ex10-3




Exhibit 10.3


PROMISSORY NOTE SECURED BY DEED OF TRUST



	 	 	 
	$4,750,000.00		
San Francisco, California
	
	
	
	

			
June 19, 2001



FOR VALUE RECEIVED, the undersigned REGAN HOLDING CORP, a California
corporation (“Borrower”), promise(s) to pay to the order of WELLS
FARGO BANK, NATIONAL ASSOCIATION (“Lender”), at the Disbursement and
Operations Center in El Segundo, California, or at such other place as
may be designated in writing by Lender, the principal sum of Four
Million Seven Hundred Fifty Thousand and 00/100ths Dollars
($4,750,000.00) or so much thereof as may from time to time be owing
hereunder by reason of advances by Lender to or for the benefit or
account of Borrower, with interest thereon, per annum, at one or more
of the Effective Rates calculated in accordance with the terms and
provisions of the Fixed Rate Agreement attached hereto as Exhibit A
and a Fixed Rate Notice described on Exhibit B attached hereto (based
on a 360-day year and charged on the basis of actual days elapsed).
All sums owing hereunder are payable in lawful money of the United
States of America, in immediately available funds.


Interest accrued on this note (“Note”) shall be due and payable on the
first day of each month commencing with the first month after the date
of this Note and continuing until the Maturity Date. Any prinicipal
reduction amounts may not be reborrowed.


The outstanding principal balance of this Note, together with all
accrued and unpaid interest, shall be due and payable in full on
December 19, 2001 (“Maturity Date”).


This Note is secured by, among other things, that certain Deed of
Trust with Absolute Assignment of Leases and Rents, Security Agreement
and Fixture Filing (“Deed of Trust”) dated as of June 19, 2001,
executed by Borrower, as trustor, to a trustee for the benefit of
Lender.


If any payment required hereunder is not received by Lender (whether
by direct debit or otherwise) on or before the fifteenth (15th)
calendar day of the month in which it becomes due, Borrower shall pay,
at Lender’s option, a late or collection charge equal to four percent
(4%) of the amount of such unpaid payment.


If: (a) Borrower shall fail to pay when due any sums payable
hereunder; or (b) a Default (as defined in the Deed of Trust) occurs
under the Deed of Trust or under any obligation secured thereby; or
(c) the property which is subject to the Deed of Trust, or any portion
thereof or interest therein, is sold, transferred, mortgaged,
assigned, encumbered or leased, whether voluntarily or involuntarily
or by operation of law or otherwise, other than as expressly permitted
by Lender in writing; THEN Lender may, at its sole option, declare all
sums owing under this Note immediately due and payable; provided,
however, that if any document related to this Note provides for
automatic acceleration of payment of sums owing hereunder, all sums
owing hereunder shall be automatically due and payable in accordance
with the terms of that document.


If any attorney is engaged by Lender to enforce or defend any
provision of this Note or the Deed of Trust, or as a consequence of
any Default, with or without the filing of any legal action or
proceeding, then Borrower shall pay to Lender immediately upon demand
all attorneys’ fees and all costs incurred by Lender in connection
therewith, together with interest thereon from the date of such demand
until paid at the rate of interest applicable to the principal balance
owing hereunder as if such unpaid attorneys’ fees and costs had been
added to the principal.


No previous waiver and no failure or delay by Lender in acting with
respect to the terms of this Note or the Deed of Trust shall
constitute a waiver of any breach, default, or failure of condition
under this Note, the Deed of Trust or the obligations secured thereby.
A waiver of any term of this Note, the Deed of Trust or of any of the
obligations secured thereby must be made in writing and shall be
limited to the express written terms of such waiver. In the event of
any inconsistencies between the terms of this Note and the terms of
any other document related to the loan evidenced by this Note, the
terms of this Note shall prevail.


