-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SstNKL+Nl3G5+XYPxcJehb3gWRAeMwhsoVxMx3lc5XP5JQZhx3kf6BTQV0kNg3IT CbakgijxGu5poMFm7qjM/A== 0000950005-03-000846.txt : 20030815 0000950005-03-000846.hdr.sgml : 20030815 20030814175526 ACCESSION NUMBER: 0000950005-03-000846 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGAN HOLDING CORP CENTRAL INDEX KEY: 0000870069 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 680211359 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19704 FILM NUMBER: 03849090 BUSINESS ADDRESS: STREET 1: 2090 MARINA AVE CITY: PETALUMA STATE: CA ZIP: 94954 BUSINESS PHONE: 7077788638 MAIL ADDRESS: STREET 1: 2090 MARINA AVE CITY: PETALUMA STATE: CA ZIP: 94954 10-Q 1 p17538_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2003 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____________ to ____________. Commission file number 000-19704 Regan Holding Corp. (Exact name of registrant as specified in its charter) California 68-0211359 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2090 Marina Avenue, Petaluma, California 94954 (Address of principal executive offices) (Zip Code) 707-778-8638 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes[ ] No[X] Applicable Only To Corporate Issuers: Indicate the number of shares outstanding of the registrant's common stock, as of August 7, 2003: Common Stock-Series A 23,849,000 Common Stock-Series B 560,000 PART I. FINANCIAL INFORMATION Item 1. Financial Statements REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Balance Sheet
June 30, 2003 December 31, 2002 ------------- ----------------- (Unaudited) Assets Cash and cash equivalents $ 9,982,000 $ 4,793,000 Trading investments 5,449,000 4,261,000 Available-for-sale investments 6,851,000 4,890,000 Accounts receivable, net of allowance of $764,000 and $760,000 at June 30, 2003 and December 31, 2002 4,923,000 3,274,000 Prepaid expenses and deposits 759,000 2,122,000 ----------- ------------ Total current assets 27,964,000 19,340,000 ----------- ------------ Net fixed assets 25,123,000 25,841,000 Deferred tax assets 1,739,000 1,715,000 Goodwill 1,170,000 1,170,000 Intangible assets, net 285,000 332,000 Other assets 1,583,000 1,649,000 ----------- ------------ Total non current assets 29,900,000 30,707,000 ----------- ------------ Total assets $57,864,000 $ 50,047,000 =========== ============ Liabilities, redeemable common stock, and shareholders' equity Liabilities Accounts payable and accrued liabilities $10,039,000 $ 8,906,000 Income taxes payable 3,847,000 2,327,000 Current portion of note payable 112,000 109,000 ----------- ------------ Total current liabilities 13,998,000 11,342,000 ----------- ------------ Deferred compensation payable 5,408,000 4,241,000 Other liabilities 267,000 190,000 Note payable, less current portion 7,140,000 7,199,000 ----------- ------------ Total non current liabilities 12,815,000 11,630,000 ----------- ------------ Total liabilities 26,813,000 22,972,000 ----------- ------------ Redeemable common stock, Series A and B 9,635,000 10,115,000 ----------- ------------ Shareholders' equity Preferred stock, no par value: Authorized: 100,000,000 shares; No shares issued or outstanding -- -- Series A common stock, no par value: Authorized: 45,000,000 shares; issued and outstanding: 20,322,000 shares and 20,495,000 shares at June 30, 2003 and December 31, 2002 3,143,000 3,324,000 Common stock committed 25,000 25,000 Paid-in capital 6,508,000 6,499,000 Retained earnings 11,717,000 7,135,000 Accumulated other comprehensive income (loss), net 23,000 (23,000) ----------- ------------ Total shareholders' equity 21,416,000 16,960,000 ----------- ------------ Total liabilities, redeemable common stock, and shareholders' equity $57,864,000 $ 50,047,000 =========== ============
See notes to financial statements. 2 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Operations (Unaudited)
For the Three Months Ended June 30, For the Six Months Ended June 30, ----------------------------------- ----------------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Revenue Marketing allowances $ 10,709,000 $ 5,027,000 $ 18,586,000 $ 10,055,000 Commissions 6,217,000 4,272,000 11,262,000 8,281,000 Administrative fees 3,552,000 3,161,000 7,136,000 5,787,000 Other income 1,713,000 205,000 2,540,000 386,000 ------------ ------------ ------------ ------------ Total revenue 22,191,000 12,665,000 39,524,000 24,509,000 ------------ ------------ ------------ ------------ Expenses Selling, general and administrative 15,586,000 11,170,000 27,873,000 22,470,000 Depreciation and amortization 1,040,000 1,040,000 2,120,000 2,089,000 Other 785,000 750,000 1,685,000 1,567,000 ------------ ------------ ------------ ------------ Total expenses 17,411,000 12,960,000 31,678,000 26,126,000 ------------ ------------ ------------ ------------ Operating income (loss) 4,780,000 (295,000) 7,846,000 (1,617,000) ------------ ------------ ------------ ------------ Other income Investment income, net 65,000 350,000 155,000 397,000 Interest expense (14,000) (28,000) (20,000) (36,000) ------------ ------------ ------------ ------------ Total other income, net 51,000 322,000 135,000 361,000 ------------ ------------ ------------ ------------ Income (loss) before income taxes 4,831,000 27,000 7,981,000 (1,256,000) Provision for (benefit from) income taxes 1,943,000 29,000 3,218,000 (456,000) ------------ ------------ ------------ ------------ Net income (loss) before accretion of redeemable common stock 2,888,000 (2,000) 4,763,000 (800,000) Accretion of redeemable common stock (70,000) -- (70,000) -- ------------ ------------ ------------ ------------ Net income (loss) available for common shareholders $ 2,818,000 $ (2,000) $ 4,693,000 $ (800,000) ============ ============ ============ ============ Basic earnings (loss) per share: Earnings (loss) available for common shareholders $ 0.11 $ -- $ 0.19 $ (0.03) Weighted average shares outstanding 24,530,000 25,136,000 24,636,000 25,237,000 Diluted earnings (loss) per share: Earnings (loss) available for common shareholders $ 0.10 $ -- $ 0.17 $ (0.03) Weighted average shares outstanding 27,344,000 25,136,000 27,477,000 25,237,000
See notes to financial statements. 3 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Unaudited)
Series A Common Stock Common ------------------------------- Stock Paid-in Shares Amount Committed Capital ------------ ----------- --------- ---------- Balance December 31, 2002 20,495,000 $ 3,324,000 $25,000 $6,499,000 Comprehensive income, net of tax: Net income Net unrealized gains on investments Less: reclassification adjustment for losses included in net income Total comprehensive income Retirement upon voluntary repurchases of common stock (173,000) (181,000) Accretion to redemption value Producer stock option expense 9,000 ----------- ----------- ------- ---------- Balance June 30, 2003 (unaudited) 20,322,000 $ 3,143,000 $25,000 $6,508,000 =========== =========== ======= ========== Accumulated Other Retained Comprehensive Earnings Income (Loss) Total ----------- ------------- ------------ Balance December 31, 2002 $ 7,135,000 $ (23,000) $ 16,960,000 Comprehensive income, net of tax: Net income 4,763,000 4,763,000 Net unrealized gains on investments 56,000 56,000 Less: reclassification adjustment for losses included in net income (10,000) (10,000) ------------- Total comprehensive income 4,809,000 Retirement upon voluntary repurchases of common stock (111,000) (292,000) Accretion to redemption value (70,000) (70,000) Producer stock option expense 9,000 ------------ ---------- ------------- Balance June 30, 2003 (unaudited) $11,717,000 $ 23,000 $ 21,416,000 ============ ========== =============
See notes to financial statements. 4 REGAN HOLDING CORP. AND SUBSIDIARIES Consolidated Statement of Cash Flows (Unaudited)
For the Six Months Ended June 30, --------------------------------- 2003 2002 ----------- ----------- Cash flows from operating activities: Net income (loss) $ 4,763,000 $ (800,000) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization 2,120,000 2,089,000 Losses on write-off of fixed assets 73,000 243,000 Provision for bad debts 46,000 121,000 Producer stock option expense 9,000 4,000 Amortization premium or discount on investments 36,000 39,000 Realized (gains) losses on sales of investments, net 16,000 (211,000) Unrealized (gains) losses on trading securities, net (614,000) 433,000 Changes in operating assets and liabilities: Purchases of trading securities, net (573,000) (4,816,000) Accounts receivable (1,695,000) 370,000 Prepaid expenses and deposits 1,363,000 (933,000) Income taxes receivable and payable 1,520,000 (106,000) Deferred tax assets (55,000) (361,000) Accounts payable and accrued liabilities 1,133,000 (492,000) Deferred compensation payable 1,167,000 48,000 Other operating assets and liabilities 143,000 (116,000) ----------- ----------- Net cash provided by (used in) operating activities 9,452,000 (4,488,000) ----------- ----------- Cash flows from investing activities: Purchases of available-for-sale securities (5,868,000) (959,000) Proceeds from sales and maturities of available-for-sale securities 3,931,000 8,081,000 Purchases of fixed assets (1,428,000) (3,497,000) Acquisition of prospectdigital assets -- (225,000) ----------- ----------- Net cash provided by (used in) investing activities (3,365,000) 3,400,000 ----------- ----------- Cash flows from financing activities: Proceeds from loans payable -- 2,362,000 Payments toward notes payable (56,000) (260,000) Repurchases of redeemable common stock (550,000) (691,000) Voluntary repurchases of common stock (292,000) (385,000) ----------- ----------- Net cash provided by (used in) financing activities (898,000) 1,026,000 ----------- ----------- Net increase (decrease) in cash and cash equivalents 5,189,000 (62,000) Cash and cash equivalents, beginning of period 4,793,000 1,376,000 ----------- ----------- Cash and cash equivalents, end of period $ 9,982,000 $ 1,314,000 =========== ===========
See notes to financial statements. 5 REGAN HOLDING CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. Basis of Presentation The accompanying Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts of Regan Holding Corp. (the "Company") and its wholly owned subsidiaries. All intercompany transactions have been eliminated. The statements are unaudited but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the Company's consolidated financial position and results of operations. The results for the three months and six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the entire year. These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 filed by the Company with the Securities and Exchange Commission on March 31, 2003. 2. Stock Options The Company has a stock-based employee compensation plan and accounts for this plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under the plan had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation:
