PRE-PAID LEGAL SERVICES, INC.
321 East Main Street
P. 0. Box 145
Ada, Oklahoma 74820
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 23, 1997, at
1:00 p.m., local time, for the following purposes:
1. To elect two 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 18, 1997 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 28, 1997
Please Sign The Enclosed Form Of Proxy 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 74820
1997 ANNUAL MEETING OF SHAREHOLDERS
The following information is furnished in connection with the 1997
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 23, 1997, at 1:00 p.m., local time. This
Proxy Statement and accompanying materials will be mailed on or about April 28,
1997 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 18, 1997. On that date, the Company had 21,953,910 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 enclosed proxy is being solicited by the Board of Directors of the
Company. 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 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, or (c) 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 74820, Attention: Kathryn Walden, Secretary.
ELECTION OF DIRECTORS
The Board of Directors consists of seven 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 Kathleen S. Pinson and Charles H. Walls, whose terms as directors expire as
of the Annual Meeting, 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 Kathleen S. Pinson and Charles H. Walls to the Board of
Directors.
Should the nominees for re-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
---- --- -------------- ------------
Kathleen S. Pinson 44 1990 1997
Charles H. Walls 65 1993 1997
Peter K. Grunebaum 63 1980 1998
Randy Harp 41 1990 1998
Francis A. Tarkenton 57 1997 1998
Harland C. Stonecipher 58 1976 1999
Wilburn L. Smith 56 1997 1999
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.
Charles H. Walls
Mr. Walls was a principal and teacher in the Rattan, Oklahoma Public
School system from 1980 until his retirement in May 1992. Previously, Mr. Walls
served as a Senior Vice President of Paramount Life Insurance Company of Little
Rock, Arkansas.
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. He also serves as a director of Prime Succession, Inc.
Randy Harp
Mr. Harp was named Chief Financial Officer in March 1990 and Chief
Operating Officer in March 1996. Mr. Harp is a Certified Public Accountant.
Francis A. Tarkenton
Mr. Tarkenton is a business consultant and a public speaker. He is also
Chairman and founder of the Fran Tarkenton Small Business NETwork. He served as
Chairman of the Board of Directors and Chief Executive Officer of KnowledgeWare,
Inc. (computer software company) from 1986 to 1994. He is also a director of
Coca Cola Enterprises, Inc. and Sterling Software, Inc. (computer software
company). On April 14, 1997, the Company's Board of Directors elected Mr.
Tarkenton to serve as a member of the Board of Directors.
Harland C. Stonecipher
Mr. Stonecipher has been the Chairman of the Board of Directors of the
Company since its organization in 1976. Mr. Stonecipher also served as Chief
Executive Officer until March 1996 and since January 1997. Prior to 1984 and
from May 1987 through January 1995, he also served as its President (except for
the period from May 1989 to March 1990). 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 was named Vice President of Marketing and Agency Director in
July 1990. Mr. Smith has been active in the marketing division of the Company
since 1980 and served as a director of the Company from March 1993 to October
1995. On April 14, 1997, Mr. Smith was appointed by the Board of Directors as
the Company's President and was elected by the Board of Directors to serve once
again as a director of the Company.
Board Meetings and Committees
The Board of Directors held five meetings during the year ended
December 31, 1996. During such year all directors attended at least 75% of the
meetings of the full Board and the committees on which they served.
The Board of Directors has established an Executive Committee
consisting of Messrs. Stonecipher, Harp and Grunebaum, a Stock Option Committee
consisting of Messrs. Stonecipher and Grunebaum, and an Audit Committee, of
which Mr. Grunebaum is presently the sole member. The Executive Committee may
exercise all of the powers of the Board of Directors, except to the extent
limited by law. The Stock Option Committee administered the Company's Stock
Option Plan until March 1997. However, since March 1997, the Stock Option Plan
has been administered by the full Board of Directors. The Audit Committee makes
recommendations to the Board of Directors concerning the selection of and
oversees the Company's independent auditors and reviews with the independent
auditors the scope and results of the annual audit. The Audit Committee also
monitors internal control policies. The Audit Committee held two meetings during
1996. The Board of Directors does not have standing nominating or compensation
committees.
No family relationships exist among executive officers and directors 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 options to purchase
10,000 shares of Common Stock on March 1 of each year. 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
quoted by the American 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 Ms. Pinson and Mr. Walls to the Board of Directors.
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 and
Chief Financial Officer
Kathleen S. Pinson Vice President and Controller
Each of the executive officers of the Company is also a director of the
Company. For descriptions of the business background and other information
concerning the executive officers, see "Election of Directors" above.
Executive Compensation
The following table sets forth the cash compensation paid by the
Company and its subsidiaries for services rendered during the twelve months
ended December 31, 1996, 1995 and 1994 to the chief executive officer and to
each other person serving as an executive officer of the Company as of December
31, 1996 whose cash compensation exceeded $100,000 during 1996. Such individuals
are referred to herein as the "named executive officers."
