SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
PRE-PAID LEGAL SERVICES, INC.
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
(1) Title of each class of securities to which transaction applies: _______.
(2) Aggregate number of securities to which transaction applies: __________.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: ___________________.
(4) Proposed maximum aggregate value of transaction: _________________.
(5) Total fee paid: ___________________.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: __________________.
(2) Form, Schedule or Registration Statement No.: _________________.
(3) Filing Party: __________________________.
(4) Date Filed: ___________________________.
PRE-PAID LEGAL SERVICES, INC.
321 East Main Street
P. 0. Box 145
Ada, Oklahoma 74821-0145
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The Annual Meeting of Shareholders of PRE-PAID LEGAL SERVICES, INC. (the
"Company") will be held in the Seminar Center at Pontotoc Area VoTech School at
601 West 33rd Street in Ada, Oklahoma, on Friday, May 31, 2002, at 1:00 p.m.,
local time, for the following purposes:
(1) To elect three members to the Company's Board of Directors.
(2) To transact such other business as may properly be brought before the
Annual Meeting or any adjournment thereof.
The Annual Meeting may be recessed from time to time and, at any reconvened
meeting, action with respect to the matters specified in this notice may be
taken without further notice to shareholders unless required by the bylaws.
Shareholders of record of Common Stock at the close of business on April 5,
2002 are entitled to notice of, and to vote on all matters at, the Annual
Meeting. A list of all shareholders will be available for inspection at the
Annual Meeting and, during normal business hours the ten days prior thereto, at
the offices of the Company, 321 East Main Street, Ada, Oklahoma.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHRYN WALDEN
------------------
Kathryn Walden, Secretary
Ada, Oklahoma
April 12, 2002
Please vote by telephone or by using the Internet as instructed on the
enclosed Proxy Card or complete, sign and date the enclosed Proxy Card and
return it promptly in the envelope enclosed for that purpose. You may
nevertheless vote in person if you do attend the meeting.
PROXY STATEMENT
PRE-PAID LEGAL SERVICES, INC.
321 East Main Street
P. 0. Box 145
Ada, Oklahoma 74821-0145
2002 ANNUAL MEETING OF SHAREHOLDERS
The following information is furnished in connection with the 2002 Annual
Meeting of Shareholders of PRE-PAID LEGAL SERVICES, INC. (the "Company") to be
held in the Seminar Center at Pontotoc Area VoTech School at 601 West 33rd
Street in Ada, Oklahoma, on Friday, May 31, 2002, at 1:00 p.m., local time. This
Proxy Statement and accompanying materials will be mailed on or about April 12,
2002 to holders of record of Common Stock as of the record date.
The record date for determining shareholders entitled to notice of the
Annual Meeting and to vote has been established as the close of business on
April 5, 2002. On that date, the Company had 19,993,970 shares of Common Stock,
par value $.01 per share, outstanding and eligible to vote, exclusive of
treasury stock. Holders of record of the Company's Common Stock on the record
date will be entitled to one vote for each share held on all matters properly
brought before the Annual Meeting.
The Board of Directors of the Company is soliciting the enclosed proxy. All
costs of soliciting proxies for the Annual Meeting will be borne by the Company.
In addition to use of the mails, proxies may be solicited by telephone, telecopy
or personal interview by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services. Copies of solicitation materials will be
furnished to banks, brokerage houses, fiduciaries and custodians holding in
their names shares of Common Stock beneficially owned by others to forward to
such beneficial owners. The Company will, upon request, reimburse such persons
for their reasonable expenses in forwarding proxy materials to beneficial
owners.
Any shareholder returning the accompanying proxy or voting by telephone or
the Internet may revoke such proxy at any time prior to its exercise by (a)
giving written notice to the Company of such revocation, (b) voting in person at
the Annual Meeting, (c) voting by telephone or using the Internet as instructed
below (your latest telephone or Internet proxy is counted) or (d) executing and
delivering to the Company a later dated proxy. Written revocations and later
dated proxies should be sent to PRE-PAID LEGAL SERVICES, INC., P. O. Box 145,
Ada, Oklahoma 74821-0145, Attention: Kathryn Walden, Secretary.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of ten members and is
divided into three classes as nearly equal in size as possible, with the term of
office of one class expiring each year. The Board of Directors has nominated and
proposes that Harland C. Stonecipher, Wilburn L. Smith and Martin H. Belsky,
whose terms as directors expire as of the Annual Meeting of Shareholders for
2002, be re-elected for three-year terms as directors.
The election of directors will require the affirmative vote of a plurality
of the shares of Common Stock voting in person or by proxy at the Annual
Meeting. All proxies received by the Board of Directors of the Company will be
voted, in the absence of instructions to the contrary, FOR the re-election of
Harland C. Stonecipher, Wilburn L. Smith and Martin H. Belsky to the Board of
Directors.
Should the nominees for election to the Board of Directors be unable to
serve for any reason, the Board of Directors may, unless the Board by resolution
provides for a lesser number of directors, designate substitute nominees in
which event all proxies received without instructions will be voted for the
election of such substitute nominees. However, to the best knowledge of the
Board of Directors of the Company, the named nominees will serve if elected.
The following is certain information about each director of the Company:
Name Age Director Since Term Expires
----------------------- --- -------------- ------------
Harland C. Stonecipher 63 1976 2002
Wilburn L. Smith 61 1997 2002
Martin H. Belsky 57 1998 2002
Kathleen S. Pinson 49 1990 2003
David A. Savula 54 1998 2003
John W. Hail 71 1998 2003
John A. Addison 44 2000 2003
Shirley A. Stonecipher 61 1998 2004
Peter K. Grunebaum 68 1980 2004
Randy Harp 46 1990 2004
Harland C. Stonecipher
Mr. Stonecipher has been the Chairman of the Board of Directors of the
Company since its organization in 1976 and served as Chief Executive Officer
until March 1996 and since February 1997. Mr. Stonecipher also served as
President of the Company at various times through January 1995. Mr. Stonecipher
also serves as an executive officer of various subsidiaries of the Company and
as a director of Advantage Marketing Systems, Inc. Mr. Stonecipher is employed
pursuant to an employment agreement which, unless sooner terminated, expires on
June 30, 2003, with the Company retaining the right to extend the agreement for
up to ten additional years.
Wilburn L. Smith
Mr. Smith has been active in the marketing division of the Company since
1980 and was named Vice President of Marketing and Agency Director in July 1990.
