CREDIT AGREEMENT BY AND BETWEEN LEGACY MARKETING GROUP, as Borrower and WASHINGTON NATIONAL INSURANCE COMPANY, as Lender July 20, 2006

Exhibit 10.1

CREDIT AGREEMENT

BY AND BETWEEN

LEGACY MARKETING GROUP,

as Borrower

and

WASHINGTON NATIONAL INSURANCE COMPANY,

as Lender

July 20, 2006

TABLE OF CONTENTS

Section 1.  ACCOUNTING TERMS - DEFINITIONS

1

Section 2.  THE TERM LOAN

9

Section 3.  REPRESENTATIONS AND WARRANTIES

14

Section 4.  GUARANTEES OF AND SECURITY FOR THE OBLIGATIONS

16

Section 5.  AFFIRMATIVE COVENANTS OF BORROWER

16

Section 6.  NEGATIVE COVENANTS OF BORROWER AND CONSOLIDATED GROUP

20

Section 7.  CONDITIONS OF LENDING

24

Section 8.  EVENTS OF DEFAULT

26

Section 9.  EFFECT OF EVENT OF DEFAULT

27

Section 10.  WAIVER - AMENDMENTS

27

Section 11.  NOTICES

27

Section 12.  COSTS, EXPENSES AND TAXES

28

Section 13.  CONFIDENTIALITY

28

Section 14.  SEVERABILITY

29

Section 15.  CAPTIONS

29

Section 16.  GOVERNING LAW - JURISDICTION

29

Section 17.  PRIOR AGREEMENTS

29

Section 18.  SUCCESSORS AND ASSIGNS

29

Section 19.  INFORMATION SHARING

29

Section 20.  INDEMNIFICATION

30

Section 21.  PARTIAL RELEASES OF COLLATERAL AND CONSENTS

30

Section 22.  JURY WAIVER

30

Exhibits:

A - Form of Term Note

B - Form of Guaranty from Personal Guarantors

C - Form of Guaranty from Entity Guarantors

D - Form of Assignment of Policy as Collateral Security

E - Form of Security Agreement from Borrower and Entity Guarantors

Schedules:

3e. - Litigation and Contingent Liabilities of the Consolidated Group

3f. - Existing Liens on Property of Members of Consolidated Group

5f.(ii) – Maximum Leverage Ratio

5f.(iii) – Minimum Interest Coverage

6a. - Permitted Restricted Payments

6c. - Existing Guarantees

6j. - Permitted indebtedness for borrowed money

6m. – Deposit Accounts

6n. – Securities Accounts

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CREDIT AGREEMENT

LEGACY MARKETING GROUP , a California corporation (the “Borrower”), and WASHINGTON NATIONAL INSURANCE COMPANY , an Illinois corporation (the “Lender”), agree as follows:

Section 1.  ACCOUNTING TERMS - DEFINITIONS.

  All accounting and financial terms used in this Agreement are used with the meanings such terms would be given in accordance with generally accepted accounting principles except as may be otherwise specifically provided in this Agreement.  Other terms utilized but not otherwise defined herein shall have the meanings ascribed to such terms by the Uniform Commercial Code as in effect in the state of Illinois, except as may be otherwise specifically provided in this Agreement. The following terms have the meanings indicated when used in this Agreement with the initial letter capitalized:

“ Affiliate ” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person.  A Person shall be deemed to control another Person if the controlling Person is the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of greater than ten percent (10%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of capital stock, by contract or otherwise.  

“ Agreement ” means this Credit Agreement between Borrower and Lender, as it may from time to time be amended.

“ Agreement Accounting Principles ” means generally accepted accounting principles as in effect as of the date of this Agreement in the United States, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.b hereof, including, without limitation, Borrower, so long as they are considered effective hedgers under FASB 133, excluding all balance sheet impact from FASB 133 (by utilizing the FASB 133 Exception) preparing its financial statements and when calculating relevant covenants contained in this Agreement.  