For the Three Months Ended June 30, For the Six Months Ended June 30, ----------------------------------- ----------------------------------- 2003 2002 2003 2002 ------------- --------- ------------- ------------- Net income (loss) available for common shareholders, as reported: $ 2,818,000 $ (2,000) $ 4,693,000 $ (800,000) Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax effects (105,000) (123,000) (207,000) (234,000) ------------- --------- ------------- ------------- Pro forma net income (loss) available for common shareholders $ 2,713,000 $(125,000) $ 4,486,000 $ (1,034,000) ============= ========= ============= ============= Earnings (loss) per share: Basic - as reported $ 0.11 $ -- $ 0.19 $ (0.03) Basic - pro forma $ 0.11 $ -- $ 0.18 $ (0.04) Diluted - as reported $ 0.10 $ -- $ 0.17 $ (0.03) Diluted - pro forma $ 0.10 $ -- $ 0.16 $ (0.04)
3. Recent Accounting Pronouncement In May 2003, the Financial Accounting Standards Board issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. Many of these instruments were previously classified as equity. The provisions of SFAS 150 will require that some of these instruments now be classified as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for existing financial instruments beginning on July 1, 6 2003. The Company's management anticipates that the implementation of SFAS 150 will not have a material effect on its consolidated results of operations or financial position. 4. Performance Bonus During the first quarter of 2003, Legacy Marketing Group began earning a quarterly performance bonus from sales of fixed annuity and life products under the terms of one of its insurance carrier partner contracts. Amounts are earned when fixed and determinable and all revenue recognition criteria have been met. The Company has recorded revenue of $1.4 million and $2 million for the three months and six months ended June 30, 2003. These amounts are included in Other income. 5. Sales Incentive Program During 2003, Legacy Marketing Group initiated a sales incentive program for its top independent insurance producers ("Wholesalers"). This program offers bonuses to Wholesalers based primarily on their achievement of predetermined annual sales targets. Bonuses will be paid to qualifying Wholesalers during the first quarter of 2004. As of June 30, 2003, Legacy Marketing Group had accrued an estimated liability of $2 million related to the sales incentive program. 6. Commitments and Contingencies During the second quarter of 2003, the Company amended its Shareholder Agreement with Lynda L. Regan, Chief Executive Officer of the Company and Chairman of the Company's Board of Directors. Under the terms of the amended agreement, upon the death of Ms. Regan, the Company would have the option (but not the obligation) to purchase from Ms. Regan's estate all shares of common stock that were owned by Ms. Regan at the time of her death, or were transferred by her to one or more trusts prior to her death. In addition, upon the death of Ms. Regan, her heirs would have the option (but not the obligation) to sell their inherited shares to the Company. The purchase price to be paid by the Company shall be equal to 125% of the fair market value of the shares. The purchase price based on the fair market value of Ms. Regan's shares at June 30, 2003 was equal to $28.2 million. The Company has purchased two life insurance policies with a combined face amount of $29 million for the purpose of funding this potential obligation upon Ms. Regan's death. The Company is involved in various claims and legal proceedings arising in the ordinary course of business. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on discussions with legal counsel, that the ultimate disposition of these claims will not have a material adverse effect on its financial condition, cash flows or results of operations. 7. Earnings (Loss) per Share
Per-share Income/(Loss) Shares Amount ------------- ------ ------ For the three months ended June 30, 2003 Net income $ 2,888,000 Accretion of redeemable common stock (70,000) ----------- Income available to common shareholders 2,818,000 24,530,000 $ 0.11 Effect of dilutive securities--employee and producer stock options -- 2,814,000 ----------- ---------- Diluted earnings per share $ 2,818,000 27,344,000 $ 0.10 =========== ========== ======== For the three months ended June 30, 2002 Basic and diluted loss available to common shareholders $ (2,000) 25,136,000 $ -- =========== ========== ======== For the six months ended June 30, 2003 Net income $ 4,763,000 Accretion of redeemable common stock (70,000) ----------- Income available to common shareholders 4,693,000 24,636,000 $ 0.19 Effect of dilutive securities--employee and producer stock options -- 2,841,000 ----------- ---------- Diluted earnings per share $ 4,693,000 27,477,000 $ 0.17 =========== ========== ======== For the six months ended June 30, 2002 Basic and diluted loss available to common shareholders $ (800,000) 25,237,000 $ (0.03) =========== ========== ========
The diluted loss per share calculations for both the three months and six months ended June 30, 2002 exclude antidilutive stock options of 4.1 million. 8. Comprehensive Income (loss) Total comprehensive income (loss) for the three months ended June 30, 2003 and 2002 was $2,934,000 and $(113,000). For the six months ended June 30, 2003 and 2002, total comprehensive income (loss) was $4,809,000 and $(874,000). 7 9. Segment Information Total Revenue --------------------------------------------------------- Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2003 2002 2003 2002 ------------- ------------- ------------ -------------- Legacy Marketing Group $21,573,000 $12,066,000 $ 38,394,000 $ 23,413,000 Legacy Financial Services, Inc. 654,000 680,000 1,236,000 1,226,000 Imagent Online, LLC 48,000 21,000 88,000 41,000 Values Financial Network, Inc. 9,000 1,000 11,000 3,000 Other 64,000 30,000 112,000 63,000 Intercompany Eliminations (157,000) (133,000) (317,000) (237,000) ----------- ----------- ------------ ------------ Total $22,191,000 $12,665,000 $ 39,524,000 $ 24,509,000 =========== =========== ============ ============ Net Income (Loss) -------------------------------------------------------- Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Legacy Marketing Group $3,358,000 $ 445,000 $5,772,000 $ 159,000 Legacy Financial Services, Inc. (219,000) (143,000) (487,000) (366,000) Imagent Online, LLC (146,000) (161,000) (300,000) (331,000) Values Financial Network, Inc. (144,000) (155,000) (285,000) (288,000) Other 39,000 12,000 63,000 26,000 Intercompany Eliminations -- -- -- -- ---------- ---------- ---------- ---------- Total $2,888,000 $ (2,000) $4,763,000 $ (800,000) ========== ========== ========== ========== Total Assets ----------------------------- June 30, December 31, 2003 2002 ---- ---- Legacy Marketing Group $ 59,286,000 $51,294,000 Legacy Financial Services, Inc. 1,486,000 1,188,000 Imagent Online, LLC 726,000 852,000 Values Financial Network, Inc. 2,692,000 2,969,000 Other 384,000 194,000 Intercompany Eliminations (6,710,000) (6,450,000) ------------- ------------- Total $ 57,864,000 $ 50,047,000 ============= ============= 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain statements contained in this document, including Management's Discussion and Analysis of Financial Condition and Results of Operations, that are not historical facts, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of Regan Holding Corp. and its businesses to be materially different from that expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, among other things, the following: general economic and business conditions; political and social conditions; government regulations, especially regulations affecting the insurance industry; demographic changes; the ability to adapt to changes resulting from acquisitions or new ventures; and various other factors referred to in Management's Discussion and Analysis of Financial Condition and Results of Operations. Regan Holding Corp. assumes no obligation to update forward-looking statements to reflect actual results or changes in or additions to the factors affecting such forward-looking statements. Regan Holding Corp. Consolidated We had consolidated net income of $2.9 million and $4.8 million during the three months and six months ended June 30, 2003 compared to consolidated net losses of $2,000 and $800,000 during the same periods in 2002. These favorable changes of $2.9 million and $5.6 million are primarily due to increased net income at Legacy Marketing Group ("Legacy Marketing") and in our Other segment, partially offset by increased losses by Legacy Financial Services, Inc. ("Legacy Financial"). Legacy Marketing During the second quarter of 2003, Legacy Marketing earned net income of $3.4 million, compared to net income of $445,000 during the second quarter of 2002. For the six months ended June 30, 2003, Legacy Marketing had net income of $5.8 million, compared to net income of $159,000 during the same period in 2002. These improved results are primarily due to increased revenue, partially offset by increased expenses. During the three months and six months ended June 30, 2003, Legacy Marketing commissions and marketing allowances increased $7.7 million (88%) and $11.6 million (67%) compared to the same periods of 2002. Legacy Marketing's sales increase was driven by sales of declared rate and equity index annuities, reflecting a shift in the marketplace toward more traditional fixed income-based annuities. In addition, sales on behalf of Investors Insurance Corporation, which began and were nominal in the second quarter of 2002, contributed $4.3 million and $7.2 million of commissions and marketing allowances during the three months and six months ended June 30, 2003. The overall increase in commissions and marketing allowances during 2003 was offset in part by the effect of discontinuing several annuity products issued by Transamerica Life Insurance and Annuity Company ("Transamerica"). Legacy Marketing will continue to administer these annuity products and to accept additional premium payments, subject to applicable additional deposit rules for these products. The discontinued products accounted for a nominal amount of our total consolidated revenue for the quarter ended June 30, 2003 and approximately 30% of our total consolidated revenue for the quarter ended June 30, 2002. For the six months ended June 30, 2003 and 2002, the discontinued products accounted for approximately 5% and 36% of our total consolidated revenue. Sales of recently introduced Transamerica products have partially offset the effect of the discontinued Transamerica products. During the second quarter of 2003, American National Life Insurance