Mr. Smith served as a director of the Company from March 1993 to October 1995.
In April 1997, the Board of Directors appointed Mr. Smith as the Company's
President and he was elected by the Board of Directors to serve again as a
director of the Company.
Martin H. Belsky
Mr. Belsky, currently Dean and Professor of Law at the University of Tulsa
College of Law, teaches courses in constitutional law, ethics, international
law, and oceans policy. Previously, Mr. Belsky was Dean and Professor of Law at
Albany Law School from 1986 to 1995.
Kathleen S. Pinson
Ms. Pinson was named Controller of the Company in May 1989 and has been a
Vice President of the Company since June 1982. Ms. Pinson has been employed by
the Company since 1979 and has been the chief accounting officer since 1982. Ms.
Pinson is a Certified Public Accountant.
David A. Savula
Mr. Savula has been active in the marketing division of the Company as an
independent contractor since 1992. Prior to his involvement with the Company,
Mr. Savula developed extensive multilevel marketing experience, both in the U.S.
as well as Canada, with other multilevel marketing companies.
John W. Hail
John W. Hail is the founder of Advantage Marketing Systems, Inc. and has
served as Chief Executive Officer and Chairman of the Board of Directors of
Advantage Marketing Systems, Inc. since its inception in June 1988. From July
1986 through May 1988, Mr. Hail served as Executive Vice President, Director and
Agency Director of the Company and also served as Chairman of the Board of
Directors of TVC Marketing, Inc., which was the exclusive marketing agent of the
Company from April 1984 through September 1985.
John A. Addison
John A. Addison is Co-Chief Executive Officer and President of Primerica
Financial Services, a subsidiary of Citigroup and one of North America's largest
financial services marketing organizations with more than 100,000
representatives. Mr. Addison oversees the development and execution of all
aspects of Primerica's marketing and sales strategies.
Shirley A. Stonecipher
Mrs. Stonecipher has been involved with the Company since its inception in
1972 as an advisor to her husband, Harland C. Stonecipher. Mrs. Stonecipher has
attended most major Company-sponsored marketing rallies over the past 25 years
and has been involved with certain specific marketing initiatives, such as the
First Ladies Club aimed at providing recognition for the wives of marketing
associates.
Peter K. Grunebaum
Mr. Grunebaum is currently Managing Director of Fortrend International, an
investment firm headquartered in New York, New York, a position he has held
since 1989.
Randy Harp
Mr. Harp was named Chief Financial Officer in March 1990 and served in that
capacity until May 2000 and has served as Chief Operating Officer since March
1996. Mr. Harp is a Certified Public Accountant. Mr. Harp also serves as a
director of Canaan Energy Corporation.
Board Meetings and Committees
The Board of Directors held four meetings during the year ended December
31, 2001. During such year all directors attended at least 75% of the meetings
of the full Board and the committees on which they served except for Mr. Addison
who attended two of the four meetings.
The Board of Directors has established an Executive Committee consisting of
Messrs. Stonecipher, Harp and Grunebaum and an Audit Committee consisting of
Messrs. Grunebaum, Belsky and Hail. The Executive Committee may exercise all of
the powers of the Board of Directors, except to the extent limited by law. The
Audit Committee makes recommendations to the Board of Directors concerning the
selection of and oversees the Company's relationship with its independent
auditors and reviews with the independent auditors the scope and results of the
annual audit. The Audit Committee also reviews financial statements and reports
including proxy statements, Forms 10-K and Forms 10-Q, reviews all significant
financial reporting issues and practices and monitors internal control policies.
Each of the members of the Audit Committee meets the independence standards of
the New York Stock Exchange. The Audit Committee held seven meetings during
2001. The Board of Directors does not have standing nominating or compensation
committees.
Harland C. Stonecipher and Shirley A. Stonecipher are husband and wife. No
other family relationships exist among the directors or executive officers of
the Company.
Compensation of Directors
Directors who are also employees of the Company or its subsidiaries receive
no additional compensation for their services as directors. Non-employee
directors of the Company receive $500 per meeting attended. Under the Company's
Stock Option Plan, each non-employee director also receives on March 1 of each
year options to purchase 10,000 shares of Common Stock. These options are
immediately exercisable as of the date of grant as to one-fourth of the shares
covered by the options and vest in additional one-fourth increments on the
following June 1st, September 1st and December 1st in the year of grant, subject
to continued service by the non-employee director during such periods. Options
granted to non-employee directors under the Stock Option Plan have an exercise
price equal to the closing price of the Common Stock on the date of grant as
reported by the New York Stock Exchange and expire five years from the date of
grant.
The Board of Directors recommends that the shareholders vote "FOR" the
re-election of Harland C. Stonecipher, Wilburn L. Smith and Martin H. Belsky to
the Board of Directors.
Fiscal 2001 Audit and Other Fees
The firm of Grant Thornton LLP was engaged in September 2001 to serve as
the Company's independent auditor for the restatement audit of fiscal years 1998
through 2000 and our annual audit for the fiscal year ended December 31, 2001.
The aggregate fees billed by Grant Thornton LLP for the restatement audit of the
Company's consolidated financial statements for 1998 through 2000, and the
related profession services, are set forth below under the caption All Other
Fees. The aggregate fees billed by Grant Thornton LLP for the annual audit of
the Company's consolidated financial statements for the fiscal year 2001 are set
forth below under the caption Audit Fees. Grant Thornton LLP performed no
services, and therefore no fees were billed by Grant Thornton LLP for financial
information systems design and implementation, or for other professional
services during fiscal 2001:
Audit Fees..................................................... $ 92,000
Financial Information Systems Design and Implementation Fees... $ -
All Other Fees................................................. $ 180,000
The Audit Committee has considered whether the provision of non-audit
services by Grant Thornton LLP is compatible with maintaining auditor
independence.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors
("Board"), the Audit Committee of the Board ("Committee") assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. During
fiscal 2001, the Committee met seven times, and the Committee chair, as
representative of the Committee, discussed the interim financial information
contained in each quarterly earnings announcement with the CFO and independent
auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls. The Committee reviewed
with the independent auditors their audit plans, audit scope, and identification
of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Committee reviewed the audited financial statements of the Company as of and
for the fiscal year ended December 31, 2001, with management and the independent
auditors. Management has the responsibility for the preparation of the Company's
financial statements and the independent auditors have the responsibility for
the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, for filing with the Securities and
Exchange Commission. The Committee intends to recommend reappointment of the
independent auditors to the Board.