If any changes in generally accepted accounting principles are hereafter required or permitted and are adopted by Borrower or any of its Subsidiaries with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the financial covenants, restrictions or standards herein or in the related definitions or terms used therein (“ Covenant Accounting Changes ”), the parties hereto agree to enter into negotiations, in good faith, in order to amend such provisions in a credit neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating Borrower’s consolidated financial condition shall be the same after such changes as if such changes had not been made; provided , however , that no Covenant Accounting Change shall be given effect in such calculations until such provisions are amended in a manner reasonably satisfactory to Lender.  If such amendment is entered into, all references in this Agreement to Agreement Accounting Principles shall mean generally accepted accounting principles as of the date of such amendment, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.b hereof except as agreed in connection with the Covenant Accounting Changes set forth in such an amendment and together with any changes in generally accepted accounting principles after the date of such amendment which are not Covenant Accounting Changes.

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“ Applicable Bank ” means the depositary institution selected by Lender at which any Deposit Account is maintained.

“ Applicable Floating Rate Margin ” means 2.5% per annum.

“ Applicable Eurodollar Margin ” means 3.5% per annum.

“ Assignment of Policy as Collateral Security ” is used as defined in Section 4.

“ Authorized Officer ” means such officer or other representative whose authority to perform acts to be performed only by an Authorized Officer under the terms of this Agreement is evidenced to Lender by a certified copy of an appropriate authorizing resolution or other evidence of authority of Borrower.

 “ Basis Point ” means one-one hundredth of one percent (.01%).

“ Borrower ” is used as defined in the Preamble.

“ Business Day ” means any day on which banks located (i) in Indianapolis, Indiana or such other city in which the principal corporate office of Lender or its affiliates is located and (ii) in the city in which the principal corporate office of Borrower or Regan Holding Corp. is located, are generally open for business.

“ Capital Expenditures ” means, without duplication, any expenditure or commitment to expend money for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a balance sheet of the Consolidated Group prepared in accordance with GAAP.

“ Change of Control ” shall be deemed to have occurred if (i) there shall have been consummated (A) any consolidation or merger of Regan Holding Corp. with or into any other corporation in which Regan Holding Corp. is not the continuing or surviving corporation or pursuant to which shares of Regan Holding Corp.’s common stock (“Common Stock”), would be converted into cash, securities or other property, other than a merger of Regan Holding Corp. in which the holders of the Common Stock immediately prior to the merger have ownership of at least a majority of the common stock of the surviving corporation immediately after the consolidation or merger or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of (x) all or substantially all of the assets of Regan Holding Corp. or (y) a majority of the common stock or other common equity of any Significant Subsidiary (as such terms is defined in Rule 405 under the Securities Act of 1933, as amended) has occurred; (ii) Regan Holding Corp.’s stockholders have approved any plan or proposal for the liquidation or dissolution of Regan Holding Corp.; (iii) any person (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” )), other than a present Ten Percent Beneficial Owner (as such term is defined in Rule 16a-2 under the Exchange Act), becomes the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act, of 10% or more of Regan Holding Corp.’s outstanding Common Stock; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute Regan Holding Corp.’s entire board of directors cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Regan Holding Corp.’s stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

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“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Collection Waterfall Agreement ” means the Collection Waterfall Agreement of even date herewith among Lender, Borrower, the Personal Guarantors and the Entity Guarantors.

“ Consolidated ” and “ consolidated ” refers to the consolidation of the accounts of the Consolidated Group in accordance with Agreement Accounting Principles.

“ Consolidated EBITDA ” means Consolidated Net Income plus , to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Net Interest Expense, (ii) income taxes, (iii) depreciation, (iv) amortization and (v) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Consolidated Group on a consolidated basis.  Both Consolidated Net Interest Expense and income taxes to be calculated in accordance with Agreement Accounting Principles.

“ Consolidated Current Assets ” of the Consolidated Group means, as of any date, the current assets of the Consolidated Group determined as to amount and classification on a consolidated basis as of such date in accordance with Agreement Accounting Principles.

 “ Consolidated Funded Debt ” means, as of any date, the sum (without duplication) of (i) the aggregate indebtedness for borrowed money (including, but not limited to, the Term Loan and any other amounts owed under this Agreement), the deferred and unpaid balance of the purchase price for acquired assets or properties, and capitalized lease obligations, in each case that would be included on a consolidated balance sheet of the Consolidated Group as of such date prepared in accordance with Agreement Accounting Principles, plus (ii) all liabilities secured as of such date by any mortgage, security interest or other lien on any assets or property owned by any member of the Consolidated Group, to the extent such liabilities are the obligation of a Person that is not a member of the Consolidated Group and would not be included on a consolidated balance sheet of the Consolidated Group as of such date prepared in accordance with Agreement Accounting Principles, plus (iii) all liabilities that any member of the Consolidated Group has guaranteed or otherwise committed itself to repay or provide funds for repayment, to the extent such liabilities are the obligation of a Person that would not be included on a consolidated balance sheet of the Consolidated Group as of such date prepared in accordance with Agreement Accounting Principles, plus (iv) all letter of credit obligations of members of the Consolidated Group.

