UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
(Mark one)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to ____________
Commission File Number: 1-9293
______________________________________________________________
PRE-PAID LEGAL SERVICES, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1016728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
321 East Main
Ada, Oklahoma 74820
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (405) 436-1234
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
Common Stock, $0.01 Par Value American Stock Exchange
Securities registered under Section 12 (g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB (X).
The issuer's revenues for the most recent fiscal year were $25,108,000.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days:
As of June 27, 1995 - $113,639,000.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of June 27, 1995 there were
20,596,187 shares of Common Stock, par value $.01 per share, outstanding.
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-KSB
pursuant to Section 13 of the Securities and Exchange Act of 1934 for the fiscal
year ended December 31, 1994, as set forth below and in the pages attached
hereto.
Part IV, Item 13 - "Exhibits and Reports on Form 8-K" is amended (i) to
include as Exhibit 99.1 the attached financial information relating to The
Employee Stock Ownership and Thrift Plan and Trust ("Plan"), as required by Form
11-K, for the fiscal year of the Plan ended December 31, 1994, which is filed as
an exhibit pursuant to Rule 15d-21 under the Securities Exchange Act of 1934,
and (ii) to include as Exhibit 23.2 the Consent of Deloitte & Touche LLP
relating to the use of their report which is included as part of Exhibit 99.1.
The full text of Item 13 and the Exhibit Index, as amended, referred to
therein are as set forth below.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: For a list of the documents filed as exhibits to this report,
see the Exhibit Index following the signatures to this report.
(b) Reports on Form 8-K: None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRE-PAID LEGAL SERVICES, INC.
/s/ KATHY PINSON
Kathy Pinson, Controller
Date: June 29, 1995
<PAGE>
INDEX TO EXHIBITS
TO FORM 10-KSB/A
AMENDMENT NO. 1
Exhibit No. Description
3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended (Incorporated by reference to Exhibit 3.1 of the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1992).
3.2 Amended and Restated Bylaws of the Company (Incorporated by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1987).
+4.1 Certificate of Designation of $2.40 Cumulative Convertible Preferred
Stock.
+4.2 Warrant Agreement dated as of June 16, 1994 between the Company and
Liberty Bank and Trust Company of Oklahoma City, National Association.
*10.1 Employment Agreement effective January 1, 1993 between the Company and
Harland C. Stonecipher (Incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1992).
*10.2 Agreements between Shirley Stonecipher, New York Life Insurance Company
and the Company regarding life insurance policy covering Harland C.
Stonecipher (Incorporated by reference to Exhibit 10.21 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1985).
*10.3 Amendment dated January 1, 1993 to Split Dollar Agreement between
Shirley Stonecipher and the Company regarding life insurance policy
covering Harland C. Stonecipher (Incorporated by reference to Exhibit
10.3 of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1992).
*10.4 Form of New Business Generation Agreement Between the Company and
Harland C. Stonecipher (Incorporated by reference to Exhibit 10.22 of
the Company's Annual Report on Form 10-K for the year ended December 31,
1986).
*10.5 Amendment to New Business Generation Agreement between the Company and
Harland C. Stonecipher effective January, 1990 (Incorporated by
reference to Exhibit 10.12 of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1992).
*10.6 Stock Option Plan (Incorporated by reference to Exhibit 10.25 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1987).
*10.7 Demand Note of Wilburn L. Smith and Carol Smith dated December 11, 1992
in favor of the Company (Incorporated by reference to Exhibit 10.15 of
the Company's Form SB-2 filed February 8, 1994).
*10.8 Security Agreement between the Company, Wilburn L. Smith and Carol Smith
dated December 11, 1992 ((Incorporated by reference to Exhibit 10.16 of
the Company's Form SB-2 filed February 8, 1994).
*10.9 Letter Agreements dated July 8, 1993 and March 7, 1994 between the
Company and Wilburn L. Smith (Incorporated by reference to Exhibit 10.17
of the Company's Form 10-KSB filed for the year ending December 31,
1993).
<PAGE>
INDEX TO EXHIBITS, (Continued)
Description
10.10 Marketing Services Agreement dated December 11, 1992 between the Company
and Roger T. Staubach (Incorporated by reference to Exhibit 10.1 of the
Company's Report on Form 8-K dated December 11, 1992).
10.11 Amendment No.1 to Marketing Services Agreement dated June 1, 1993
between the Company and Roger Staubach (Incorporated by reference to
Exhibit 10.12 of the Company's Form SB-2 filed February 8, 1994).
10.12 Amendment No.2 to Marketing Services Agreement dated December 1, 1993
between the Company and Roger Staubach (Incorporated by reference to
Exhibit 10.13 of the Company's Form SB-2 filed February 8, 1994).
*+10.13 Employment agreement effective January 23, 1995 between the Company and
Jack Mildren.
+10.14 Revolving Credit Agreement between Company and Bank One, Texas, National
Association dated January 27, 1995.
+10.15 Purchase Warrant dated as of June 8, 1994 issued to Paulson Investment
Company, Inc.
+11.1 Statement of Computation of Per Share Earnings.