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus (1) Options Compensation(2)
--------------------------- ---- ------ --------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Harland C. Stonecipher (3)............... 1996 $160,789 $129,293 - $12,939
Chairman of the Board and Chief 1995 157,755 99,107 - 13,500
Executive Officer 1994 157,755 273,680 - 15,249
Jack Mildren (4)......................... 1996 152,885 72,948 - 778
Former Chief Executive Officer 1995 138,461 5,625 250,000 -
and President
Randy Harp............................... 1996 102,461 - - 3,975
Chief Operating Officer and 1995 101,112 - 50,000 2,600
Chief Financial Officer 1994 97,161 - - 2,400
</TABLE>
- ----------------
(1) Bonus to Mr. Stonecipher consists primarily of override commissions earned
by Mr. Stonecipher pursuant to his employment agreement with the Company of
$75,990, $54,183, and $44,417 during 1996, 1995 and 1994, respectively, and
override commissions earned by Mr. Stonecipher with respect to commissions
earned by PPL Agency, Inc., a Company affiliated insurance agency, of
$49,496, $44,924, and $229,263 during 1996, 1995 and 1994, respectively. The
1994 PPL Agency commissions reflect a non-recurring payment for renewal
commissions. 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. Mildren for 1996 consisted primarily of a $25,000 performance
bonus based upon the achievement by the Company of certain earnings per
share goals together with commissions earned of $43,925 by Mr. Mildren
pursuant to his employment agreement with the Company. See "Executive
Compensation and Other Information-Employment Contracts and Termination of
Employment and Change-in-Control Arrangements."
(2) All Other Compensation of Mr. Stonecipher includes $6,739, $6,958, and
$8,159 for the years 1996, 1995 and 1994, 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 $6,200, $6,542, and $7,090 for
the years 1996, 1995 and 1994, respectively, representing vested
contributions by the Company to the Employee Stock Ownership and Thrift Plan
and Trust (the "ESOP").
All Other Compensation of Messrs. Mildren and Harp consists of vested
contributions by the Company to the ESOP.
(3) Mr. Stonecipher also served as Chief Executive Officer and President until
January 1995, and as Chief Executive Officer until March 1996. In February
1997, Mr. Stonecipher resumed his position as Chief Executive Officer when
Mr. Mildren resigned.
(4) Mr. Mildren joined the Company as its President and a director in January
1995 and was appointed as Chief Executive Officer in March 1996. Mr. Mildren
resigned as President and Chief Executive Officer and director in February
1997 at the expiration of his employment contract.
There were no grants of stock options during the year ended December
31, 1996 to any of the named executive officers. The following table provides
information with respect to each of the named executive officers who held stock
options from the Company as of December 31, 1996 concerning the exercise of
options during the year ended December 31, 1996 and unexercised options held as
of December 31, 1996.
Option Exercises and Year-end Value Table
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options at Options at
December 31, 1996 December 31, 1996 (1)
------------------------ ---------------------------
Shares
Acquired Value
Name on Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- ------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Mildren - $ - 250,000 - $2,993,750 -
Randy Harp 20,000 247,500 70,000 - 807,500 -
</TABLE>
- ----------------
(1) Value of unexercised in-the-money options at December 31, 1996 is calculated
based on the market price per share of Common Stock of $18.25 per share on
December 31, 1996 less the option exercise price.
(2) Value realized is calculated based on the market price per share of Common
Stock of $12.75 on the date of exercise 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 which
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 $157,750
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 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, 1996 are reflected in the summary compensation table set
forth above. Mr. Stonecipher has deferred payments under this agreement of
$51,989 at December 31, 1996. 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 an interactive
video and other training aides developed by the Company. The cost to each
marketing associate for participation in the program is $249. Pursuant to an
agreement with the Company, Mr. Stonecipher receives a payment of $10 for each
marketing associate who participates in the program.
In July 1984, the Company entered into a life insurance arrangement
with 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 Mr. Stonecipher's wife is the owner and beneficiary. Mr.
Stonecipher's wife 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.
Pursuant to an employment agreement which expired in February 1997, Mr.
Mildren served as the Company's President and Chief Executive Officer and
received a base salary of $150,000, a performance bonus of $25,000 based upon
the Company's achievement of certain 1996 performance goals, and an override
commission equal to $.025 per active membership for memberships written since
January 1, 1995. Override commission will be paid for Mr. Mildren's life on all
memberships written during his employment. Mr. Mildren resigned as President and
Chief Executive Officer and director in February 1997 at the expiration of his
employment contract.