 “ Consolidated Group ” as of any date means the Consolidated Group consisting of Regan Holding Corp. and each of its Consolidated Subsidiaries as of such date.

“ Consolidated Net Income ” of the Consolidated Group for any period means the net income of the Consolidated Group determined on a consolidated basis for such period in accordance with Agreement Accounting Principles, after adding back minority interests of Consolidated Subsidiaries to the extent excluded in determining Consolidated Net Income, but excluding any portion of the net income of any Person that is not a Consolidated Subsidiary of the Consolidated Group.

“ Consolidated Net Interest Expense ” of the Consolidated Group for any period means the interest that is expensed (or, under Agreement Accounting Principles, would be expensed) during such period by the Consolidated Group.

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“ Consolidated Net Worth ” for the Consolidated Group means, as of any date, the sum of (i) the aggregate of all assets (excluding treasury stock) which would be shown on a consolidated balance sheet of the Consolidated Group as of such date prepared in accordance with Agreement Accounting Principles, minus (ii) all Consolidated Total Liabilities of the Consolidated Group as of such date.

“ Consolidated Operating Cash Flow ” of the Consolidated Group for any period means the sum, without duplication, of (i) the Consolidated Net Income of the Consolidated Group for such period after eliminating therefrom all non-cash ordinary and extraordinary items and gain or loss on sale or other disposition of fixed assets, plant or equipment, plus (ii) Consolidated Net Interest Expense, income taxes, depreciation and amortization, in each case to the extent included in determining such Consolidated Net Income for such period.

“ Consolidated Subsidiary ” of the Consolidated Group as of any date means any current or future Subsidiary of the Consolidated Group which as of such date would be consolidated on the consolidated balance sheet of the Consolidated Group in accordance with Agreement Accounting Principles as in effect on the Closing Date.

“ Consolidated Total Liabilities ” of the Consolidated Group means, as of any date, the aggregate of all obligations (including, without limitation, redeemable stock of Regan Holding Corp.) which would be classified as liabilities on a consolidated balance sheet of the Consolidated Group as of such date prepared in accordance with Agreement Accounting Principles.

“ Control Securities Accounts ” means the restricted securities account nos. 19R001405, 19R001421, 19R890005, 19R001439 and 19R001447, maintained by Borrower at Pershing, LLC for which Borrower, Lender and Pershing LLC have entered into a control agreement which requires the consent of Lender for any withdrawals of amounts other than interest and dividend income or the customary fees of Pershing LLC.

"Conversion Date" means June 30, 2007.

 “ Deposit Account ” means the restricted deposit account(s) maintained by Borrower (and/or any applicable Guarantor) at the Applicable Bank in which Lender has a perfected first security interest subject to the terms of the Security Agreement and the applicable control agreement(s).

“ Dollars ” and “ $ ” means the currency of the United States of America.

“ Entity Guarantor ” means each of Regan Holding Corp. and all current and future subsidiaries that account for greater than 1% of the consolidated assets or 5% of the consolidated revenues of Regan Holding Corp., including, without limitation, Legacy Advisory Services, Inc., and Imagent Online LLC (but not including, for so long as it is a registered broker-dealer, Legacy Financial Services, Inc.).

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Event of Default ” means any of the events described in Section 8 .

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“ Excess Cash Flow ” means, for any fiscal period of Borrower, the excess, if any, of (a) the sum, without duplication, of (i) the Consolidated Net Income for such fiscal period, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, and (iii) the aggregate net amount of non cash loss on the disposition of property by the Consolidated Group during such fiscal period (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income over (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the Consolidated Group in cash during such fiscal period on account of Capital Expenditures (excluding the principal amount of indebtedness incurred in connection with such expenditures and any such expenditures financed with the proceeds of asset dispositions that have not yet been used to pay down the Term Loan), (iii) the aggregate amount of all optional prepayments of the Term Loan during such fiscal period, (iv) the aggregate amount of all regularly scheduled principal payments of long term debt (including the Term Loan) of the Consolidated Group made during such fiscal period (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), and (v) the aggregate net amount of non-cash gain on the disposition of property by the Consolidated Group during such fiscal period (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such net income.

