE>
*Indicates that the percentage of the outstanding shares beneficially owned
is less than one percent (1%).
(1) Includes 1,700 shares owned by Ms. Regan 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
Lynda L. 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 Ute
Scott-Smith, 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 1997, the
Audit Committee held two 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.
Directors' Meetings
During the fiscal year ended December 31, 1997, four meetings of the Board
of Directors of the Company were held.
Directors' Compensation
The Company compensates outside Directors for attending Board and committee
meetings at $2,000 per meeting. Currently, Steve C. Anderson and Ute Scott-Smith
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.
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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 1997, 1996
and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------
Annual Annual All Other
Name and Position Year Salary Bonus (1) Other Compensation
- ----------------- ---- ------ --------- ----- ------------
<S> <C> <C> <C> <C> <C>
Lynda L. Regan, 1997 $ 407,712 $ 167,916 $ 4,750(2) $ --
Chief Executive 16,825(5)
Officer 1996 408,894 52,290 4,750(2) --
16,824(5)
1995 408,067 181,534 4,620(2) --
11,216(5)
R. Preston Pitts, 1997 $ 300,000 $149,916 $ 4,750(2) $ --
President and Chief 1996 300,000 72,290 4,750(2) --
Operating Officer 1995 300,000 81,534 4,620(2) --
Gregory C Egger, (4) 1997 $ 77,885 $52,046 $ -- $ --
Chief Marketing
Officer
David A. Skup, (4) 1997 $ 60,577 $20,661 $ -- $ --
Chief Financial
Officer
H. Lynn Stafford, 1997 $ 139,231 $ 73,416 $ 4,750(2) $ --
Information Systems 1996 130,059 31,790 4,750(2) --
Officer 1995 50,000 32,368 -- --
Ute Scott-Smith, (6) 1997 $ 66,754 $ -- $ 4,750(2) $ --
Senior Vice President 1996 177,318 47,290 4,750(2) --
1995 175,000 56,534 4,620(2) --
80,313(3)
</TABLE>
(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) Mr. Skup and Mr. Egger were elected officers of the Company in July, 1997,
and August, 1997, respectively.
(5) The Company pays interest on debt related to a split dollar life insurance
policy under which Ms. Regan is the beneficiary.
(6) Ms. Scott-Smith resigned effective April 4, 1997, and became a Director in
August, 1997.
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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 to
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
third 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 1997, the Chief Executive and President were 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
1997 included: (i) management of the Company to achieve net income targets; (ii)
implementation of stock option incentive programs for producers and employees;
and, (iii) implementation of a formal plan to recruit and retain programming
personnel.
In addition to the salary based bonuses described above, each executive
officer received a bonus based on the performance of the Company during 1997. An
amount equal to 1.25% of the Company's net income for 1997 was allocated to each
of the five individuals who served as executive officers as of the end of 1997.
One third of the amount allocated to each officer was paid in February of 1998.
The remaining two-thirds will be paid in equal installments in February of 1999
and 2000, contingent upon the Company achieving net income growth of 12% per
year in 1998 and 15% in 1999, and provided that such
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individual is employed with the Company on the date that the installment is to
be paid.
In determining Lynda L. Regan's level of compensation for 1997, 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 1997 at $407,712 and $167,916, respectively.
Respectfully submitted,
Lynda L. Regan
Steve C. Anderson
R. Preston Pitts
Ute Scott-Smith
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
Corporation, 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. 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, $.78 per share
commencing December 31, 1996, $.84 per share commencing June 30, 1997, and $.96
per share commencing December 31, 1997. 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 Chief Executive Officer of the Company, is also Chairman of
the Board of Directors and R. Preston Pitts, who is President and Chief
Operating 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.
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Certain Relationships and Related Transactions
The Company paid Ashley A. Penney, a Director until August, 1997, $133,113
for services provided as a human resource consultant during 1997.
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, 1997, 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, 1997.
ITEM 2
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, 1998. 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, 1998, and your proxy will be so voted unless you
specify otherwise.
SHAREHOLDERS 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, 1999, to
the Company at its principal executive offices.
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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 proxy 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, 1997, is being furnished to shareholders concurrently with this
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
April 22, 1998
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