 











If this Note is executed by more than one person or entity as
Borrower, the obligations of each such person or entity shall be joint
and several. No person or entity shall be a mere accommodation maker,
but each shall be primarily and directly liable hereunder. Except as
otherwise provided in any agreement executed in connection with this
Note, Borrower waives: presentment; demand; notice of dishonor; notice
of default or delinquency; notice of acceleration; notice of protest
and nonpayment; notice of costs, expenses or losses and interest
thereon; notice of late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of
the rights or interests in or to properties securing payment of this
Note.


Time is of the essence with respect to every provision hereof. This
Note shall be construed and enforced in accordance with the laws of
the State of California, except to the extent that federal laws
preempt the laws of the State of California, and all persons and
entities in any manner obligated under this Note consent to the
jurisdiction of any federal or state court within the State of
California having proper venue and also consent to service of process
by any means authorized by California or federal law.


All notices or other communications required or permitted to be given
pursuant to this Note shall be given to the Borrower or Lender at the
address and in the manner provided for in the Loan Agreement.


The Loan Documents contain or expressly incorporate by reference the
entire agreement of the parties with respect to the matters
contemplated therein and supersede all prior negotiations or
agreements, written or oral. The Loan Documents shall not be modified
except by written instrument executed by all parties. Any reference
to the Loan Documents includes any amendments, renewals or extensions
now or hereafter approved by Lender in writing.


Exhibits A is attached hereto and incorporated herein by reference.




	“BORROWER”	 







	REGAN HOLDING CORP, a California corporation	 







	By: /s/ H. Lynn Stafford	 







	Title: Chief Information Officer	 















FIXED RATE AGREEMENT



Exhibit A to Promissory Note Secured by Deed of Trust (“Note”), dated

June 19, 2001, made by REGAN HOLDING CORP, a California corporation,

as Borrower, to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender.



R E C I T A L S


Borrower has requested and Lender has agreed to provide a fixed rate
as a basis for calculating the effective rate of interest on amounts
owing under this Note. Borrower acknowledges the following: (i) it
understands the process of determining the fixed rates as provided
herein; (ii) amounts owing under this Note may bear interest at
different rates and for different time periods; and (iii) absent the
terms and conditions hereof, it would be extremely difficult to
calculate Lender’s additional costs, expenses, and damages in the
event of a Default or prepayment by Borrower hereunder. Given the
above, Borrower agrees that the provisions herein (including, without
limitation, the Fixed Rate Price Adjustment defined below) provide for
a reasonable and fair method for Lender to recover its additional
costs, expenses and damages in the event of a Default or prepayment by
Borrower.


1RATES AND TERMS DEFINED.Various rates and terms not otherwise
defined herein are defined and described as follows:


“Alternate Rate” is a rate of interest per annum five percent (5%) in
excess of the applicable Effective Rate in effect from time to time.


“Applicable LIBO Rate” is the rate of interest, rounded upward to the
nearest whole multiple of one-hundredth of one percent (.01%), equal
to the sum of: (a) Three and One-Half Percent (3.5000%) plus (b) the
LIBO Rate, which rate is divided by one (1.00) minus the Reserve
Percentage:

	 	 	 	 	 
	Applicable LIBO Rate = 3.5000% +	LIBO Rate	
	
	
	
	

	(1 - Reserve Percentage)






		
	 	“Business Day(s)” means a day of the week (but not a Saturday,
Sunday or holiday) on which the offices of Lender are open to the
public for carrying on substantially all of Lender’s business
functions.
	 
	 	“Fixed Rate” is the Applicable LIBO Rate as accepted by Borrower
as an Effective Rate for a particular Fixed Rate Period and Fixed
Rate Portion.
	 
	 	“Fixed Rate Commencement Date” means the date upon which the
Fixed Rate Period commences.
	 
	 	“Fixed Rate Period” is the period beginning on and including the
date on which Lender shall make the initial disbursement of Loan
proceeds under the Loan Agreement in the amount sufficient to
constitute a Fixed Rate Portion, and ending on the date which
numerically corresponds to such date thirty (30) days thereafter,
and each consecutive



 









		
	 	thirty (30) day period thereafter throughout the term of the
Loan; provided that no Fixed Rate Period shall extend beyond the
Maturity Date.
	 