“ Funded Debt ” means, as of any date, with respect to a Person, the sum (without duplication) of (i) the aggregate indebtedness for borrowed money, the deferred and unpaid balance of the purchase price for acquired assets or properties, and capitalized lease obligations of such Person, plus (ii) all liabilities secured as of such date by any mortgage, security interest or other lien on any assets or property of such Person, plus (iii) all liabilities guaranteed or otherwise committed itself to repay or provide funds for repayment, to the extent such liabilities are the obligation of such Person, plus (iv) all letter of credit obligations of such Person.

“ Guarantor ” means each of the Entity Guarantors and the Personal Guarantors, as the case may be.

“ Guaranty Agreements ” is used as defined in Section 4 .

“ Interest Coverage Ratio ” means, as of the last day of any fiscal quarter, the ratio of (i) the sum of (A) the Consolidated Operating Cash Flow of the Consolidated Group for the 12-month period ending on such day, minus (B) Capital Expenditures, to (ii) the sum of (A) the Consolidated Net Interest Expense of the Consolidated Group for such 12-month period, to the extent payable in cash, plus (B) Restricted Payments paid during such period.

“ Interest Period ” means each consecutive 1, 2, 3 or 6 month period effective as of the first day of each Interest Period and ending on the last day of each Interest Period, provided that if any Interest Period is scheduled to end on a date for which there is no numerical equivalent to the date on which the Interest Period commenced, then it shall end instead as of the last day of such calendar month.

“ Lender ” is used as defined in the Preamble.

“ Leverage Ratio ” means, as of the last day of any fiscal quarter, the ratio of (i) the Consolidated EBITDA for the immediately preceding four (4) fiscal quarters, to (ii) the Consolidated Funded Debt as of such date.

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“LIBOR-based Rate” means that per annum rate of interest which is equal to the sum of the Applicable Eurodollar Margin plus the LIBOR Rate.

“LIBOR Rate”  means the offered rate for U.S. Dollar deposits of not less than $1,000,000.00 for a period of time equal to each Interest Period as of 11:00 A.M. City of London, England time two London Business Days prior to the first date of each Interest Period of as shown on the display designated as “British Bankers Assoc. Interest Settlement Rates” on the Telerate System (“Telerate”), Page 3750, or such other page or pages as may replace such pages on Telerate for the purpose of displaying such rate; provided, however, that if such rate is not available on Telerate then such offered rate shall be otherwise independently determined by Lender from an alternate, substantially similar independent source available to Lender or shall be calculated by Lender by a substantially similar methodology as that theretofore used to determine such offered rate in Telerate.

“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Loan Document ” means any of this Agreement, the Term Note, the Security Agreement, the Guaranty Agreements, the Collection Waterfall Agreement, the Assignment of Policy as Collateral Security, and any other instrument or document which evidences or secures the Term Loan or any of them or which expresses an agreement as to terms applicable to the Term Loan, and in the plural means any two or more of the Loan Documents, as the context requires.

“London Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Borrower and each Entity Guarantor, taken as a whole, (b) the ability of Borrower or any Entity Guarantor to perform any of its obligations under the Loan Documents to which it is a party, (c) any collateral securing the Obligations, or Lender’s liens on any such collateral or the priority of such liens, or (d) the rights of or benefits available to Lender thereunder.

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“ Net Proceeds ” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made as a result of such event to repay Indebtedness (other than the Term Loan) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund contingent liabilities reasonably estimated to be payable and (iv) in the case of (b)(ii) and (iii) above, the amount of such proceeds reinvested by any member of the Consolidated Group, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by an Authorized Officer).

“ Net Worth ” for a Person means, as of any date, the sum of (i) the aggregate of all assets (excluding treasury stock) which would be shown on a balance sheet of the Person as of such date prepared in accordance with Agreement Accounting Principles, minus (ii) the aggregate of all obligations which would be classified as liabilities on a balance sheet of the Person as of such date prepared in accordance with Agreement Accounting Principles.