Company ("American National") reduced the crediting rates of several annuity products marketed by Legacy Marketing. As a result, sales of annuity products on behalf of American National began to decrease during the second quarter of 2003, and we believe this trend may continue for the remainder of 2003. It is possible that in the short term, overall consolidated revenues may also decline due to this event. Legacy Marketing is developing new annuity products with American National that may result in increased sales for Legacy Marketing in the long term. In July 2003, Legacy Marketing announced that it would discontinue marketing the AssureMark (SM) fixed annuity product issued by John Hancock Variable Life Insurance Company ("John Hancock") beginning in August 9 2003. As a result, sales of annuity products on behalf of John Hancock will decrease during the remainder of 2003. Legacy Marketing is developing new annuity products with John Hancock that may result in increased sales in the long term. Administrative fees increased $391,000 (12%) and $1.4 million (23%) during the three months and six months ended June 30, 2003 compared to the same periods in 2002 primarily due to increased issuing and maintenance fees. Other income increased $1.4 million (847%) and $2 million (728%) during the three months and six months ended June 30, 2003 compared to the three months and six months ended June 30, 2002. This was primarily due to recognition of a quarterly performance bonus from sales of fixed annuity and life products under the terms of one of the Company's insurance carrier partner contracts. As of June 30, 2003, Legacy Marketing sold and administered products on behalf of four unaffiliated insurance carriers: American National, Transamerica, Investors Insurance Corporation, and John Hancock. Legacy Marketing also performs administrative services for products of IL Annuity and Insurance Company ("IL Annuity"). As indicated below, the agreements with these carriers generated a significant portion of our total consolidated revenue (sales on behalf of Investors Insurance Corporation began in the second quarter of 2002): Three months ended June 30, Six months ended June 30, ----------------------------- -------------------------- 2003 2002 2003 2002 ------------- ------------- ------------- ----------- American National 46% 14% 44% 13% Transamerica 20% 59% 22% 62% Investors Insurance Corporation 19% - 18% - IL Annuity 5% 11% 5% 13% John Hancock 3% 8% 4% 6% Our consolidated revenues are derived primarily from sales and administration of the following annuity products:
Three months ended June 30, Six months ended June 30, --------------------------- -------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- --------- BenchMark(SM) series (sold on behalf of American National) 46% 12% 43% 11% SelectMark(R) series (sold on behalf of Transamerica) 20% 59% 22% 61% MarkOne(SM) series (sold on behalf of Investors Insurance Corporation) 19% -- 18% -- VisionMark(R) series (sold on behalf of IL Annuity) 3% 8% 4% 12% AssureMark(SM) series (sold on behalf of John Hancock) 3% 8% 4% 6%
We believe that sales of the BenchMark(SM) series sold on behalf of American National and sales of the AssureMark(SM) series sold on behalf of John Hancock may decrease during the remainder of 2003, as mentioned above. Legacy Marketing expenses increased $4.3 million (37%) and $5.4 million (23%) during the three months and six months ended June 30, 2003 compared to the same periods in 2002 primarily due to increases in selling, general and administrative expenses. Selling, general and administrative expenses increased $4.4 million (43%) and $5.4 million (27%) primarily due to increases in sales promotion and support expenses, compensation, insurance, and courier expenses. Sales promotion and support expenses increased primarily due to bonuses for our top independent insurance producers based on their achievement, for the year 2003, of predetermined annual sales targets. Compensation increased primarily due to salary increases, incentive based compensation based on our consolidated year-to-date results, temporary help due to increased business volume, and benefits. Increased insurance expenses reflected rising prices for errors and omissions and workers' compensation insurance coverage. The increase in courier expenses was related to increased business volume. During 2002, we began an evaluation of an internal use software project that we initially licensed in 1998. We began this project intending to replace our administration system after the vendor of our existing administration system required us to migrate from the existing system to an alternative platform. In late 2002, we learned from our vendor that we might be able to retain our existing system. A financial analysis completed in February 2003 indicated that 10 remaining on the existing system may provide greater benefit than converting to a new system even after considering the investment to date. In July 2003, our vendor concluded that we could continue to use our existing system for an extended period. We are currently performing a rigorous evaluation of our Company-wide technological needs, which includes an assessment of the viability of the existing system. We expect to complete this assessment within the next few months. To date, we have $4.4 million capitalized relating to this software. If our final decision is to abandon the existing software, we estimate that approximately $1.2 million of this software will have continuing value and be used to upgrade our existing system. In the event we do make a decision to abandon the software, we expect to write off the remaining $3.2 million in the period we make that decision. Legacy Financial Legacy Financial incurred net losses of $219,000 during the second quarter of 2003 compared to net losses of $143,000 during the second quarter of 2002, primarily due to decreased revenues and increased expenses. For the six months ended June 30, 2003, Legacy Financial had net losses of $487,000 compared to net losses of $366,000 during the same period in 2002, primarily due to increased expenses. Legacy Financial revenue decreased $26,000 (4%) during the second quarter of 2003 compared to the same period in 2002, primarily due to decreased marketing allowances and commissions related to lower overall sales volume and changes in product mix. On a year-to-date basis, revenue is relatively flat compared to the prior year. Legacy Financial expenses increased $118,000 (13%) and $218,000 (12%) during the three months and six months ended June 30, 2003 compared to the same periods in 2002. The increase in the second quarter of 2003 expenses is primarily due to an increase in selling, general and administrative expenses. Selling, general and administrative expenses increased $104,000 (13%) primarily attributable to increased incentive compensation, increased errors and omissions insurance premiums, and increased legal expenses related to routine matters, partially offset by lower occupancy costs resulting from Legacy Financial's move to the Company's headquarters during 2002. On a year-to-date basis, selling, general and administrative expenses increased $131,000 (8%) primarily due to increased incentive compensation, increased errors and omissions insurance premiums, and increased legal expenses related to routine matters, partially offset by lower occupancy costs resulting from Legacy Financial's move to the Company's headquarters during 2002. Other expenses increased $87,000 (52%) primarily due to increased insurance costs and equipment maintenance expenses. Imagent Online, LLC Imagent Online, LLC ("Imagent") had net losses of $146,000 during the second quarter of 2003 compared to net losses of $161,000 during the second quarter of 2002. During the six months ended June 30, 2003, Imagent had net losses of $300,000 compared to net losses of $331,000 during the same period in 2002. The reduced losses are primarily due to increased revenues partially offset by increased expenses. Revenues increased $27,000 (129%) and $47,000 (115%) during the three months and six months ended June 30, 2003 compared to comparable prior year periods primarily due to increased subscriptions and licensing revenues. Expenses increased $22,000 (8%) and $15,000 (3%) during the second quarter and year-to-date periods primarily due to increased depreciation and amortization, partially offset by decreased postage expenses related to a direct marketing campaign. Values Financial Network, Inc. Values Financial Network, Inc. ("VFN") had net losses of $144,000 during the second quarter of 2003 compared to net losses of $155,000 during the second quarter of 2002. During the six months ended June 30, 2003, VFN had net losses of $285,000 compared to net losses of $288,000 during the same period in 2002. The reduced losses are primarily due to increased revenues, partially offset by increased expenses. Revenues increased $8,000 (800%) and $8,000 (267%) during the quarterly and year-to-date periods primarily due to rental income from a tenant who began subleasing office space from VFN in the second quarter of 2003. Expenses increased by a nominal amount during the second quarter of 2003 compared to the same period in 2002, and increased $21,000 (5%) on a year-to-date basis primarily due to a loss on the disposal of fixed assets. 11 When we purchased VFN in 2000, part of the purchase price was for goodwill. Before January 1, 2002, we amortized the goodwill on a straight-line basis over 10 years, which was its estimated useful life. Pursuant to Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," we ceased amortizing goodwill on January 1, 2002. As required by SFAS 142, we performed a transitional and annual goodwill impairment test during 2002. The impairment test required by the provisions of SFAS 142 required us to forecast the discounted value of future cash flows expected to be derived from VFN. During 2002, we revised the business model for VFN to focus on corporate and individual producer sales and our projections supported the balance of goodwill. During the first six months of 2003, cash flows did not meet the forecasted amount. We have further refined our business model for VFN, including identifying a new market and committing additional resources to develop the business. We also updated our cash flow forecast to reflect the business model changes and concluded that these projections support the balance of goodwill. When we perform our 2003 annual goodwill impairment analysis, we may conclude that some amount of goodwill impairment has occurred if revenues do not occur as planned. Other Segment During the second quarter of 2003, combined net income from our Other segment was $39,000, compared to combined net income of $12,000 during the second quarter of 2002. For the six months ended June 30, 2003, combined net income from our Other segment was $63,000, compared to combined net income of $26,000 during the same period in 2002. These favorable changes are primarily due to increased advisory fee revenues. Liquidity and Capital Resources Net cash provided by operating activities was $9.5 million for the six months ended June 30, 2003 compared to net cash used in operating activities of $4.5 million for the same period in 2002, primarily due to increased operating results and lower net purchases of trading securities. Net cash used in investing activities was $3.4 million for the six months ended June 30, 2003 compared to net cash provided by investing activities of $3.4 million for the six months ended June 30, 2002, primarily due to increased purchases and lower sales of available-for-sale securities, partially offset by lower cash outlays for the development of internal use software. Net cash used in financing activities was $898,000 compared to net cash provided by financing activities of $1 million, primarily due to net proceeds from loans during the first half of 2002, partially offset by lower repurchases of our common stock. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Company's market risk, interest rate risk, credit risk, or equity price risk since December 31, 2002. Please see the Company's Annual Report on Form 10-K for the year ended December 31, 2002 for more information concerning Quantitative and Qualitative Disclosures About Market Risk. Item 4. Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and executed, can provide only reasonable assurance of achieving the desired control objectives. As of the date hereof, the Company's Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Company's management, the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Company determined that it should have recorded additional revenue during the first quarter of 2003 that it earned as a performance bonus for sales of fixed annuity and life products under the terms of one of its insurance carrier partner contracts. This deficiency was reported to the Company's auditors and to the audit committee of the Company's Board of Directors. As a result, the Company restated its Consolidated Financial Statements for the three months ended March 31, 2003. The Company has instituted changes intended to ensure that the financial effects of all contracts are more effectively monitored. The Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. The Company's management, including the Chief Executive Officer and the Chief Financial Officer, also evaluated the Company's internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there have been no such changes during the quarter covered by this report, except as described above. 12 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The following matters were submitted to a vote of our shareholders at the Annual Meeting of Shareholders held on June 6, 2003:
For Against Abstain/Withheld --- ------- ---------------- 1. Election of five (5) Directors to hold office until the Annual Meeting of Shareholders in 2004 and until their successors are duly elected. The nominees are listed as follows: a. Lynda L. Regan 16,083,539 -- 80,077 b. R. Preston Pitts 16,074,047 -- 89,569 c. Ute Scott-Smith 15,912,960 -- 250,656 d. J. Daniel Speight, Jr. 16,114,120 -- 49,496 e. Dr. Donald Ratajczak 16,114,343 -- 49,273 2. Ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent auditors for the year ended December 31, 2003. 15,221,330 928,813 13,473
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 4 Amended and Restated Shareholder's Agreement, dated as of June 30, 2003, by and among the Company, Lynda Regan, Alysia Anne Regan, Melissa Louise Regan and RAM Investments. Exhibit 10.1 Amendment Five to the Marketing Agreement by and between Legacy Marketing Group and Transamerica Life Insurance and Annuity Company. * Exhibit 10.2 Amendment Six to the Administrative Services Agreement by and between Legacy Marketing Group and Transamerica Life Insurance and Annuity Company. Exhibit 10.3 Amendment Seven to the Administrative Services Agreement by and between Legacy Marketing Group and Transamerica Life Insurance and Annuity Company. Exhibit 31.1 Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 31.2 Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act. Exhibit 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K No reports on Form 8-K were filed during the second quarter of 2003. * Certain confidential commercial and financial information has been omitted from the indicated exhibit, but filed under separate cover with the U.S. Securities and Exchange Commission. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REGAN HOLDING CORP. Date: August 14, 2003 Signature: /s/ R. Preston Pitts ---------------------------------------- R. Preston Pitts President and Chief Operating Officer Date: August 14, 2003 Signature: /s/ G. Steven Taylor ---------------------------------------- G. Steven Taylor Chief Financial Officer 14
EX-4 3 p17538_ex4.txt AMENDED AND RESTATED SHAREHOLDER'S AGREEMENT EXHIBIT 4 REGAN HOLDING CORP. AMENDED AND RESTATED SHAREHOLDER'S AGREEMENT THIS AMENDED AND RESTATED SHAREHOLDER'S AGREEMENT (this "Agreement") is made this 30th day of June, 2003, by and among Lynda Regan, ("Regan"), Regan Holding Corp. ("RHC"), a California corporation, Alysia Anne Regan, Melissa Louise Regan, and RAM Investments (Lynda Regan as Trustee), a trust formed under the laws of the State of California. WITNESSETH: WHEREAS, RHC has authorized capital stock consisting of 100,000,000 shares of common stock, no par value (the "Common Stock"), of which the following shares of Common Stock are currently issued, outstanding and owned beneficially by Regan as follows: Shareholder Shares ----------- ------ RAM Investments 11,292,622 (Lynda Regan as Trustee) WHEREAS, the parties hereto believe that the execution of this Agreement will facilitate the continuous, harmonious and effective management of the affairs, policies, and operations of RHC; WHEREAS, the parties intend to allow RHC to purchase shares of Common Stock owned beneficially by Regan upon her death; WHEREAS, the parties intend to allow Regan's representatives to sell shares of Common Stock owned beneficially by Regan to RHC upon her death; WHEREAS, the parties believe that the restrictions that this Agreement places upon Regan's shares combined with the number of shares that she controls entitles her to receive additional consideration if RHC repurchases them; WHEREAS, the parties have entered into the Regan Holding Corp. Shareholder's Agreement, dated May 27, 1998 (the "Shareholder's Agreement"); and WHEREAS, the parties hereto have agreed that the Shareholder's Agreement be amended and restated as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and promises set forth in this Agreement and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties agree as follows: 1. Insurance. RHC shall make application for, take out and maintain in effect such insurance policies on the life of Regan whenever and in such amounts as, in the opinion of the Board of Directors of RHC, may be required to fulfill its obligations under Section 2 and 3 of this Agreement. Such insurance shall be listed in the Life Insurance Schedule attached hereto as Schedule A and incorporated by reference herein (such policies are hereinafter collectively referred to as the "Life Policies"). RHC shall maintain such Life Policies in full force and effect and shall not, without the prior written consent of Regan, cancel any Life Policy or take or omit to take any action which might give rise to the termination or cancellation thereof. RHC shall pay all premiums on all Life Policies carried by it pursuant to this Agreement as such premiums become due and shall, upon written notice from Regan, give due proof of such payment to Regan within five days after receipt of such written notice. If any premium on any such Life Policy is not paid within 20 days after its due date, Regan may pay or cause to be paid the premium on such Life Policy and shall be entitled to reimbursement from RHC therefor. RHC may apply any dividends declared on any Life Policies to the payment of premiums. 2. Option to Sell upon Death. 2.1. Upon the death of Regan (the "Decedent"), the Decedent's personal representative(s) and/or trustee(s) of trust(s) created during Regan's lifetime (collectively, the "Representatives") shall have the right (but not the obligation) to sell, at their option, all or a portion of the shares of Common Stock of RHC owned of record and beneficially by the Decedent at the time of her death (the "Decedent Shares") or that were transferred by Regan during her lifetime to trust(s) (the "Trust Shares"). Upon receipt of notice from one or more of the Decedent's Representatives of their intent to sell a portion of the Decedent Shares and/or Trust Shares to RHC, RHC shall purchase such number of Decedent Shares and/or Trust Shares that the Representatives elect to sell. RHC shall by written notice addressed to the Representatives fix a closing date (the "Decedent Closing Date") for the purchase of such number of the Decedent Shares and/or Trust Shares. The Decedent Closing Date shall not be less than ten days after the appointment of such Representatives or notification to the trustee(s), whichever event is earliest, nor more than six months after RHC receives the notice of intent to sell. RHC shall purchase and the Representatives shall sell such number of the Decedent Shares and/or Trust Shares on the Decedent Closing Date at a price per share (the "Decedent Purchase Price") which shall be 125% of the Stated Value (as defined in Section 4 of this Agreement) per share of the Decedent Shares or as otherwise determined pursuant to Section 4 of this Agreement. 2.2. The dollar amount of the Decedent Purchase Price multiplied by the number of Decedent Shares so owned by the Decedent at the date of death of the Decedent and/or Trustee Shares (the "Aggregate Decedent Purchase Price") shall be paid in cash on the Decedent Closing Date to the extent of the cash proceeds received by RHC under the Life Policies insuring the life of the Decedent (the "Insurance Proceeds") and neither the Decedent nor her Representatives shall have any right, title or interest in or to any Insurance Proceeds in excess of the Decedent Purchase Price. In the event that the Aggregate Decedent Purchase Price shall exceed the dollar amount of Insurance Proceeds (the "Decedent Insurance Purchase Price Cash Shortfall"), RHC shall pay the Decedent Insurance Purchase Price Cash Shortfall in cash. 3. Option to Purchase upon Death. 