16.1 Letter on change in certifying accountant (Incorporated by reference to
Exhibit 16.1 of the Company's Form 8-K filed August 12, 1994).
21.1 List of Subsidiaries of the Company (Incorporated by reference to
Exhibit 22.1 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1991).
+23.1 Consent of Deloitte & Touche LLP.
++23.2 Consent of Deloitte & Touche LLP relating to report concerning plan
financial information included as part of Exhibit 99.1.
++99.1 Financial information relating to the Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust, as required by Form
11-K for the fiscal year of the plan ended December 31, 1994.
____________________
* Constitutes a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report.
+ Previously filed.
++ Filed herewith.
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-82144 of Pre-Paid Legal Services, Inc. on Form S-8 of our report dated May 3,
1995 on the financial statements of The Pre-Paid Legal Services, Inc. Employee
Stock Ownership and Thrift Plan and Trust for the year ended December 31, 1994
appearing in this Amendment No. 1 on Form 10-KSB/A of Pre-Paid Legal Services,
Inc. for the year ended December 31, 1994.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Oklahoma City, Oklahoma
June 27, 1995
EXHIBIT 99.1
<PAGE>
Pre-Paid Legal Services, Inc.
Employee Stock Ownership
and Thrift Plan and Trust
Financial Statements
for the years ended December 31, 1994 and 1993
and Independent Auditors' Report
<PAGE>
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust
Index to Financial Statements
Page
Independent Auditors' Report 1
Financial Statements as of December 31, 1994 and 1993
and for the years then ended:
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes-to Financial Statements 4-8
Schedules required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under ERISA have been omitted because they are not
applicable.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and
Thrift Plan and Trust
We have audited the accompanying statement of net assets available for
benefits of Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift
Plan and Trust (the "Plan") as of December 31, 1994, and the related statement
of changes in net assets available for benefits for the year then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of the Plan for the year ended December 31,
1993 were audited by other auditors whose report, dated June 24, 1994, expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31,
1994, and the changes in net assets available for benefits for the year then
ended in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Oklahoma City, OK
May 3, 1995
<PAGE>
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust
Statement of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31,
1994 1993
Assets
<S> <C> <C>
Investments at fair value:
Short-term investment fund (Cost: 1994, $67,424;
1993, $89,574) .................................... $ 67,424 $ 89,574
Pre-Paid Legal Services, Inc. common stock
(Cost: 1994, $343,578; 1993, $284,592) ........... 599,266 443,540
Pre-Paid Legal Services, Inc. preferred stock
(Cost: 1994, $51,953) ............................. 56,000 --
Receivables:
Employer contribution ............................... 39,000 33,876
Elective deferrals .................................. 765 --
Dividends ........................................... 1,200 --
Cash ................................................... 1 1,061
Net assets available for benefits ................. $763,656 $568,051
</TABLE>
<PAGE>
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust
Statement of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Additions to net assets:
Net investment income:
Net appreciation in fair value of investments ..... $104,727 $116,473
Interest income ................................... 3,357 1,979
Dividend income ................................... 2,600 --
110,684 118,452
Contributions:
Employer (Pre-Paid Legal Services, Inc.
common stock) ................................... 39,000 33,877
Participants ...................................... 60,708 53,454
99,708 87,331
Total additions ................................... 210,392 205,783
Deductions from net assets:
Benefits paid to participants ....................... 14,787 3,844
Net increase ...................................... 195,605 201,939
Net assets available for benefits:
Beginning of year ................................... 568,051 366,112
End of year ......................................... $763,656 $568,051
</TABLE>
<PAGE>
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust
Notes to Financial Statements
For the Years Ended December 31, 1994 and 1993
1. Formation of the Plan and Summary of Significant Accounting Policies
The Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan
and Trust (the "Plan") was established on January 1, 1988 for the benefit of the
employees of Pre-Paid Legal Services, Inc. and its subsidiaries (the "Company").
The Plan was amended, effective January 1, 1994, to comply with applicable
provisions of the Omnibus Budget Reconciliation Act of 1993, and is subject to
the applicable provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
The Plan is administered by a committee of three employees appointed by the
Company (the "Committee"). The Committee also serves as Trustee and Investment
Manager.
The following is a summary of the Plan's significant accounting policies:
Basis of accounting
The Plan's financial statements are prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles.
Investments
Investments traded on national securities exchanges are valued at closing
prices on the last business day of the year. The cost of investments sold is
determined on the basis of average cost, and investment transactions are
recorded on a trade date basis.
Under the terms of the Plan, the Committee acquires, holds and disposes of
all cash and investments, including common and preferred stock of the Company,
through a trust fund.
Non Cash Contributions
Contributions of Company Stock are recorded at fair value.
Expenses
Expenses of administration of the Plan are paid by the Plan if not paid by
the Company.
<PAGE>
2. Plan Description
The following brief description of the provisions of the Plan is provided
for general information purposes only. Participants should refer to the plan
agreement for more complete information.
General
The Plan is a defined contribution plan covering certain employees of the
Company and employees of affiliated companies which file a consolidated tax
return with the Company. The plan year is January 1 to December 31. All
employees at least 21 years of age are eligible to enroll in the Plan on January
1 or July 1 following the date the employee completes one year of service (1,000
hours) within 12 consecutive months of their employment date.