“Non-Control Securities Accounts” means Securities Accounts designated as nos. 19R001413 and 19R001454 maintained by the Borrower with Pershing, LLC, which may be margin accounts maintained by the Borrower with Pershing LLC and in which any security interest granted to Lender will be junior and subordinate to any security interest in favor of Pershing LLC and the other Securities Accounts of Borrower with Wells Fargo Bank and Morgan Keegan,  which though subject to a control agreement with such entities, will permit the Borrower to make withdrawals until Lender notifies such securities intermediaries that there has been an Event of Default hereunder and that pursuant to the terms of the Security Agreement and as permitted under the Collection Waterfall Agreement, Lender is exercising exclusive control over such accounts.

“ Note ” means the Term Note, together with all renewals, amendments and substitutions thereof.

“ Obligations ” means all obligations of Borrower and the Entity Guarantors in favor of Lender of every type and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including but not limited to, but without duplication;  (i) all of such obligations on account of the Term Loan; (ii) any guaranty thereof by any Entity Guarantor; (iii) all other obligations arising under any Loan Document as amended from time to time; and (iv) all other obligations, agreements in existence from time to time.

“ Officer’s Certificate ” means a certificate in a form reasonably acceptable to Lender signed by the chief executive officer or the chief financial officer of Borrower, confirming that all of the representations and warranties contained in Section 3 of this Agreement are true and correct as of the date of such certificate except as specified therein and with the further exceptions that:  (i) the representation contained in Section 3.1.d shall be construed so as to refer to the latest financial statements which have been furnished to Lender as of the date of any Officer’s Certificate, and (ii) all other representations will be construed to have been amended to conform with any changes of which Borrower shall have previously given Lender notice in writing.  The Certificate shall further confirm that no Event of Default or Unmatured Event of Default shall have occurred and be continuing as of the date of the Certificate or shall describe any such event which shall have occurred and be then continuing and the steps being taken by Borrower to correct it.

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“ Person ” means any individual, corporation, firm, enterprise, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company or other entity of any kind, or any government or political subdivision or any agency, department or instrumentality thereof.

“ Personal Guarantor ” means each of Lynda L. Regan and R. Preston Pitts.

“ Plan ” means an employee pension benefit plan as defined in ERISA.

“ Prepayment Event ” means:

(a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of Borrower or any Entity Guarantor, with a value in excess of (i) $100,000 as to any individual sale, transfer or disposition or series of related sales, transfers or other disposition (other than the long term care commissions hereinafter described) not reinvested in a like-kind asset unless otherwise agreed by Lender in writing, and (ii)  up to $150,000 in the case of a one-time sale of long-term care commissions by Borrower, or (iii) $500,000 in the aggregate during the term of the Term Loan unless otherwise agreed by Lender in writing; or

(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Consolidated Group with a fair value immediately prior to such event equal to or greater than $100,000 as to any individual loss or greater than $500,000 with respect to all losses (unless any insurance or other recovery with respect thereto is reinvested in a like-kind asset); or

(c) the issuance by Borrower or any Entity Guarantor of any equity interests, or the receipt by Borrower or any Entity Guarantor of any capital contribution (except as a result of the exercise of any stock options or as a result of capital contributions made by and among Regan Holding Corp. and the Entity Guarantors in the normal and ordinary course of business and in a manner consistent with historical practice);

(d) the incurrence by Borrower or any Entity Guarantor of any Funded Debt, other than Funded Debt not in excess of the lesser of (i) 50.0% of the value of assets in the Non-Control Securities Accounts maintained with Pershing LLC, (ii) 15.0% of the value of assets in all Securities Accounts maintained by the Borrower with Pershing, LLC, or (ii) $2,000,000; or

(e) the death of either of the Personal Guarantors to the extent of the insurance proceeds collected by Regan Holding Corp. on the existing key-man life insurance policies.

 “ Prime-based Rate ” means a variable per annum rate of interest which is equal to the sum of the Applicable Floating Rate Margin plus the Prime Rate.

“ Prime Rate ” means a rate per annum equal to the prime rate of interest announced from time to time by Bank of America, N.A. or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.

“ Relevant Date ” means the date of determination, as the context requires.