Peter K. Grunebaum Martin H. Belsky John W. Hail
Committee Chairman Committee Member Committee Member
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
Name Position
-------------------------------- ------------------------------------------
Harland C. Stonecipher Chairman of the Board of Directors and
Chief Executive Officer
Wilburn L. Smith President
Randy Harp Chief Operating Officer
Kathleen S. Pinson Vice President and Controller
Steve Williamson Chief Financial Officer
Each of the executive officers of the Company with the exception of Mr.
Williamson is also a director of the Company. For descriptions of the business
background and other information concerning the executive officers other than
Mr. Williamson, see "Election of Directors" above.
Steve Williamson
Mr. Williamson was named Chief Financial Officer of the Company in May
2000. From April 1997 until his employment with the Company in March 2000, Mr.
Williamson served as the Chief Financial Officer of Peripheral Enhancements,
Inc., an electronic memory assembly company. Prior to April 1997, Mr. Williamson
served as Director in Charge of Banking Practice for Horne & Company, a public
accounting firm. Mr. Williamson is a Certified Public Accountant.
Executive Compensation
The following table sets forth the compensation paid by the Company and its
subsidiaries for services rendered during the years ended December 31, 2001,
2000 and 1999 to the chief executive officer and to each other person serving as
an executive officer of the Company as of December 31, 2001 whose compensation
exceeded $100,000 during 2001. Such individuals are referred to herein as the
"named executive officers."
Summary Compensation Table
Long Term
Annual Compensation Compensation
----------------------- ------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus (1) Options Compensation (2)
------------------------------- ---- -------- ---------- ------------ ----------------
Harland C. Stonecipher......... 2001 $157,755 $1,473,556 100,000 $11,740
Chairman of the Board and 2000 157,755 1,230,297 100,000 11,970
Chief Executive Officer 1999 157,755 947,720 100,000 12,274
Wilburn L. Smith............... 2001 - 1,967,795 - 7,110
President 2000 - 1,562,532 - 5,250
1999 - 1,075,742 - 5,250
Randy Harp..................... 2001 167,019 32,500 80,000 5,282
Chief Operating Officer 2000 145,196 40,000 50,000 7,575
1999 120,865 40,000 50,000 3,900
Kathleen S. Pinson............. 2001 110,613 12,500 5,000 5,282
Vice President and Controller 2000 100,763 9,000 5,000 3,900
1999 91,560 6,000 5,000 3,900
Steve Williamson............... 2001 99,365 7,500 15,000 1,740
Chief Financial Officer
----------------
(1) Bonus to Mr. Stonecipher consists of override commissions earned by Mr.
Stonecipher pursuant to his employment agreement with the Company of
$240,000, $240,000 and $213,467 during 2001, 2000 and 1999, respectively,
and override commissions earned by Mr. Stonecipher with respect to
commissions earned by PPL Agency, Inc., a Company affiliated insurance
agency, of $56,576, $50,467 and $46,493 during 2001, 2000 and 1999,
respectively. The bonus amount also includes $1,176,980, $939,830 and
$687,760 during 2001, 2000 and 1999, respectively, representing a payment
of $10 for each marketing associate who participated in the Company's "Fast
Start to Success" training program that commenced in January 1997. See
"Executive Compensation and Other Information-Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" and "Certain
Relationships and Related Transactions."
Bonus to Mr. Smith consists of override commissions and other fees paid
with respect to commissions earned by, and new sales associate sponsorships
within, the Company's multilevel marketing sales force. The amounts
indicated for Mr. Smith do not include any amounts received by Mr. Smith as
a result of his equity ownership in certain entities which are not
affiliated with the Company but which are engaged in the marketing of the
Company's legal service memberships and earn commissions from sales of
memberships. See "Certain Relationships and Related Transactions."
Bonus to Messrs. Harp and Williamson and Ms. Pinson consisted of a
performance bonus based upon the achievement by the Company of certain
earnings per share goals.
(2) All Other Compensation of Mr. Stonecipher includes $5,331, $5,660 and
$5,964 for the years 2001, 2000 and 1999, respectively, relating to the
time value of premiums paid pursuant to a certain split dollar life
insurance agreement that provides for such premiums to be refunded to the
Company upon Mr. Stonecipher's death, and also includes $6,409, $6,310 and
$6,310 for the years 2001, 2000 and 1999, respectively, representing vested
contributions by the Company to the Employee Stock Ownership and Thrift
Plan and Trust (the "ESOP").
All Other Compensation of Messrs. Smith, Harp and Williamson and Ms. Pinson
consists of vested contributions by the Company to the ESOP.
The following table contains information concerning the grant of stock
options during the year ended December 31, 2001 under the Company's Stock Option
Plan to each of the named executive officers who received option grants during
such year.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term (3)
------------------------------------------------------------------------------------ -----------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (1) Year ($/Sh) (2) Date 5% 10%
---------------------- ------------ ---------- ----------- ---------- -------- ----------
Harland C. Stonecipher 100,000 22.6% $16.46 05/25/2006 $455,000 $1,005,000
Randy Harp 30,000 6.8 19.20 03/01/2011 362,100 918,000
Randy Harp 50,000 11.3 16.46 05/25/2006 227,500 502,500
Kathleen S. Pinson 5,000 1.1 16.46 05/25/2006 22,750 50,250
Steve Williamson 10,000 2.3 19.20 03/01/2011 120,700 306,000
Steve Williamson 5,000 1.1 16.46 05/25/2006 22,750 50,250
-----------------
(1) All options granted to the named executive officers during 2001 were
granted under the Company's Stock Option Plan. The exercise price of such
options is equal to 100% of the market price per share of the Common Stock
on the date of grant. The options granted to Mr. Stonecipher and 50,000 of
the options granted to Mr. Harp were immediately exercisable as of the date
of grant as to one-fourth of the shares covered thereby and became
exercisable in additional one-fourth increments on June 1, September 1, and
December 1, 2001. The remaining 30,000 options granted to Mr. Harp and the
10,000 options granted to Mr. Williamson on March 1, 2001 vest and become
exercisable at the rate of 20% per year and expire if not exercised ten
years after the grant date. The remaining 5,000 options granted to Mr.
Williamson and the options granted to Ms. Pinson become exercisable in
one-half increments beginning one year after the grant date. The options
expire if not exercised five years after the date of grant.