3.1. Upon the death of Regan, RHC shall have the right (but not the obligation) to buy, at its option, all or a portion of the Decedent Shares or the Trust Shares. Upon receipt of notice from the Company of its intent to buy all or a portion of the Decedent Shares and/or Trust Shares, the Representatives shall sell such number of Decedent Shares and/or Trust Shares that RHC elects to buy. RHC shall by written notice addressed to the Representatives fix a closing date (the "Company Closing Date") for the purchase of such number of the Decedent Shares and/or Trust Shares. The Company Closing Date shall not be less than ten days after the appointment of such Representatives or notification to the trustee(s), whichever event is earliest, nor more than six months after the first Representative receives the notice of RHC's intent to buy. The Representatives shall sell and RHC shall purchase such number of the Decedent Shares and/or Trust Shares on the Company Closing Date at the Decedent Purchase Price which shall be 125% of the Stated Value (as defined in Section 4 of this Agreement) per share of the Decedent Shares or as otherwise determined pursuant to Section 4 of this Agreement. 3.2. The dollar amount of the Aggregate Decedent Purchase Price shall be paid in cash on the Company Closing Date to the extent of the cash proceeds received by RHC under the Insurance Proceeds and neither the Decedent nor her Representatives shall have any right, title or interest in or to any Insurance Proceeds in excess of the Decedent Purchase Price. In the event that the Aggregate Decedent Purchase Price shall exceed the Decedent Insurance Purchase Price Cash Shortfall, RHC shall pay the Decedent Insurance Purchase Price Cash Shortfall in cash. 2 4. Stated Value. RHC issues a Stated Value every six months. The "Stated Value" is the value of the Company's Series A Non Redeemable common stock as determined by an independent appraiser for financial reporting purposes. The Stated Value shall be determined based on a discounted cash flow approach after consideration of outstanding options and with the recognition of a marketability discount of 35%. If RHC fails to give a Stated Value for six months, the Stated Value shall be 107.5% of the previous Stated Value or the fair market value (whichever is greater). 5. Delivery of Certificates. On the Decedent Closing Date or the Company Closing Date (the "Closing"), the purchase by RHC of the Shares shall take place at 10:00 a.m. at a location designated by RHC. At the Closing, the stock certificate or certificates representing the Shares shall be delivered to RHC duly endorsed in blank, and RHC shall pay the Aggregate Decedent Purchase Price therefor in cash. 6. Termination. This Agreement shall be perpetual until the happening of the first of any of the events listed below: 6.1. An agreement in writing prior to the death of Regan between RHC and Regan to terminate this Agreement. 6.2. The dissolution of RHC prior to the death of Regan. 6.3. The consummation prior to the death of Regan of a merger, consolidation or share exchange whereby RHC is not the surviving or successor corporation. 6.4. The adjudication prior to the death of Regan of RHC as bankrupt, the execution prior to the death of Regan by RHC of an assignment for the benefit of creditors, or the appointment prior to the death of Regan of a receiver for RHC. 6.5. One year elapses after the death of Regan. 7. Notices. All notices and other communications under this Agreement shall be in writing and shall be given and deemed to be received when hand-delivered and a signed receipt is given therefor or mailed registered or certified U.S. mail, return receipt requested, postage prepaid, and addressed to RHC at 2090 Marina Avenue, Petaluma, California 94954; to Lynda Regan at 351 Hicks Valley Road, Petaluma, California 94952; to RAM Investments at 351 Hicks Valley Road, Petaluma, California 94952; to Alysia Anne Regan at 67 Bridle Path, Novato, California, 94945; and to Melissa Louise Regan at 351 Hicks Valley Road, Petaluma, California 94952. 8. Additional Actions and Documents. Each of the parties hereto agrees to take or cause to be taken such further actions as are necessary to execute, acknowledge, seal and deliver or cause to be executed, acknowledged, sealed and delivered such further instruments and documents as are necessary and to use her/its reasonable efforts to obtain such requisite consents as any other party may from time to time reasonably request to fully effectuate the purposes and fulfill the content of this Agreement. 9. Insertion in Will. Regan agrees to insert in her will, or to execute a codicil thereto, a provision directing and authorizing her personal representatives to fulfill and comply with the terms, provisions and conditions of this Agreement and to sell and transfer shares of Common Stock held by her beneficially or of record in accordance herewith. 10. Transfer of Shares. The parties agree that Regan's shares may be transferred as security for any transaction (provided that if RHC elects to purchase the shares, the proceeds must first be used to pay the debt with the balance being paid to the certificate holder) or transferred to any trust or estate planning vehicle with fifteen days 3 notice to the parties without being bound by the restrictions contained herein. However, when Regan dies, Melissa Louise Regan and Alysia Anne Regan agree to be bound by the terms and conditions contained in this Agreement as to any stock of RHC that they own at Regan's death. 11. Miscellaneous. 11.1. This instrument contains the entire, integrated agreement among the parties and supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein, and no modification shall be binding upon the party affected unless set forth in writing and duly executed by each party to this Agreement. 11.2. Regan represents and warrants: that she is the sole beneficial owner of the number of shares of the Common Stock as set forth immediately above her signature hereto, evidenced by the certificate numbers shown immediately after such number of shares; that all of such shares are free and clear of any and all liens, claims, charges, security interests or encumbrances of any kind except as reflected by any endorsements on the certificates; and that she has the full and entire right, power and authority to sell or otherwise transfer such shares in accordance with the terms, provisions and conditions of this Agreement. Regan, however, discloses that the shares are subject to a contract between Regan and Bobby Moody, Jr. which requires her to vote her shares to elect him as a director if he instructs her to do so. 11.3. All of the covenants and agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of their respective heirs, guardians, personal and legal representatives, successors and permitted assigns. 11.4. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California, without giving effect to the conflict of laws rules of the State of California. 11.5. In the event that one or more of the provisions of this Agreement shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 11.6. In the event of a breach of this Agreement, any nonbreaching party hereto may maintain an action for specific performance against the party or parties hereto who are alleged to have breached any of the terms, conditions, representations, warranties, provisions, covenants or agreements herein contained, and it is hereby further agreed that no objection to the form of action in any proceeding for specific performance of this Agreement shall be raised by any party hereto so that such specific performance of this Agreement may not be obtained by the aggrieved party. Anything contained herein to the contrary notwithstanding, this Section 11.6 shall not be construed to limit in any manner whatsoever any other rights and remedies an aggrieved party may have by virtue of any breach of this Agreement. 11.7. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 11.8. Unless the context otherwise requires, whenever used in this Agreement, the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include the neuter and feminine gender, and vice versa. 11.9. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall together constitute one document. 4 [signatures on the following page] 5 IN WITNESS WHEREOF, the patties hereunto have executed, sealed and delivered this Agreement on the date first written above. Number of Certificate Shareholder Shares owned Number(s) ----------- ------------ --------- RAM Investments 11,292,622 RHA 0417 (Lynda Regan Trustee) REGAN HOLDING CORP. LYNDA REGAN BY: /s/ R. Preston Pitts BY: /s/ Lynda Regan ---------------- --------------- R. Preston Pitts Title: President Lynda Regan MELISSA LOUISE REGAN BY: /s/ Melissa Louise Regan ------------------------- ALYSIA ANNE REGAN Melissa Louise Regan BY: /s/ Alysia Anne Regan ---------------------- Alysia Anne Regan RAM INVESTMENTS, LYNDA REGAN AS TRUSTEE BY: /s/ Lynda Regan as Trustee -------------------------- Lynda Regan as Trustee 6 Schedule A 1. $14 million face amount with Indianapolis Life Insurance Company. Issued July 15, 1998, expires July 15, 2043 (age 95). 10 year level term. Policy # 000100038622. Lynda Regan Insured, Beneficiary - Regan Holding Corp. 2. $15 million face amount with Security-Connecticut Life Insurance Company, Issued November 8, 2000, expires November 8, 2043. 5 year level term. Policy # 2433369K. Lynda L Regan Insured, Beneficiary Regan Holding Corp. EX-10.1 4 p17538_ex10-1.txt AMENDMENT FIVE TO THE MARKETING AGREEMENT AMENDMENT FIVE TO MARKETING AGREEMENT THIS FIFTH AMENDMENT TO THE MARKETING AGREEMENT is effective as indicated herein, by and between TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY, hereinafter referred to as "Transamerica," a North Carolina corporation, and LEGACY MARKETING GROUP, hereinafter referred to as "LMG," a California corporation. WHEREAS, Transamerica and LMG entered into a Marketing Agreement, dated May 29, 1998, as amended, hereinafter referred to as the "Agreement," wherein Transamerica and LMG agreed to jointly develop proprietary annuity products, wherein LMG would market such products on behalf of Transamerica, utilizing its nationwide distribution channels of duly licensed and appointed Producers in consideration of the fees as set forth in APPENDIX B of the Agreement. NOW, THEREFORE, in consideration of the foregoing recitals and mutual promises hereinafter contained and other good and valuable consideration, the parties hereto do agree as follows: 1. The Policy Forms table in APPENDIX A is restated & amended to include new business Discontinuance Dates as follows. The discontinuance date is the date which on or after no further applications will be accepted. For the products earmarked to be withdrawn effective March 3rd, 2003 in the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange transfer paperwork must be received by March 3rd, 2003 and the transferred funds completed by June 6th, 2003 in order for the policy to be issued.