	 	“Fixed Rate Portion” is the portion of the principal balance of
this Note which is subject to a Fixed Rate, each of which is an
amount: (a) equal to the unpaid principal balance of this Note;
or (b) the current month’s principal disbursement which may
constitute a separate Fixed Rate Portion until the maturity of
the next maturing Fixed Rate Period applicable to the remaining
outstanding principal hereunder.
	 
	 	“LIBO Rate” is the rate of interest, rounded upward to the
nearest whole multiple of one-hundredth of one percent (.01%),
quoted by Lender as the London Inter-Bank Offered Rate for
deposits in U.S. Dollars at approximately 9:00 a.m. California
time, for a Fixed Rate Commencement Date or a Price Adjustment
Date, as appropriate, for purposes of calculating effective rates
of interest for loans or obligations making reference thereto for
an amount approximately equal to a Fixed Rate Portion and for a
period of time approximately equal to a Fixed Rate Period or the
time remaining in a Fixed Rate Period after a Price Adjustment
Date, as appropriate, but in no event shall the LIBO Rate be less
than four percent (4.00%).
	 
	 	“Loan Agreement” is that certain Loan Agreement dated as of June
19, 2001 between Borrower and Lender.
	 
	 	“Loan Documents” are the documents defined as such in the Loan
Agreement.
	 
	 	“Prime Rate” is a base rate of interest which Lender establishes
from time to time and which serves as the basis upon which
effective rates of interest are calculated for those loans making
reference thereto. Any change in an Effective Rate due to a
change in the Prime Rate shall become effective on the day each
such change is announced within Lender.
	 
	 	“Regulatory Costs” are, collectively, future, supplemental,
emergency or other changes in Reserve Percentages, assessment
rates imposed by the FDIC, or similar requirements or costs
imposed by any domestic or foreign governmental authority and
related in any manner to a Fixed Rate.
	 
	 	“Reserve Percentage” is at any time the percentage announced
within Lender as the reserve percentage under Regulation D for
loans and obligations making reference to an Applicable LIBO Rate
for a Fixed Rate Period or time remaining in a Fixed Rate Period
on a Price Adjustment Date, as appropriate. The Reserve
Percentage shall be based on Regulation D or other regulations
from time to time in effect concerning reserves for Eurocurrency
Liabilities as defined in Regulation D from related institutions
as though Lender were in a net borrowing position, as promulgated
by the Board of Governors of the Federal Reserve System, or its
successor.
	 
	 	“Taxes,” are, collectively, all withholdings, interest
equalization taxes, stamp taxes or other taxes (except income and
franchise taxes) imposed by any domestic or foreign governmental
authority and related in any manner to a Fixed Rate.



 









		
	 	“Variable Rate” is a floating rate of interest of Two Percent
(2.00%) per annum in excess of the Prime Rate.
	 
	 	2EFFECTIVE RATE.The “Effective Rate” upon which interest shall
be calculated for this Note shall be one or more of the
following:
	 
	 	2.1 The Effective Rate shall be (a) the Fixed Rate set in
accordance with the provisions hereof, provided, however, if any
of the transactions necessary for the calculation of interest at
any Fixed Rate should be or become prohibited or unavailable to
Lender, or, if in Lender’s good faith judgment, it is not
possible or practical for Lender to set a Fixed Rate for the
Fixed Rate Portion and Fixed Rate Period, the Effective Rate for
such Fixed Rate Portion shall remain at or revert to the Variable
Rate, or (b) the Variable Rate, if, on or before 9:00 a.m.
California time on the Fixed Rate Commencement Date, Borrower
requests Lender to convert the Fixed Rate Portion to the Variable
Rate in anticipation of a full or partial repayment of the Loan.
	 
	 	2.2 During such time as a Default, breach or failure of
condition exists under the Loan Agreement or any of the Loan
Documents; or from and after the date on which all sums owing
under this Note become due and payable by acceleration or
otherwise; or from and after the date on which the property
encumbered by the Deed of Trust or any portion thereof or
interest therein, is sold, transferred, mortgaged, assigned, or
encumbered, whether voluntarily or involuntarily, or by operation
of law or otherwise, without Lender’s prior written consent
(whether or not the sums owing under this Note become due and
payable by acceleration); or from and after the Maturity Date,
then at the option of Lender, the interest rate applicable to the
then outstanding principal balance of this Note shall be the
Alternate Rate.
	 