(2) Exercise price of the options must be paid in cash or, if the Board of
Directors so permits, by tender of shares of Common Stock or other
property, or by a combination of such means of payment.
(3) Potential realizable value is the amount that would be realized upon
exercise by the named executive officer of the options immediately prior to
the expiration of their respective terms, assuming the specified compound
annual rates of appreciation of the Company's Common Stock over the
respective terms of the options. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on stock option exercises depend
on the future performance of the Common Stock and overall market
conditions. There can be no assurances that the potential values reflected
in this table will be achieved.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options at Options at
December 31, 2001 December 31, 2001 (1)
--------------------------- ---------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------------- ----------- -------- ----------- ------------- ----------- -------------
Harland C. Stonecipher - - 500,000 - $1,309,000 $ -
Randy Harp - - 250,000 30,000 621,452 81,000
Kathleen S. Pinson - - 12,500 7,500 29,500 27,200
Steve Williamson - - 7,500 22,500 - 54,200
----------------------------
(1) Value of unexercised in-the-money options at December 31, 2001 is
calculated based on the market price per share of Common Stock of $21.90
per share on December 31, 2001 less the option exercise price.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has an employment agreement with Mr. Stonecipher that commenced
in January 1993, and, unless sooner terminated, expires on June 30, 2003. Under
the terms of the employment agreement, Mr. Stonecipher is to receive
compensation as determined by the Board of Directors but not less than $157,755
per year. In addition to his annual salary, Mr. Stonecipher also is entitled to
receive a supplemental retirement benefit in the amount of $26,000 per year
payable on the first day of the month following his termination of employment
and annually thereafter until the earlier of his death or the date upon which
ten such payments have been made. Mr. Stonecipher must meet certain minimal
conditions subsequent to the termination of his employment in order to receive
such payments. The Company's obligation pursuant to the employment agreement is
subject to the continuation of a certain split dollar life insurance agreement
between the Company and Shirley A. Stonecipher, Mr. Stonecipher's wife,
described below. If the Company terminates the employment agreement for any
reason (other than Mr. Stonecipher's death) or Mr. Stonecipher terminates the
agreement for certain specified events including a change of control of the
Company (as defined in the agreement), the Company is required to pay Mr.
Stonecipher a lump sum payment equal to the present value (using a 3% discount
rate) of the remaining salary and retirement benefits throughout the term of the
contract.
Pursuant to an agreement with the Company, Mr. Stonecipher is also entitled
to an override commission, payable monthly, in an amount equal to $.025 per
active membership as compensation for his efforts in assisting in the growth and
development of new production for the Company and its subsidiaries. The
agreement provides that the amount of the commissions shall in no event exceed
$20,000 per month. The payment of such commissions to Mr. Stonecipher continues
during his lifetime. The agreement requires that Mr. Stonecipher devote
reasonable efforts to the generation of new membership sales for the Company.
The amounts paid to Mr. Stonecipher under this agreement during the fiscal year
ended December 31, 2001 are reflected in the summary compensation table set
forth above. Mr. Stonecipher has deferred payments under this agreement of
$277,132 at December 31, 2001. Mr. Stonecipher also receives a portion of the
annualized commission revenue of PPL Agency, Inc., which is owned by Mr.
Stonecipher as a nominee for the Company. See "Certain Relationships and Related
Transactions." Such amounts paid to Mr. Stonecipher are also reflected in the
summary compensation table set forth above.
Commencing in January 1997, the Company implemented its "Fast Start to
Success" program pursuant to which electing marketing associates may participate
in Company-sponsored sales training programs, including use of a video and other
training aides developed by the Company. The cost to each marketing associate
for participation in the program is typically $249, except for special
promotions the Company implements from time to time. Mr. Stonecipher receives a
payment of $10 for each marketing associate who participates in the program.
Such amounts paid to Mr. Stonecipher in connection with the "Fast Start to
Success" program are reflected in the summary compensation table set forth
above. Mr. Stonecipher has deferred payments under this agreement of $154,650 at
December 31, 2001.
In July 1984, the Company entered into a life insurance arrangement with
Shirley A. Stonecipher, Mr. Stonecipher's wife, whereby the Company agreed to
pay premiums on a life insurance policy covering Mr. Stonecipher. The face
amount of the policy is $600,000 and Mrs. Stonecipher is the owner and
beneficiary. Mrs. Stonecipher has an agreement with the Company whereby upon Mr.
Stonecipher's death, the proceeds of the policy will be paid to the Company in
an amount sufficient to reimburse premiums paid to date by the Company and any
supplemental retirement payments made pursuant to his employment contract. This
agreement is secured by a collateral assignment of the policy proceeds.
Board of Director Interlocks and Insider Participation in Executive Compensation
Decisions
The Board of Directors of the Company is responsible for establishing
compensation of Harland C. Stonecipher, Chairman and Chief Executive Officer of
the Company. Mr. Stonecipher establishes the cash compensation of all other
executive officers. The Board of Directors does not have a standing compensation
committee. Since Mr. Stonecipher's cash compensation for 2001 was determined
pursuant to his employment agreement and other arrangements with the Company
approved by the Board of Directors prior to 2001, the Board of Directors did not
have any deliberations during 2001 relating to Mr. Stonecipher's cash
compensation for such year. However, during 2001, the Board of Directors
approved the grant of stock options to Mr. Stonecipher, Randy Harp, Steve
Williamson and Kathleen S. Pinson, each executive officers and directors of the
Company, for the purchase of 100,000, 80,000, 15,000 and 5,000 shares,
respectively, under the Company's Stock Option Plan. Messrs. Stonecipher, Smith
and Harp and Ms. Pinson participated in the deliberations of the Board of
Directors with respect to such stock option grants.
Report On Executive Compensation
As previously indicated, the Board of Directors of the Company (the
"Board") is responsible for establishing compensation of Harland C. Stonecipher,
the Chairman and Chief Executive Officer. Mr. Stonecipher is responsible for
establishing the cash compensation of all other executive officers including, as
applicable, the negotiation of employment contracts with executive officers. The
Board does not have a standing compensation committee. The Company's
compensation of executives is established to provide reasonable base salaries
and other compensation in the form of cash and equity incentive compensation
opportunities that are linked to performance of the Company and increases in
shareholder value.