- ------------------------------------ ------------------------------------ ------------------------------------ --------------------- PRODUCT NAME POLICY FORM NUMBERS* EFFECTIVE DATES DISCONTINUANCE DATES - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Series - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R)5 75/25 T-CTMY0298-5-75/25; 5/29/98 3/3/03 T-PTMY0298-5-7525 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)7 75/25 T-CMY0799-7-75/25; 10/18/99 3/3/03 T-PMY0799-7-75/25 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 75/25 T-CTMY0298-10-75/25; 5/29/98 3/3/03 T-PTMY0298-10-75/25 - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Secure Series - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R)5 Secure (formerly T-CTMY0298-5-50/50; 7/10/2000 3/3/03 known as the SelectMark(R)5 50/50) T-PTMY0298-5-50/50 (5/29/98 for SelectMark(R) 5 50/50) - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)7 Secure (formerly T-CMY0799-7-50/50; 7/10/2000 3/3/03 known as the SelectMark(R)7 50/50) T-PMY0799-7-50/50 (10/18/99 for SelectMark(R)7 50/50) - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Special Edition Series - ------------------------------------------------------------------------------------------------------------------------------------ Selectmark(R)5 Special Edition T-PSMSE-0801-5 01/02/02 3/3/03 T-CSMSE-0801-5 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)7 Special Edition T-CMY0799-7-100; 10/18/99 3/3/03 T-PMY0799-7-100 - ------------------------------------ ------------------------------------ ------------------------------------ ---------------------
1 of 8 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)7 Special Edition T-CEIA-0500-7 7/26/2000 3/3/03 Equity Index Strategy - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 Special Edition T-CTMY0298-10-50/50; 2/9/99 3/3/03 for all states (formerly known as the Select T-PTMY0298-10-50/50 5/29/98 for except Florida. Mark(R)10 50/50) SelectMark(R)10 50/50) 9/1/03 for plan codes ARIH52 & ARIR52 in Florida** - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 Special Edition T-CMY1099-10-100; 4/6/2000 3/3/03 with STS T-PMY1099-10-100 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 Special Edition T-CEIA-0500-10; 7/26/2000 3/3/03 Equity Index Strategy T-PEIA-0500-10 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 Special Edition T-CEIA-0500-10STS; 7/26/2000 3/3/03 with STS and Equity Index Strategy T-PEIA-0500-10STS - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- Selectmark(R)Special Edition Plus 4 T-C-SMSE-0402-10-4; 04/30/02 9/1/03** T-P-SMSE-0402-10-4 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- Selectmark(R)Special Edition Plus T-C-SMSE-0402-10-0; 05/06/02 3/3/03 T-P-SMSE-0402-10-0 - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Elite Series - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R)5 Elite T-C390-0701-5; 9/1/01 9/1/03** T-P390-0701-5 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)7 Elite T-C390-0701-7; 9/1/01 9/1/03** T-P390-0701-7 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- SelectMark(R)10 Elite T-C390-0701-10; 9/1/01 9/1/03** T-P390-0701-10 - ------------------------------------------------------------------------------------------------------------------------------------ PreferMark Series - ------------------------------------------------------------------------------------------------------------------------------------ PreferMark Platinum T-CMY0500-9; 7/26/2000 T-PMY0500-9 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- PreferMark Gold T-CMY0500-10; 7/26/2000 T-PMY0500-10 - ------------------------------------------------------------------------------------------------------------------------------------ Riders - ------------------------------------------------------------------------------------------------------------------------------------ Beneficiary Rider T-CBR-0799; 10/18/99 T-PBR-0799 - ------------------------------------ ------------------------------------ ------------------------------------ --------------------- Beneficiary Rider Plus T-PBRII-0400; T-CBRII-0400 7/26/2000 - ------------------------------------ ------------------------------------ ------------------------------------ ---------------------
* Including all State required variations of the above referenced products/policy form numbers ** Transamerica and LMG may determine that this date may need to be changed depending on how other product development efforts progress. Any such change shall be set forth in a separate written agreement or amendment. 2 of 8 * CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC. 2. The Compensation table in APPENDIX B is restated & amended to include new rates and their effective dates as follows. All rate changes included in this table are applicable only to applications received on or after such referenced effective dates.
Compensation to Legacy ------------------------------------------------------------------------- Age Mandated Commission Reduction (g) POLICY FORM --------------------------------- LMG Trail NUMBERS/ (a) (b) (c) (d) (e) (f) Com. (AKA Special PRODUCT NAME Effective Dates Commis- Comm. % Trail Mkt. Override Administrative Rules sion Reduces Reduction Allow. Trail Fee or @ Age Fund One fee) - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Series - -------------------------- --------------------------------------------------------------------------------------------------------- T-CTMY0298-5-75/25; SelectMark(R) 5 75/25 T-PTMY0298-5-75/25 Effective 5/29/98 5.00% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 5.00% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- T-CMY0799-7-75/25; SelectMark(R) 7 75/25 T-PMY0799-75/25 Effective 10/18/99 7.00% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 7.00% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- T-CTMY0298-10-75/25; SelectMark(R) 10 75/25 T-PTMY0298-10-75/25 Effective 5/29/98 8.00% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 8.00% 85 * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Secure Series - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) 5 Secure T-CTMY0298-5-50/50; (formerly known as the T-PTMY0298-5-50/50 SelectMark(R)5 50/50) Effective 7/10/00 4.75% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 4.75% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 7 Secure T-CMY0799-7-50/50; (formerly known as the T-PMY0799-7-50/50 SelectMark(R)7 50/50) Effective 7/10/00 6.25% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 6.25% 85 * * * * * - -------------------------- ---------------------------------------------------------------------------------------------------------
3 of 8 * CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC. - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Special Edition Series - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) 5 Special T-PSMSE-0801-5 Edition T-CSMSE-0801-5 Effective 01/02/02 6.25% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 6.25% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 7 Special T-CMY0799-7-100; Edition T-PMY0799-7-100 Effective 10/18/99 8.75% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 8.75% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 7 Special T-CEIA-0500-7 Edition Equity Index Strategy Effective 7/26/00 8.75% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 8.75% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 10 Special T-CTMY0298-10-50/50; Edition (formerly known T-PTMY0298-10-50/50 as the SelectMark(R) 10 50/50) Effective 2/9/99 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 1/1/03 9.50% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 10 Special T-CMY1099-10-100; Edition with STS T-PMY1099-10-100 Effective 4/6/00 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 1/2/03 9.50% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 10 Special T-CEIA-0500-10; Edition Equity Index T-PEIA-0500-10 Strategy Effective 7/26/00 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 1/2/03 9.50% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 10 Special T-CEIA-0500-10STS; Edition with STS and T-PEIA-0500-10STS Equity Index Strategy Effective 7/26/00 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 1/2/03 9.50% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) Special T-C-SMSE-0402-10-0; Edition Plus T-P-SMSE-0402-10-0 Effective 5/6/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 10.00% 80 * * * * * --------------------------------------------------------------------------------------------------------- Effective 1/2/03 9.50% 80 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) Special T-C-SMSE-0402-10-4; Edition Plus 4 T-P-SMSE-0402-10-4 Effective 4/30/02 8.50% 80 * * * * * (+0.25% bonus) --------------------------------------------------------------------------------------------------------- Effective 12/1/02 9.00% 80 * * * * * - -------------------------- ---------------------------------------------------------------------------------------------------------