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“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interests in Regan Holding Corp., any Entity Guarantor or Borrower, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interests in Regan Holding Corp., any Entity Guarantor or Borrower or any option, warrant or other right to acquire any such equity interests in Regan Holding Corp., any Entity Guarantor or Borrower, except (i) as required with respect to redeemable stock and (ii) for dividends or distributions paid to Regan Holding Corp. by Borrower or the Entity Guarantors in the normal and ordinary course of business and in a manner consistent with historical practice.

“ Securities Account ” means any securities account maintained by Borrower (and/or any applicable Guarantor) at a securities intermediary in which Lender has been granted a security interest subject to the terms of the Security Agreement.

“ Security Agreement ” means the Security Agreement of even date herewith from Borrower and the Entity Guarantors, as the same may be amended modified or replaced from time to time.

“ Subsidiary ” means, as of any date of determination, any corporation, partnership or limited liability company, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time owned by such Consolidated Group or one or more Subsidiaries of such Consolidated Group, or (ii) in the case of a partnership or limited liability company, which is controlled by the Consolidated Group, one of its Subsidiaries, and of which at least a majority of the ownership interests are at the time owned by such Consolidated Group or one or more of its Subsidiaries.  For purposes of this definition, a partnership or limited liability company shall be “controlled by” a Person if such Person possesses the power to direct or cause the direction or management or policies of the partnership or limited liability company.

“Term Loan” is used as defined in Section 2.a.

“Term Loan Commitment” means a maximum principal amount of Six Million and NO/100 Dollars ($6,000,000.00) less any principal repayments of the Term Loan.

“Term Note” is used as defined in Section 2.a(ii).

“Unmatured Event of Default” means any event specified in Section 8 , which is not initially an Event of Default, but which would, if uncured, become an Event of Default with the giving of notice or the passage of time or both.

Section 2.  THE TERM LOAN.

  Subject to all of the terms and conditions of this Agreement, Lender will make the Term Loan described in this Section to Borrower.

(a)

The Term Loan .  Lender will make a non-revolving multiple advance term loan (the “Term Loan”) to Borrower contemporaneously with the execution of this Agreement on the following terms and subject to the following conditions:

(i)

Amount .  The original principal amount of the Term Loan shall be Six Million and NO/100 Dollars ($6,000,000.00).

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(ii)

The Term Note .  The obligation of Borrower to repay the Term Loan shall be evidenced by a promissory note (the “Term Note”) in the form of Exhibit “A”  Prior to maturity of the Term Loan, Borrower will make quarterly principal payments, due on the first day of each January, April, July and October, commencing July 1, 2007, each in the amount of (i) 3.75% of the outstanding principal balance of the Term Loan as of the Conversion Date for the first four principal payments, (ii) 5.0% of the outstanding principal balance of the Term Loan as of the Conversion Date for the next twelve quarterly principal payments and (iii) 6.25% of the outstanding principal balance of the Term Loan as of the Conversion Date for the final four quarterly principal payments; provided, however, that such quarterly payments shall be reduced, in order of maturity, by any other principal payment made under this Section or otherwise.  The principal of the Term Loan shall be due and repayable in full on April 1, 2012, on which date the entire principal balance of the Term Loan shall be due and payable together with all accrued and unpaid interest.  Until the Maturity Date, Borrower shall additionally semi-annually prepay the Term Loan on each March 31 and September 30, commencing March 31, 2008 in an amount equal to fifty percent (50.0%) of the Consolidated Group’s Excess Cash Flow for the immediately preceding semi-annual six (6) month fiscal periods ended (as of December 31 and June 30) immediately prior to each of such payment dates, but only to the extent that as a result of such prepayment the Consolidated Group would not have combined balances of cash and marketable securities of less than the value of assets in the Securities Accounts held by Pershing LLC, plus an additional $4,000,000.00 (such amount to be adjusted as mutually agreed upon by the parties following any merger, sale, consolidation, acquisition, spin-off or other similar business combination or transaction involving any of the Consolidated Group).  Each Excess Cash Flow prepayment shall be accompanied by a certificate signed by an Authorized Officer certifying the manner in which Excess Cash Flow and the resulting prepayment were calculated, which certificate shall be in form and substance satisfactory to Lender.  In the event and on each occasion that any Net Proceeds are received by or on behalf of Borrower or any Entity Guarantor in respect of any Prepayment Event, Borrower shall, immediately after such Net Proceeds are received by Borrower or any Entity Guarantor, prepay the Term Loan in an aggregate amount equal to 100% of such Net Proceeds.