The base salary of Mr. Stonecipher for 2001 was as provided in his
employment agreement with the Company entered into in 1993. The principal terms
of his employment agreement are described elsewhere herein. See "Executive
Compensation and Other Information - Employment Contracts and Termination of
Employment and Change-in-Control Arrangements." The level of base salary for Mr.
Stonecipher in the employment agreement was determined through negotiations with
Mr. Stonecipher at the time the employment agreement was entered into, and the
base salaries of the other executive officers of the Company for 2001 were
determined by Mr. Stonecipher based upon his assessment of the respective
executive officer's performance and potential contribution to the Company's
financial and operational objectives.
Pursuant to his employment agreement, Mr. Stonecipher receives a monthly
override commission of $.025 per active membership, subject to certain
limitations, and a portion of the annualized commission revenue of PPL Agency,
Inc., which is owned by Mr. Stonecipher as a nominee of the Company. During
2001, Mr. Stonecipher received $296,576 pursuant to these commission-based
incentive compensation arrangements. These arrangements foster the goals of the
Company's compensation policy by linking a significant portion of the chief
executive officer's annual compensation to the level of revenues derived from
active memberships, thereby creating strong financial incentives to the chief
executive officer for the continued growth of the Company's membership base.
During 2001, new membership sales increased 9% to 728,295 compared to 670,118
during 2000, and active memberships in force of 1,242,908 at December 31, 2001
increased 17% compared to 1,064,805 memberships in force at December 31, 2000.
Over the last five years, the compounded growth rate of the Company's active
membership base has exceeded 33% per year and earnings per share has grown from
$.08 per share to $1.26 per share for 2001.
During 1997, the Company implemented its "Fast Start to Success" program.
The "Fast Start to Success" program is a Company-sponsored field training
program for the Company's marketing associates that utilizes audio, video and
other training aides developed by the Company and is designed to increase new
memberships sold and new sales associates recruited per participating associate.
Participating associates are required to pay the Company a one-time training fee
to offset the Company's direct and indirect costs incurred in developing and
maintaining the program. Mr. Stonecipher receives a payment from the Company of
$10 for each marketing associate who participates in the "Fast Start to Success"
program. Such payments totaled $1,176,980 during 2001. Mr. Stonecipher was
instrumental in the conception and development of the program, which the Board
believes has enhanced the Company's marketing efforts and contributed to the
growth of new membership sales during 2001. Mr. Stonecipher's compensation in
connection with the program represents another element in the Company's
incentive compensation policy designed to link significant portions of the chief
executive officer's compensation with growth in the Company's membership base.
The Company maintains a Stock Option Plan (the "Plan") pursuant to which
the Board may grant options to purchase Common Stock to directors and employees
of the Company, including the executive officers. The exercise price of options
granted under the Plan may not be less than the fair market value per share of
Common Stock on the date of grant. In authorizing option awards under the Plan
to executive officers, the Board considers various factors including the
recommendation of the Chairman, the relative responsibilities of the optionee,
the Board's subjective evaluation of the optionee's performance, and the
optionee's relative equity interest in the Company in the form of stock and
options. The Board granted options during 2001 to the Company's executive
officers as follows: Harland C. Stonecipher - 100,000; Randy Harp - 80,000,
Steve Williamson - 15,000 and Kathleen S. Pinson - 5,000. The Board considers
stock options to be an important element of the Company's incentive compensation
policies and anticipates that additional options will be granted to certain
executive officers during 2002.
The Board of Directors has not adopted a policy with respect to
qualification of executive compensation in excess of $1 million per individual
for deduction under Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. In evaluating any policy for future
periods, the Board of Directors would expect to consider a number of factors,
including the nature of the Company's compensatory arrangements under employment
contracts or otherwise, the materiality of amounts likely to be involved and
potential ramifications of any loss of flexibility to respond to unforeseeable
changes in circumstances that might result from such policy.
The preceding report is presented by each of the current members of the
Board of Directors.
Harland C. Stonecipher Wilburn L. Smith Martin H. Belsky
Kathleen S. Pinson David A. Savula John W. Hail
Shirley S. Stonecipher Randy Harp Peter K. Grunebaum
John A. Addison
Shareholder Return Performance Graph
The following graph compares the cumulative total shareholder returns of
the Company's Common Stock during the five years ended December 31, 2001 with
the cumulative total shareholder returns of the Russell 2000 Index, the Media
General Personal Services industry index and a selected peer group. The peer
group consists of companies principally engaged in activities within the
Standard Industrial Classification Code applicable to the activities of the
Company (Insurance Carriers Not Elsewhere Classified) and prior to this year
included the following companies: E. W. Blanch Holdings, Inc.; Enhance Financial
Services Group, Inc.; Great American Financial Resources; Hallmark Financial
Services, Inc.; Healthnet, Inc. and Horace Mann Educators Corporation. Since two
of the six companies, E. W. Blanch Holdings, Inc. and Enhance Financial Services
Group, Inc. were acquired and are no longer reporting entities, the Company has
selected Media General's Personal Services industry index to use in place of the
peer group. The following graph includes the remaining four companies in the
peer group. The Company had initially selected this peer group because there are
no comparable issuers with publicly traded securities that are engaged
principally in the development, underwriting and marketing of prepaid legal
service plans. For 2001 and following years, the Company will use the Media
General Personal Services industry index because the peer group previously
selected has become too small and the Personal Services index is the industry
index which, in the Company's opinion, is the best available index to use for
comparative return purposes. The comparison assumes an investment of $100 on
January 1, 1997 in each of the Company's Common Stock, the Russell 2000 Index,
Media General's Personal Services industry index and the peer group and that any
dividends were reinvested.
Comparison of Cumulative Total Return of Company,
Russell 2000 Index, Peer Group and Industry Index
[GRAPH APPEARS HERE]
12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001
---------- ---------- ---------- ---------- ---------- ----------
Pre-Paid Legal Services, Inc. 100.00 187.33 180.82 131.51 139.73 120.00
Peer Group 100.00 122.77 106.69 80.66 115.22 107.56
Personal Services Industry Index 100.00 131.06 134.58 61.22 57.07 93.06
Russsell 2000 Index 100.00 122.34 118.91 142.21 136.07 137.46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of shares of Common Stock of the Company by each person
(other than directors and executive officers of the Company) known by the
Company to be the beneficial owner of more than five percent of the issued and
outstanding Common Stock. The information is based on Schedules 13D or 13G filed
by the applicable beneficial owner with the Securities and Exchange Commission
or other information provided to the Company by the beneficial owner.