4 of 8 * CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC. - ------------------------------------------------------------------------------------------------------------------------------------ SelectMark(R) Elite Series - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 5 Elite T-C390-0701-5; T-P390-0701-5 Effective 9/1/01 8.00% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 8.00% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 7 Elite T-C390-0701-7; T-P390-0701-7 Effective 9/1/01 9.50% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 9.50% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- SelectMark(R) 10 Elite T-C390-0701-10; T-P390-0701-10 Effective 9/1/01 11.00% 85 * * * * * --------------------------------------------------------------------------------------------------------- Effective 12/1/02 11.00% 85 * * * * * - -------------------------- --------------------------------------------------------------------------------------------------------- PreferMark Series - -------------------------- --------------------------------------------------------------------------------------------------------- PreferMark Platinum Y-CMY0500--9; Age-mandated T-PMY0500-9 commission reduction also applies to Effective 7/26/00 7.50% 85 * * * * * override --------------------------------------------------------------------------------------------------------- Effective 12/1/02 7.50% 85 * * * * * No Change - -------------------------- --------------------------------------------------------------------------------------------------------- PreferMark Gold T-CMY0500-10; Age-mandated T-PMY0500-10 commission reduction also applies to Effective 7/26/00 3.00% 85 * * * * * override --------------------------------------------------------------------------------------------------------- Effective 12/1/02 3.00% 85 * * * * * No Change - -------------------------- ---------------------------------------------------------------------------------------------------------
3. The General Compensation Rules are amended & restated as follows: GENERAL COMPENSATION RULES 1. Base Commission (Column (a) above): Transamerica will pay LMG on the last business day of the week base commissions for all premiums received in cash by LMG during that week, i.e., the prior Friday through Thursday, in the specified percentages indicated in Column (a) above. Such commissions will be paid by Transamerica to LMG by Transamerica authorizing LMG to write a check to itself against the Transamerica Disbursement account for the total weekly commission amount. Additional premiums will be subject to the same base commission percentages noted above as the initial premium. In addition to the base commission rates specified in Column (a) above Transamerica will pay LMG an additional commission as follows: 5 of 8 * CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC. (1) *% of all premiums received on or before August 31, 2001 by LMG for the SelectMark(R) 10 Special Edition (for premiums received after October 18, 1999), SelectMark(R) 10 Special Edition Equity Index Strategy, SelectMark(R) 10 STS Special Edition Equity Index Strategy and SelectMark(R) 10 Special Edition with STS products for applications received by Legacy for such products on or before August 31, 2001, and in the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange/transfer paperwork must be received by LMG by August 31, 2001 and the cash received by November 30, 2001 for Transamerica to pay the extra *% bonus. (2) *% of all premiums received during the period September 1, 2001 and September 30, 2001 for such products for applications received by LMG for such products. In the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange/transfer paperwork must be received by LMG between September 1 and September 30th and the cash received by November 30, 2001 for Transamerica to pay the extra *% bonus. Note: As a practical matter, LMG's administrative system will treat additional deposits on inforce policies in the same manner as cash received on 1035 exchanges and other transfers with respect to the above rules. Transamerica agrees to this treatment on additional deposits based on (1) LMG's representation that additional deposits will not be material and (2) LMG's agreement that this treatment on additional deposits will not be disclosed in any manner to producers or policyholders. LMG also agrees to limit disclosure of this treatment on additional deposits to LMG employees on a "need to know" basis. 2. Age Mandated and Voluntary Trail Selection Commission Reduction (Columns (b), (c) and (d) above): The following provision applies to payment of all base commissions for all products subject to this Agreement (see below for separate rules for PreferMark Gold and PreferMark Platinum) if the issue age is greater than 79 (in the case of SelectMark(R) Special Edition products) and 84 for other products, or voluntary trail compensation is selected. The *% additional commission payable for the SelectMark(R) 10 series products is considered part of the base commission. If the issue age is greater than 79 or 84 as defined in the Death Benefit Proceeds provision of the applicable policy form or voluntary trail compensation is selected, base commissions are reduced by *%. A trail base commission is paid monthly beginning in policy year 2. Column (d) reflects the trail base commission percentage on an annual basis (calculated as Column (a) multiplied by the percentage in Column (c) divided by 10). This trail base commission is paid monthly (the payable amount, calculated each month, is the Column (d) annual percentage divided by 12 and multiplied by the annuity cash value). The monthly trail base commission continues to be paid until death of the annuitant, surrender of the policy or election of a settlement option. 6 of 8 * CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SEC. With regard to PreferMark Gold and PreferMark Platinum, if the issue age of a policy is greater than 84 as defined in the Death Benefit Proceeds provision of such policy form or voluntary trail compensation is selected, the applicable base commission percentage is reduced by *% for all premiums received for that policy. No monthly trail commission is payable. 3. Marketing Allowance (Column (e) above): Transamerica will pay to LMG a Marketing Allowance for all premiums received by LMG in the specified percentages indicated in Column (e) above. LMG will bill Transamerica weekly and Transamerica will pay LMG such Marketing Allowance by wire transfer within five (5) business days of receipt of such documentation. 4. Override Commission (Column (f) above): Transamerica will pay to LMG an override commission (on the last business day of the week) for all premiums received by LMG during that week, in the specified percentages indicated in Column (f) above. The override commission percentages in Column (f) include *% which is paid back to Transamerica by LMG at the end of each fiscal year (for this purpose each fiscal year begins on August 1 and ends on the following July 31) for the first $* of aggregate premium received by LMG during that fiscal year for all (excluding PreferMark Gold and PreferMark Platinum) products (net of premiums returned to policyholders under free look provisions if the aggregate premium received by LMG for the fiscal year is less than $*). LMG will retain the *% on all premiums received in excess of $* in each fiscal year. Notwithstanding the foregoing, LMG's obligation to pay Transamerica the aforementioned $* shall terminate upon LMG's final payment of $* for the fiscal year ending July 31, 2001. With regard to PreferMark Gold and PreferMark Platinum, if the issue age of a policy is greater than 84 as defined in the Death Benefit Proceeds provision of such policy form the applicable override commission percentage is reduced by *% for all premiums received for that policy. 5. LMG Trail Commission (Column (g) above): Transamerica will pay LMG the annual rate shown in column (g) above, paid monthly, of the total Annuity Cash Value of the policies sold under this Agreement. For the purpose of the foregoing, Annuity Cash Value is the contract's Cash Value which reflects any applicable reductions, loans and withdrawals. The commission is based on the total month end Annuity Cash Value and will be paid within six (6) business days of month end by Transamerica via wire transfer to an LMG bank account. 7 of 8 4. All other provisions in the Agreement not specifically amended above remain in effect and unchanged. IN WITNESS HEREOF, the parties have hereto executed this Agreement. LEGACY MARKETING GROUP TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY By: /s/ Don Dady By: /s/ Ken Kilbane Title: VP of Marketing Title: VP Legacy Marketing Sales Date: May 6, 2003 Date: May 7, 2003 8 of 8
EX-10.2 5 p17538_ex10-2.txt AMEND. SIX TO ADMIN. SERVICES AGREEMENT EXHIBIT 10.2 AMENDMENT SIX TO ADMINISTRATIVE SERVICES AGREEMENT THIS SIXTH AMENDMENT TO THE ADMINISTRATIVE SERVICES AGREEMENT is effective as indicated herein, by and between TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY, hereinafter referred to as "Transamerica," a North Carolina corporation, and LEGACY MARKETING GROUP, hereinafter referred to as "LMG," a California corporation. WHEREAS, Transamerica and LMG entered into an Administrative Services Agreement, dated May 29, 1998, as amended, hereinafter referred to as the "Agreement," wherein LMG agreed to provide certain Transamerica accounting and service functions in consideration of the fees as set forth in APPENDIX B of the Agreement. NOW, THEREFORE, in consideration of the foregoing recitals and mutual promises hereinafter contained and other good and valuable consideration, the parties hereto do agree as follows: 1. The Policy Forms table in APPENDIX A is restated & amended to include new business Discontinuance Dates as follows. No new policies may be issued for applications received on or after the discontinuance date. For the products earmarked to be withdrawn effective March 3rd, 2003 in the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange transfer paperwork must be received by March 3rd, 2003 and the transferred funds completed by June 6th, 2003 in order for the policy to be issued. Notwithstanding the foregoing, LMG shall continue to provide administrative services for such policies.