	 	3 ESTABLISHMENT OF FIXED RATES.Lender shall automatically
establish each Fixed Rate at the commencement of each Fixed Rate
Period.
	 
	 	4 TAXES, REGULATORY COSTS AND RESERVE PERCENTAGES. Upon Lender’s
demand, Borrower shall pay to Lender, in addition to all other
amounts which may be, or become, due and payable under this Note
and Loan Documents, any and all Taxes and Regulatory Costs, to
the extent they are not internalized by calculation of a Fixed
Rate. Further, at Lender’s option, the Fixed Rate shall be
automatically adjusted by adjusting the Reserve Percentage, as
determined by Lender in its prudent banking judgment, from the
date of imposition (or subsequent date selected by Lender) of any
such Regulatory Costs. Lender shall give Borrower notice of any
Taxes and Regulatory Costs as soon as practicable after their
occurrence, but Borrower shall be liable for any Taxes and
Regulatory Costs regardless of whether or when notice is so
given.
	 
	 	5FIXED RATE PRICE ADJUSTMENT. Borrower acknowledges that
prepayment or acceleration of a Fixed Rate Portion during a Fixed
Rate Period shall result in Lender’s incurring additional costs,
expenses and/or liabilities and that it is extremely difficult
and impractical to ascertain the extent of such costs, expenses
and/or liabilities. Therefore, on the date a Fixed Rate Portion
is prepaid or the date all sums payable hereunder become due and
payable, by acceleration or otherwise (“Price Adjustment Date”),
Borrower will pay Lender (in addition to all other sums then
owing to Lender) an amount (“Fixed Rate 



 









		
	 	Price Adjustment”) equal
to the then present value of (a) the amount of interest that
would have accrued on the Fixed Rate Portion for the remainder of
the Fixed Rate Period at the Fixed Rate set on the Fixed Rate
Commencement Date, less (b) the amount of interest that would
accrue on the same Fixed Rate Portion for the same period if the
Fixed Rate were set on the Price Adjustment Date at the
Applicable LIBO Rate in effect on the Price Adjustment Date. The
present value shall be calculated by using as a discount rate the
LIBO Rate quoted on the Price Adjustment Date.




		
	 	By initialing this provision where indicated below, Borrower
confirms that Lender’s agreement to make the loan evidenced by
this Note at the interest rates and on the other terms set forth
herein and in the other Loan Documents constitutes adequate and
valuable consideration, given individual weight by Borrower, for
this agreement.




BORROWER’S INITIALS: /s/ HLS




		
	 	6PURCHASE, SALE AND MATCHING OF FUNDS.Borrower understands,
agrees and acknowledges the following: (a) Lender has no
obligation to purchase, sell and/or match funds in connection
with the use of a LIBO Rate as a basis for calculating a Fixed
Rate or Fixed Rate Price Adjustment; (b) a LIBO Rate is used
merely as a reference in determining a Fixed Rate and Fixed Rate
Price Adjustment; and (c) Borrower has accepted a LIBO Rate as a
reasonable and fair basis for calculating a Fixed Rate and a
Fixed Rate Price Adjustment. Borrower further agrees to pay the
Fixed Rate Price Adjustment, Taxes and Regulatory Costs, if any,
whether or not Lender elects to purchase, sell and/or match
funds.
	 
	 	7MISCELLANEOUS.As used in this Exhibit, the plural shall mean
the singular and the singular shall mean the plural as the
context requires. Addresses for the Fixed Rate Notice shall be
the same as those for notices under the Loan Agreement executed
in connection with this Note.




This Agreement is executed concurrently with and as part of this Note
referred to and described first above.



        
         “BORROWER”




REGAN HOLDING CORP, a California corporation




By: /s/ H. Lynn Stafford




Title: Chief Information Officer