Security Ownership of Certain Beneficial Owners
Beneficial Ownership
------------------------------
Number Percent of
------------------------------------------------------------------- of Class
Shares
Name and Address of Beneficial Owner -------------- -----------
------------------------------------
Thomas W. Smith
323 Railroad Avenue
Greenwich, CT 06830 4,035,501(1) 20.2
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06830 2,841,000(1) 14.2
---------------------
(1) Included in the shares of Common Stock indicated as beneficially owned by
Thomas W. Smith ("Smith") and Thomas N. Tryforos ("Tryforos") are 2,780,600
shares as to which they have shared voting and shared dispositive power. In
addition, Smith beneficially owns 1,254,901 shares of Common Stock as to
which he has sole voting and dispositive power and Tryforos beneficially
owns 60,400 shares of Common Stock as to which he has sole voting and
dispositive power. Of the shares indicated as beneficially owned by Smith
and Tryforos, 3,135,501 and 2,780,600 shares in the aggregate,
respectively, are beneficially owned in their capacities as investment
managers for certain managed accounts.
The following table sets forth certain information concerning the
beneficial ownership of shares of Common Stock of the Company as of March 29,
2002 by (a) each director of the Company, (b) each of the named executive
officers, and (c) all of the directors and executive officers of the Company as
a group.
Security Ownership of Directors and Executive Officers
Beneficial Ownership (1)
------------------------------
Number Percent
------------------------------------------------------------------- of of
Shares Class
Name of Director or Executive Officer ----------------- ----------
Harland C. Stonecipher
321 East Main Street
Ada, Oklahoma 74820.......................................... 1,570,373 (2) (3) 7.7
Shirley A. Stonecipher........................................... 1,112,873 (2) (4) 5.6
Randy Harp....................................................... 323,554 (5) 1.6
Wilburn L. Smith................................................. 105,606 (6) *
Kathleen S. Pinson............................................... 78,013 (7) *
Peter K. Grunebaum............................................... 50,700 (8) *
David A. Savula.................................................. 34,395 (9) *
John W. Hail..................................................... 44,375 (10) *
Martin H. Belsky................................................. 37,150 (11) *
John A. Addison.................................................. 12,500 (12) *
Steve Williamson................................................. 15,174 (13) *
All directors and executive officers as a group (11 persons)..... 2,314,340 (14) 11.0
--------------------
* Less than 1%.
(1) Unless otherwise indicated in the footnotes to the table and subject to
community property laws where applicable, each of the shareholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. The percentage of ownership for each
person is calculated in accordance with rules of the Securities and
Exchange Commission without regard to shares of Common Stock issuable upon
exercise of outstanding stock options, except that any shares a person is
deemed to own by having a right to acquire by exercise of an option are
considered outstanding solely for purposes of calculating such person's
percentage ownership.
(2) Harland C. Stonecipher and Shirley A. Stonecipher are husband and wife.
Included in the shares of Common Stock indicated as beneficially owned by
Mr. and Mrs. Stonecipher are 1,051,525 shares as to which they have shared
voting and shared dispositive power.
(3) Includes 18,848 shares owned under the ESOP as to which Mr. Stonecipher has
sole voting power, but shared dispositive power, and 500,000 shares
issuable upon exercise of outstanding options.
(4) Includes 42,500 shares issuable upon exercise of outstanding options but
does not include the shares beneficially owned by Mr. Stonecipher described
in Note (3) above as to which Mrs. Stonecipher shares neither voting nor
dispositive power, and Mrs. Stonecipher disclaims beneficial ownership of
such shares.
(5) Includes 16,838 shares owned under the ESOP as to which Mr. Harp has sole
voting power, but shared dispositive power, and 256,000 shares issuable
upon exercise of outstanding options.
(6) Includes 34,858 shares owned under the ESOP as to which Mr. Smith has sole
voting power, but shared dispositive power.
(7) Includes 18,920 shares owned under the ESOP as to which Ms. Pinson has sole
voting power, but shared dispositive power, and 12,500 shares issuable upon
the exercise of outstanding options. Also, includes 2,986 shares owned
under the ESOP by Ms. Pinson's husband, also an employee of the Company, as
to which he has sole voting power, but shared dispositive power. Ms. Pinson
disclaims beneficial ownership of shares that are owned by her husband.
(8) Includes 42,500 shares issuable upon exercise of outstanding options.
(9) Includes 12,117 shares issuable upon exercise of outstanding options.
(10) Includes 500 shares owned by a corporation that Mr. Hail controls and
42,500 shares issuable upon exercise of outstanding options.
(11) Includes 37,000 shares issuable upon exercise of outstanding options.
(12) Includes 12,500 shares issuable upon exercise of outstanding options.
(13) Includes 284 shares owned under the ESOP as to which Mr. Williamson has
sole voting power, but shared dispositive power, and 14,500 shares issuable
upon exercise of outstanding options.
(14) Includes 972,117 shares issuable upon exercise of outstanding options and
92,734 shares owned under the ESOP as to which the respective executive
officers and directors have sole voting power, but shared dispositive
power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Chairman, Harland C. Stonecipher, is the owner of PPL Agency,
Inc. ("Agency"). The Company has agreed to indemnify and hold harmless the
Chairman for any personal losses incurred as a result of his ownership of this
corporation and any income earned by Agency accrues to the Company. The Company
provides management and administrative services for Agency, for which it
receives specified management fees and expense reimbursements.
Agency's financial position and results of operations are included in the
Company's financial statements on a combined basis. Agency earned commissions,
net of amounts paid directly to its agents by the underwriter, during 2001, 2000
and 1999 of $121,000, $122,000 and $121,000, respectively, through its sales of
insurance products of an unaffiliated company. Agency had net income of $16,000
and $12,000 for the years ended December 31, 2001 and 2000, respectively and a
net loss for the year ended December 31, 1999 of $18,000 after incurring
commissions earned by the Chairman of $57,000, $50,000 and $49,000,
respectively, and annual management fees paid to the Company of $36,000 for
2001, 2000 and 1999.