- ----------------------------- ------------------------------ ----------------- ---------------------- PRODUCT NAME POLICY FORM NUMBERS* EFFECTIVE DATES DISCONTINUANCE DATES - ----------------------------------------------------------------------------------------------------- SelectMark(R) Series - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)5 75/25 T-CTMY0298-5-75/25; 5/29/98 3/3/03 T-PTMY0298-5-7525 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)7 75/25 T-CMY0799-7-75/25; 10/18/99 3/3/03 T-PMY0799-7-75/25 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)10 75/25 T-CTMY0298-10-75/25; 5/29/98 3/3/03 T-PTMY0298-10-75/25 - ----------------------------------------------------------------------------------------------------- SelectMark(R) Secure Series - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)5 Secure T-CTMY0298-5-50/50; 7/10/2000 3/3/03 (formerly known as the T-PTMY0298-5-50/50 (5/29/98 for SelectMark(R)5 50/50) SelectMark(R)5 50/50) - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)7 Secure T-CMY0799-7-50/50; 7/10/2000 3/3/03 (formerly known as the T-PMY0799-7-50/50 (10/18/99 for - ----------------------------- ------------------------------ ----------------- ----------------------
1 of 3 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)7 50/50) SelectMark(R)7 50/50) - ----------------------------------------------------------------------------------------------------- SelectMark(R) Special Edition Series - ----------------------------- ------------------------------ ----------------- ---------------------- Selectmark(R)5 Special T-PSMSE-0801-5 01/02/02 3/3/03 Edition T-CSMSE-0801-5 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)7 Special T-CMY0799-7-100; 10/18/99 3/3/03 Edition T-PMY0799-7-100 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R) 7 Special T-CEIA-0500-7 7/26/2000 3/3/03 Edition Equity Index Strategy - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)10 Special T-CTMY0298-10-50/50; 2/9/99 3/3/03 for all Edition (formerly known as T-PTMY0298-10-50/50 5/29/98 for states except the Select Mark(R)10 50/50) SelectMark(R)10 Florida. 50/50) 9/1/03 for plan codes ARIH52 & ARIR52 in Florida** - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)10 Special T-CMY1099-10-100; 4/6/2000 3/3/03 Edition with STS T-PMY1099-10-100 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R) 10 Special T-CEIA-0500-10; 7/26/2000 3/3/03 Edition Equity Index T-PEIA-0500-10 Strategy - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)10 Special T-CEIA-0500-10STS; 7/26/2000 3/3/03 Edition with STS and Equity T-PEIA-0500-10STS Index Strategy - ----------------------------- ------------------------------ ----------------- ---------------------- Selectmark(R)Special T-C-SMSE-0402-10-4; 04/30/02 9/1/03** Edition Plus 4 T-P-SMSE-0402-10-4 - ----------------------------- ------------------------------ ----------------- ---------------------- Selectmark(R)Special T-C-SMSE-0402-10-0; 05/06/02 3/3/03 Edition Plus T-P-SMSE-0402-10-0 - ----------------------------------------------------------------------------------------------------- SelectMark(R) Elite Series - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)5 Elite T-C390-0701-5; 9/1/01 9/1/03** T-P390-0701-5 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)7 Elite T-C390-0701-7; 9/1/01 9/1/03** T-P390-0701-7 - ----------------------------- ------------------------------ ----------------- ---------------------- SelectMark(R)10 Elite T-C390-0701-10; 9/1/01 9/1/03** T-P390-0701-10 - ----------------------------------------------------------------------------------------------------- PreferMark Series - ----------------------------- ------------------------------ ----------------- ---------------------- PreferMark Platinum T-CMY0500-9; 7/26/2000 T-PMY0500-9 - ----------------------------- ------------------------------ ----------------- ---------------------- PreferMark Gold T-CMY0500-10; 7/26/2000 T-PMY0500-10 - ----------------------------------------------------------------------------------------------------- Riders - ----------------------------- ------------------------------ ----------------- ---------------------- Beneficiary Rider T-CBR-0799; 10/18/99 T-PBR-0799 - ----------------------------- ------------------------------ ----------------- ---------------------- Beneficiary Rider Plus T-PBRII-0400; T-CBRII-0400 7/26/2000 - ----------------------------- ------------------------------ ----------------- ----------------------
* Including all State required variations of the above referenced products/policy form numbers ** Transamerica and LMG may determine that this date may need to be changed depending on how other product development efforts progress. Any such change shall be set forth in a separate written agreement or amendment. 2 of 3 2. The third sentence of Section 4.3(a) is hereby amended to read as follows: "LMG and Transamerica shall, if required by law or governmental regulation, provide fifteen days' written notice of termination or cancellation or any other change in the Agreement to the appropriate Departments of Insurance. 3. Appendix D, "Schedule of Authorized Personnel, Representing Transamerica, Authorized to provide day to day direction of LMG employees for items not covered in this Agreement" is hereby amended to read as follows: Ken Kilbane Caroline Kirst Jeff Aaron Nancy DeWitt IN WITNESS HEREOF, the parties have hereto executed this Agreement. LEGACY MARKETING GROUP By: /s/ Don Dady Title: VP of Marketing Date: May 6, 2003 TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY By: /s/ Ken Kilbane Title: VP Legacy Marketing Sales Date: May 7, 2003 3 of 3
EX-10.3 6 p17538_ex10-3.txt AMEND. SEVEN TO ADMIN. SERVICES AGREEMENT EXHIBIT 10.3 AMENDMENT SEVEN TO ADMINISTRATIVE SERVICES AGREEMENT THIS SEVENTH AMENDMENT TO THE ADMINISTRATIVE SERVICES AGREEMENT is effective as indicated herein, by and between TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY, hereinafter referred to as "Transamerica," a North Carolina corporation, and LEGACY MARKETING GROUP, hereinafter referred to as "LMG," a California corporation. WHEREAS, Transamerica and LMG entered into an Administrative Services Agreement, dated May 29, 1998, as amended, hereinafter referred to as the "Agreement," wherein LMG agreed to provide certain Transamerica accounting and service functions in consideration of the fees as set forth in APPENDIX B of the Agreement. NOW, THEREFORE, in consideration of the foregoing recitals and mutual promises hereinafter contained and other good and valuable consideration, the parties hereto do agree as follows: 1. Effective December 16, 2002, Add to APPENDIX C, SERVICES TO BE PROVIDED, Section 2, "Other Services," sub-section d. as follows: "d. Conservation Program LMG will implement and administer a Conservation Program based upon mutually agreed upon written procedures, guidelines and reports that include the following elements: 1) Conservation Case Identification (a) Review of all surrender requests to identify cases that meet the Conservation Program criteria established by Transamerica. 2) Program Execution (a) Phone calls and letters to surrendering owners (b) Contact with writing producer (c) Explanations of existing product's benefits and features (d) Suggestions to owners of alternative options 3) Documentation and Reporting (a) Detailed documentation and tracking of conservation attempts (b) Regular periodic reports to Transamerica of agreed upon data (c) Regular periodic review of Save Ratio (surrenders completed vs. surrenders saved) and evaluation of program effectiveness by LMG and Transamerica 1 (d) All reports to Transamerica will be delivered within 10 business days of the end of the applicable reporting period All direct contact with contract owners, customers and producers involving explanation of benefits, product features and alternative options will be performed by a Conservation Specialist who is appropriately licensed as an insurance agent under applicable state law. Subject to 60 days advance written notification to LMG, Transamerica may terminate the Conservation Program effective any date for any reason on or after December 16, 2003 or effective any date prior to December 16, 2003 if the Save Ratio falls below 5% for any rolling 3 month period." 2. Effective December 16, 2002, add to APPENDIX B, Processing Fees, Section 3, "Out-Of-Pocket Expenses," sub-section a.(4) as follows: "(4) Transamerica will pay LMG $2,438.40 per month for implementing and administering the Conservation Program described in APPENDIX C as amended above. The December 2002 fee will be pro-rated. Any change to the monthly payment amount will be made in accordance with the provisions of Section 4.3(b) of the Agreement." 3. Amend APPENDIX B by deleting the modification made to "Processing Fees, Sub-Section 3(a) "Out-of-Pocket Expenses" in Amendment No. 3 so that said sub-section is restored to the wording which existed prior to the changes made by said Amendment No. 3. 4. Amend APPENDIX B by replacing "1. Multi Year Guarantee Products" with "1. Annuity Products" IN WITNESS HEREOF, the parties have hereto executed this Agreement. LEGACY MARKETING GROUP By: /s/ R. Preston Pitts Title: President Date: July 21, 2003 TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY By: /s/ Ken Kilbane Title: VP Legacy Marketing Sales Date: July 23, 2003 2 EX-31.1 7 p17538_ex311.txt CERTIFICATIONS LYNDA L. REGAN EXHIBIT 31.1 CERTIFICATIONS I, Lynda L. Regan, Chief Executive Officer of Regan Holding Corp., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Regan Holding Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 13, 2003 /s/ Lynda L. Regan ---------------- ------------------------------------ Lynda L. Regan Chairman and Chief Executive Officer EX-31.2 8 p17538_ex312.txt CERTIFICATIONS G.STEVEN TAYLOR EXHIBIT 31.2 CERTIFICATIONS I, G. Steven Taylor, Chief Financial Officer of Regan Holding Corp., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Regan Holding Corp.: 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2003 /s/ G. Steven Taylor ---------------- ------------------------------------ G. Steven Taylor Chief Financial Officer EX-32.1 9 p17538_ex321.txt CERTIFICATION OF CHEIF EX OFFICER EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER REGAN HOLDING CORP. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003 PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I am the Chief Executive Officer of Regan Holding Corp., a California corporation (the "Company"). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended June 30, 2003 and filed with the Securities and Exchange Commission ("Form 10-Q"). Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to the best of my knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 13, 2003 /s/ Lynda L. Regan ---------------- -------------------------------------- Lynda L. Regan Chief Executive Officer A signed original of this written statement required by Section 906 or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Regan Holding Corp. and will be retained by Regan Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 10 p17538_ex322.txt CERTIFICATION OF CHEIF FINANCIAL OFFICER EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER REGAN HOLDING CORP. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003 PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I am the Chief Financial Officer of Regan Holding Corp., a California corporation (the "Company"). I am delivering this certificate in connection with the Form 10-Q of the Company for the quarter ended June 30, 2003 and filed with the Securities and Exchange Commission ("Form 10-Q"). Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I hereby certify that, to the best of my knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 14, 2003 /s/ G. Steven Taylor ---------------- -------------------------------------------- G. Steven Taylor Chief Financial Officer A signed original of this written statement required by Section 906 or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Regan Holding Corp. and will be retained by Regan Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
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