(iii)

Interest on the Term Loan .  The unpaid principal balance from time to time of the Term Loan shall bear interest from the date the first disbursement of proceeds of the Term Loan is made prior to the maturity of the Term Note at a rate per annum equal to the Prime-based Rate, except that at the option of Borrower exercised from time to time as provided in Section 2.b(i) , interest may accrue prior to maturity on the entire outstanding balance of the Term Loan or on any portion thereof which is an integral multiple of $100,000.00 (unless the selection is for the entire outstanding principal balance of the Term Loan) and as to which no LIBOR-based Rate previously selected remains in effect at a LIBOR-based Rate; provided that no LIBOR-based Rate may be elected for a period extending beyond the scheduled final maturity of the Term Loan.  After maturity, whether scheduled maturity or maturity by virtue of acceleration on account of the occurrence of an Event of Default, interest will accrue on the Term Loan at a rate per annum equal to the Prime-based Rate plus Two Hundred (200) Basis Points, except that as to any portion of the Term Loan for which Borrower may have elected a LIBOR-based Rate for a period of time that has not expired at maturity, such portion shall, during the remainder of such period, bear interest at the greater of the Prime-based Rate plus Two Hundred (200) Basis Points per annum or the LIBOR-based Rate then in effect plus Two Hundred (200) Basis Points.  Prior to maturity, (A) interest accruing at a Prime-based Rate shall be due and payable on the last Business Day of each calendar quarter and (B) interest accruing at a LIBOR-Based Rate shall be payable on the last day of each Interest Period

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relating to such portion of the Term Loan (provided that if the Interest Period is in excess of Three (3) months, interest will be paid each Three (3) months following the first day of such Interest Period).  After maturity, interest shall be payable as accrued and without demand.

(iv)

Deposit Account Administration .  Except as may otherwise be expressly agreed to by Lender (in writing), all of the Trailing Commissions (as such term is defined in the Collection Waterfall Agreement) shall be immediately deposited into a Deposit Account within two (2) Business Days of receipt of such funds from the relevant insurance company.  Lender shall receive from the Applicable Bank daily cash balance information for the Deposit Account and notice from the Applicable Bank of all debits, payments and charges to and regular monthly or periodic statements of the accounting for the Deposit Account.  Following an Event of Default, the cash release from the Deposit Account will cease immediately and any release of funds from the Deposit Account thereafter will be at the sole discretion of Lender.

 (v)

Use of Proceeds of the Term Loan .  The proceeds of the Term Loan shall be used in their entirety to partially finance Borrower’s working capital requirements and other proper corporate purposes, and to pay accrued but unpaid interest on the Term Loan prior to maturity.

(vi)

Procedure for Disbursements .  Each disbursement of principal under the Term Loan (each, a “Disbursement”) shall be conditioned upon receipt by Lender from Borrower of a written request executed by an Authorized Officer, provided that Lender may, at its discretion, make a Disbursement upon the oral request of Borrower made by an Authorized Officer, or upon a request transmitted to Lender by telephone facsimile (“fax”) machine, or by any other form of written electronic communication (all such requests for Disbursements being hereafter referred to as “informal requests”).  In so doing, Lender may rely on any informal request which shall have been received by it in good faith from a person reasonably believed to be an Authorized Officer.  Each informal request shall be promptly confirmed by a duly executed written request if Lender so requires and shall in and of itself constitute the representation of Borrower that no Event of Default or Unmatured Event of Default has occurred and is continuing or would result from the making of the requested Disbursement and that the making of the requested Disbursement shall not cause the principal balance of the Term Loan to exceed Term Loan Commitment.  No Disbursements will be made under the Term Loan after the Conversion Date.   Each Disbursement under the Term Loan will be in a minimum amount of $1,000,000.  Upon receipt of a request for a Disbursement, or at Lender’s discretion upon receipt of an informal request for a Disbursement and upon compliance with any other conditions of lending stated in this Agreement, Lender shall disburse the amount of the requested Disbursement to Borrower.  All Disbursements by Lender and pa