Mr. Stonecipher and Shirley A. Stonecipher own Stonecipher Aviation LLC
("SA") and Mr. and Mrs. Stonecipher together with Wilburn L. Smith, President
and a director of the Company, own S & S Aviation LLC ("S&SA"). The Company has
agreed to reimburse SA and S&SA for certain expenses pertaining to trips made by
Company personnel for Company business purposes using aircraft owned by SA and
S&SA. Such reimbursement represents the pro rata portion of direct operating
expenses, such as fuel, maintenance, pilot fees and landing fees, incurred in
connection with such aircraft based on the relative number of flights taken for
Company business purposes versus the number of other flights during the
applicable period. No reimbursement is made for depreciation, capital
expenditures or improvements relating to such aircraft. During 2001, 2000 and
1999, the Company paid $214,000, $264,000 and $276,000, respectively, to SA as
reimbursement for such transportation expenses. S&SA was organized during 2000,
and the Company paid $355,000 and $372,000 to S&SA during 2001 and 2000,
respectively, as reimbursement for such transportation expenses.
The Company indemnified Mr. Stonecipher for litigation expenses and
settlement costs in connection with a lawsuit filed by Frank Jaques, a former
director of the Company, in 1999 against Mr. Stonecipher in the District Court
of Pontotoc County, Oklahoma. Mr. Jaques claimed damages relating to an
agreement between Mr. Jaques and Mr. Stonecipher relating to a stock
subscription agreement with the Company that Mr. Stonecipher entered into in
order to obtain the approval of the Oklahoma Securities Department for the
Company's original intrastate public offering in 1977. The stock subscription
agreement was executed by Mr. Stonecipher for the benefit of the Company in his
capacity as the Chairman and founder. The Board of Directors determined that the
requirements for indemnification under the Company's Bylaws had been satisfied
and that Mr. Stonecipher was entitled to such indemnification. In 2000, the
Company reimbursed Mr. Stonecipher $130,000 for litigation expenses, and in
2001, the Company reimbursed him for $1,000 in litigation expenses and $275,000
for settlement of the case which was accrued as of December 31, 2000.
Wilburn L. Smith, President and a director of the Company, has loans from
the Company made in December 1992, December 1996 and October 1998. The largest
aggregate balance of the loans during the year ended December 31, 2001 was
$526,000. The outstanding balance of the loans as of December 31, 2001 was
$511,000. The loans bear annual interest at the rate of 3% in excess of the
prime rate, adjusted on January 1 of each year, and are secured by Mr. Smith's
commissions from the Company. Mr. Smith also owns corporations or partnerships
not affiliated with the Company but engaged in the marketing of the Company's
legal service memberships and which earn commissions from sales of memberships.
These entities earned commissions, net of amounts passed through as commissions
to their sales agents, during 2001, 2000 and 1999 of $18,000, $13,000 and
$14,000, respectively.
Randy Harp, Chief Operating Officer and a director of the Company, has
loans from the Company made in December 2000. The largest aggregate balance of
these loans during the year ended December 31, 2001 was $441,000. The
outstanding balance of these loans as of December 31, 2001 was $441,000. These
loans bear annual interest at the rate of 3% in excess of the prime rate,
adjusted on January 1 of each year.
John W. Hail, a director of the Company, served as Executive Vice
President, Director and Agency Director of the Company from July 1986 through
May 1988 and also served as Chairman of the Board of Directors of TVC Marketing,
Inc., which was the exclusive marketing agent of the Company from April 1984
through September 1985. Pursuant to agreements between Mr. Hail and the Company
entered into during the period in which Mr. Hail was an executive officer of the
Company, Mr. Hail receives override commissions from renewals of certain
memberships initially sold by the Company during such period. During 2001, 2000
and 1999, such override commissions on renewals totaled $92,000, $90,000 and
$91,000, respectively. Mr. Hail also owns interests ranging from 12% to 100% in
corporations not currently affiliated with the Company, including TVC Marketing,
Inc., but which were engaged in the marketing of the Company's legal service
memberships and which earn renewal commissions from memberships previously sold.
These entities earned renewal commissions, net of amounts passed through as
commissions to their sales agents, during 2001, 2000 and 1999 of $294,000,
$313,000 and $301,000, respectively.
David A. Savula, a director of the Company, is actively engaged as an
independent contractor in the marketing of the Company's legal service
memberships. During 2001, 2000 and 1999, Mr. Savula received from the Company
$1.1 million, $936,000 and $815,000 respectively, pursuant to a previous
agreement with the Company providing for the payment to Mr. Savula of override
commissions and other fees with respect to commissions earned by, and new sales
associate sponsorships within, the Company's multilevel marketing sales force,
as well as amounts received pursuant to his individual associate agreement.
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of the Company and persons who beneficially own more than 10%
of the Company's Common Stock to file reports of ownership and changes in
ownership of the Company's Common Stock with the Securities and Exchange
Commission. The Company is required to disclose delinquent filings of reports by
such persons during 2001. Based on a review of the copies of such reports and
amendments thereto received by the Company, or written representations that no
filings were required, the Company believes that during 2001 all Section 16(a)
filing requirements applicable to its executive officers, directors and 10%
shareholders were met, except as described below.
Mr. Savula, a director of the Company did not file a Form 4 relating to one
transaction for November 2000 until February 2001 and Mr. Smith, President and a
director of the Company did not file a Form 4 relating to three transactions for
January 2001 until March 2001.
VOTING
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the Annual Meeting. All other matters
properly brought before the Annual Meeting, if any, will be decided by a
majority of the votes cast on the matter, unless otherwise required by law
Shares represented by proxies which are marked "withhold authority" with
respect to the election of any one or more nominees for election as directors
will be counted for the purpose of determining the number of shares represented
by proxy at the meeting. However, because directors are elected by a plurality
rather than a majority of the shares present in person or represented by proxy
at the Annual Meeting, proxies marked "withhold authority" with respect to any
one or more nominee will not affect the outcome of the nominee's election unless
the nominee receives no affirmative votes or unless other candidates are
nominated for election as directors.
Shares represented by limited proxies will be treated as represented at the
meeting only as to such matter or matters for which authority is granted in the
limited proxy. Shares represented by proxies returned by brokers where the
brokers' discretionary authority is limited by stock exchange rules will be
treated as represented at the Annual Meeting only as to such matter or matters
voted on in the proxies.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company engaged Grant Thornton LLP as its independent accountants in
September 2001. Grant Thornton LLP served as the Company's independent
accountants for the year ended December 31, 2001. Representatives of Grant
Thornton LLP are expected to be present at the Annual Meeting, with the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended December 31,
2001, including audited financial statements, accompanies this Proxy Statement.