Participants contribute to the Plan on a pre-tax basis only. Types of
contributions provided for in the Plan are:
Discretionary Company Contributions
The employer may make discretionary contributions to the Plan for each plan
year. The contributions may vary from year to year and shall be determined by
written action of the Board of Directors of the Company. Contributions may be
made only out of the consolidated net profits before federal and state income
taxes from the current or a preceding plan year. The Company's contribution may
be paid to the Trustee either in cash, qualified employer securities or in other
property. In 1994 and 1993 all employer contributions were made in qualified
employer securities.
Matching Company Contribution
The matching Company contribution is an amount which, when added to amounts
forfeited by other participants, equals the amount necessary to match the
following percentages of participants' deferred compensation contributions (up
to a maximum of 6%) for the plan year. The matching employer contribution is
allocated at the end of each plan year to each participant's Company
contribution account based on the following percentages:
Years of Service
On First Day Matching
Of Plan Year Percentages
0 - 5 50%
6 - 10 75%
11 or more 100%
<PAGE>
Employee Deferred Compensation Contribution
A participant may elect to defer a portion of his compensation in the form
of a contribution to his deferred compensation account under the Plan. Subject
to the limitations contained in the Plan, a participant may elect to defer any
portion of his compensation. However, a participant may never defer more than
the lesser of the Internal Revenue Service limitation ($9,240 in 1994 and $8,994
in 1993, respectively) in any plan year or a percentage of compensation greater
than the maximum percentage of compensation determined annually by the
Committee.
Separate accounts are maintained for each participant in the Plan. When an
election is made by the participant to defer part of his compensation, an
employee deferred compensation account is established. Each participant will
also have a Company contribution account consisting of matching contributions
made by the Company and a proportionate share of forfeitures.
All amounts in the participant's accounts are placed in a trust fund and
invested by the Trustee. The Trustee must invest the trust fund solely in the
interest of and for the exclusive purpose of providing benefits to the
participants and their beneficiaries while minimizing the expenses of
administering the Plan. Under the terms of the Plan, all Company contributions
and up to seventy-five percent (75%) of the participant's contributions may be
invested in common stock of the Company or in preferred stock convertible into
common stock of the Company at a conversion price which, as of the date of
acquisition by the Plan, is reasonable. Such securities are termed qualified
employer securities.
A participant will be entitled to his employee deferred compensation
account at the normal retirement date, permanent disability, death, separation
from employment, attaining age 59 1/2, or in the case of hardship (as determined
by the Committee).
A participant will be entitled to the full amount credited to his Company
contribution account at the normal retirement date, or upon permanent disability
or death. If a participant terminates employment for any reason after he has
completed one (1) year of service, he will be entitled to receive a portion or
all of his account, depending on his years of service. The percentage of the
Company contribution account to which a participant is entitled and the
percentage forfeited if a participant leaves the employer for reasons other than
retirement, permanent disability or death prior to becoming fully vested is
computed according to the following formula:
<PAGE>
Vested Forfeited
Years of Service Percentage Percentage
Less than 1 0% 100%
1 but less than 2 20% 80%
2 but less than 3 40% 60%
3 but less than 4 60% 40%
4 but less than 5 80% 20%
5 or more 100% 0%
A participant will always be fully vested in his employee deferred
compensation account, regardless of his years of service.
The Company may amend the Plan at any time to conform to the Internal
Revenue Code, Treasury Regulations and rulings thereunder. The Company has the
right to terminate the Plan at any time upon prior written notice to the Trustee
and may direct the Trustee to liquidate the shares of participants in the trust
fund. Upon termination or permanent suspension of contributions, the accounts of
all participants affected thereby shall become nonforfeitable and shall be
distributed within twenty-five (25) months of the termination.
3. Income Taxes
A favorable determination letter dated June 22, 1993 was received from the
Internal Revenue Service indicating that the Plan, as amended through December
17, 1991, qualifies under Section 401(a) of the Internal Revenue Code and is
exempt from Federal income taxes under Section 501(a) of the Code. The Plan has
been amended since receiving the determination letter. However, the plan
administrator believes that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code.
Therefore, the plan administrator believes that the Plan continues to be
qualified and no provision for income taxes has been included in the Plan's
financial statements.
4. Distributions
Former participants who request distribution of their accounts may request
distribution of stock or may request their entire distribution in cash. The
ability of the Plan to make distributions in cash depends, in part, on the funds
available to the Plan to make purchases of the Company's Common Stock.
Distributions which were made in 1994 included distributions of 44 shares of the
Company's Common Stock and cash of $14,707.
Participants who terminated employment during 1994 may request
distributions to be paid during 1995. The balance of the accounts of the former
participants at December 31. 1994 included a total of vested shares of the
Company's Common Stock of 64,968 and cash of $13,020. These amounts may be
distributed upon the request of the former participants during 1995, however,
amounts distributed would be determined at the time of distribution based upon
current balances, current market value of the Company's Common Stock and form of
distribution requested by the former participants. As a result, the amount of
the liability for such future distributions is not known.