The Annual Report is not incorporated by reference into this Proxy Statement or
deemed to be a part of the materials for the solicitation of proxies.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 filed with the Securities and Exchange Commission is available
without charge to any shareholder of the Company who requests a copy in writing
from the Company, Attn.: Janice Stinson, Investor Relations, P. O. Box 145, Ada,
Oklahoma 74821-0145.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider properly presented proposals of
shareholders intended to be presented for action at the Annual Meeting of
Shareholders. Such proposals must comply with the applicable requirements of the
Securities and Exchange Commission and the Company's bylaws. Under the Company's
bylaws, a notice of intent of a shareholder to bring any matter before a meeting
shall be made in writing and received by the Secretary of the Company not more
than 150 days and not less than 90 days in advance of the annual meeting or, in
the event of a special meeting of shareholders, such notice shall be received by
the Secretary of the Company not later than the close of the fifteenth day
following the day on which notice of the meeting is first mailed to
shareholders. Every such notice by a shareholder shall set forth: (a) the name
and address of the shareholder who intends to bring up any matter; (b) a
representation that the shareholder is a registered holder of the Company's
voting stock and intends to appear in person or by proxy at the meeting to bring
up the matter specified in the notice; (c) with respect to notice of an intent
to make a nomination, a description of all understandings among the shareholder
and each nominee and any other person (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the shareholder and
such other information regarding each nominee proposed by the shareholder as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had each nominee been
nominated by the Board of Directors of the Company; and (d) with respect to
notice of an intent to bring up any other matter, a description of the matter,
and any material interest of the shareholder in the matter. Notice of intent to
make a nomination shall be accompanied by the written consent of each nominee to
serve as a director of the Company, if elected. All shareholder proposals should
be sent to the Secretary of the Company at P.O. Box 145, Ada, Oklahoma
74821-0145.
A shareholder proposal submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 and intended to be included in the Company's
proxy statement relating to the 2003 Annual Meeting must be received no later
than December 28, 2002. To be considered for presentation at the 2003 Annual
Meeting, although not included in the Proxy Statement for such meeting, a
proposal must be received within the time period set forth in the Company's
bylaws as described above. In addition, the proxy solicited by the Board of
Directors for the 2003 Annual Meeting will confer discretionary authority to
vote on any such shareholder proposal presented at the 2003 Annual Meeting
unless the Company is provided with notice of such proposal no later than ninety
days prior to the date of the 2003 annual meeting.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters to
be presented for action at the Annual Meeting other than those listed in the
Notice of Meeting and referred to herein. If any other matters properly come
before the Annual Meeting or any adjournment thereof, it is intended that the
proxy solicited hereby be voted as to any such matter in accordance with the
recommendations of the Board of Directors of the Company.
YOUR VOTE IS IMPORTANT!
You can vote one of three ways:
1. Vote by Telephone.
2. Vote by Internet.
3. Vote by Mail.
VOTE BY TELEPHONE
Your Telephone vote is quick, easy and immediate. Just follow these easy steps:
1. Read the accompanying Proxy Statement
2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the
instructions.
3. When instructed, enter the Control Number, which is printed on the lower
right-hand corner of the back-side of your proxy card.
4. Follow the simple recorded instructions.
Please note that all votes cast by Telephone must be made prior to 5:00 p.m.
Central Time, May 29, 2002
Your telephone vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned the proxy card.
If you vote by telephone, please do not return your proxy by mail.
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately submitted.
Just follow these easy steps:
1. Read the accompanying Proxy Statement
2. Visit our Internet voting site at http://www.eproxyvote.com/ppd and follow
-----------------------------
the instructions on the screen.
Please note that all votes cast by Internet must be submitted prior to 5:00 p.m.
Central Time, May 29, 2002.
Your Internet vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated and returned the proxy card.
If you vote by Internet, please do not return your proxy by mail.
VOTE BY MAIL
To vote by mail, read the accompanying Proxy Statement then complete, sign and
date the proxy card below. Detach the card and return it in the envelope
provided herein.
IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, DETACH PROXY CARD AND RETURN
---
PROXY
PRE-PAID LEGAL SERVICES, INC.
Proxy Solicited on Behalf of the Board of
Directors Annual Meeting of the Shareholders to be held
on Friday, May 31, 2002
The undersigned shareholder of Pre-Paid Legal Services, Inc., an Oklahoma
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 12, 2002, and
hereby appoints Randy Harp and Kathleen S. Pinson, or either of them, as proxies
and attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 2002 Annual
Meeting of Shareholders of the Company, to be held in the Seminar Center at
Pontotoc Area VoTech School at 601 West 33rd Street in Ada, Oklahoma, on Friday,
May 31, 2002, at 1:00 p.m., local time, and at any adjournment thereof, and to
vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below.
(1) Election of directors:
____ FOR all nominees listed below (except as indicated).
____ WITHHOLD AUTHORITY to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below.
(01) Harland C. Stonecipher (02) Wilburn L. Smith (03) Martin H. Belsky
(2) In their discretion, upon such matters as may properly come before
the meeting or any adjournment or adjournments thereof.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE NOMINEES LISTED IN ITEM 1. IF ANY OTHER MATTERS ARE
BROUGHT BEFORE THE MEETING OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN
THE PROXY STATEMENT FOR ELECTION AS A DIRECTOR IS UNABLE TO SERVE OR FOR GOOD
CAUSE WILL NOT SERVE, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEES AS
THE BOARD MAY RECOMMEND.
DATED: __________________________________________________, 2002
----------------------------------------------------------------
Printed Name(s) of Shareholder(s)
Signature(s): -------------------------------------------------
-------------------------------------------------
(Please sign exactly as name appears on the proxy card. If shares are
held jointly, each holder should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person).
APPENDIX TO PROXY STATEMENT OF PRE-PAID LEGAL SERVICES, INC.
CONTAINING SUPPLEMENTAL INFORMATION REQUIRED TO BE
PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION
The following is information required to be provided to the Securities and
Exchange Commission in connection with the Definitive Proxy Materials of
Pre-Paid Legal Services, Inc. (the "Company") in connection with the 2002 Annual
Meeting of Shareholders of the Company. This information is not deemed to be a
part of the Proxy Statement and will not be provided to shareholders in
connection with the Proxy Statement.
1. The Company anticipates that the definitive Proxy Materials will be mailed
to the shareholders on or about April 12, 2002.