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 compensation of all other executive
officers. The Board of Directors does not have a standing compensation
committee. Since Mr. Stonecipher's compensation for 1996 was determined pursuant
to his employment agreement and other agreements with the Company approved by
the Board of Directors and entered into prior to 1996, the Board of Directors
did not have any deliberations during 1996 relating to Mr. Stonecipher's
compensation for such year. However, in December 1996, the Board of Directors
approved the Company's "Fast Start to Success" program which was implemented in
January 1997 and pursuant to which Mr. Stonecipher will receive compensation as
described elsewhere herein. See "Executive Compensation and Other Information
- -Employment Contracts and Termination of Employment and Change-in-Control
Arrangements." Randy Harp and Kathleen. S. Pinson, each an executive officer and
a director of the Company, participated in the deliberations of the Board of
Directors with respect to Mr. Stonecipher's compensation pursuant to the "Fast
Start to Success" program. Jack Mildren, a former executive officer and director
of the Company, also participated in such deliberations.
Report On Executive Compensation
As previously indicated, the Board of Directors of the Company (the
"Board") is responsible for establishing compensation of the Chairman. The
Chairman is responsible for establishing 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 salaries of Mr. Stonecipher and Mr. Mildren during 1996 were
as provided in their employment agreements with the Company entered into in 1993
and 1995, respectively. The principal terms of these employment agreements are
described elsewhere herein. See "Executive Compensation and Other Information -
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements." The levels of base salary for Mr. Stonecipher and Mr. Mildren in
the employment agreements were determined through negotiations with the
respective executive officers and the base salaries of the other executive
officers of the Company for 1996 were determined by the Chairman based upon his
assessment of the respective executive officer's performance and potential
contribution to the Company's financial and operational objectives.
During 1996, Mr. Mildren received as provided in his employment
agreement a bonus of $25,000 based on the achievement by the Company of earnings
per share of in excess of $0.50 for 1996. The Company did not pay any
discretionary bonuses to its executive officers during 1996.
Pursuant to his employment agreement, Mr. Stonecipher receives an
override commission of $0.025 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. Pursuant to
his employment agreement, Mr. Mildren received an override commission of $0.025
per active membership written since January 1, 1995, a date which approximates
the date Mr. Mildren joined the Company. During 1996, Mr. Stonecipher and Mr.
Mildren received $75,990 and $43,925 respectively, 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 respective executive officer's annual compensation to the level of
revenues derived from active memberships, thereby creating strong financial
incentives to such executive officers for the continued growth of the Company's
membership base. During 1996, new membership sales increased 77% to 194,483
compared to 109,922 during 1995, and active memberships in force of 294,l5l at
December 31, 1996 increased 44% compared to 203,535 memberships in force at
December 31, 1995. The Company has achieved increased levels of total active
memberships in force each year since 1992.
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
optionee's relative equity interest in the Company in the form of stock and
options. The Board did not award any stock options under the Plan to executive
officers during 1996. However, the Board did grant option awards to executive
officers during 1995 and considers stock options to be an important element of
the Company's incentive compensation policies. The Board anticipates that
additional options will be granted to certain executive officers during 1997.
The preceding report is presented by each of the members of the Board
who served as a director during 1996.
Harland C. Stonecipher
Peter K. Grunebaum Charles H. Walls
Randy Harp Kathleen S. Pinson
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, 1996 with
the cumulative total shareholder returns of the Russell 2000 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
includes the following companies: American Annuity Group, Inc.; E. W. Blanch
Holdings, Inc.; Enhance Financial Services Group, Inc.; Financial Security
Assurance Holdings LTD.; Foundation Health Systems, Inc. Class A; Hallmark
Financial Services, Inc.; and Horace Mann Educators Corporation. The Company has
selected this peer group primarily 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. The comparison
assumes an investment of $100 on December 31, 1991 in each of the Company's
Common Stock, the Russell 2000 Index and the peer group and that any dividends
were reinvested.
Comparison of Cumulative Total Return of Company,
Russell 2000 Index and Peer Group
[GRAPH APPEARS HERE]
================================================================================
FISCAL YEAR ENDING
COMPANY 1991 1992 1993 1994 1995 1996
PRE-PAID LEGAL SVCS INC 100 125.00 168.75 200.00 1037.50 1825.00
PEER GROUP 100 127.77 123.08 128.98 168.18 200.72
BROAD MARKET 100 118.41 140.80 138.24 177.56 207.05
================================================================================
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.
Security Ownership of Certain Beneficial Owners
Beneficial Ownership
--------------------
Number Percent
of of
Name and Address of Beneficial Owner Shares Class
- --------------------------------------------------------------------------------
Thomas W. Smith
323 Railroad Avenue
Greenwich, CT 06830............................... 2,031,950 (1) 9.3
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06830............................... 1,837,500 (1) 8.4
- ---------------------
(1) Included in the shares of Common Stock indicated as beneficially owned by
Thomas W. Smith ("Smith") and Thomas N. Tryforos ("Tryforos") are 1,826,000
shares as to which they have shared voting and shared dispositive power.
These shares are beneficially owned by Smith and Tryforos in their
respective capacities as investment managers of certain managed accounts
and are included in the respective beneficial ownership totals of both
Smith and Tryforos. In addition, Smith beneficially owns 205,950 shares of
Common Stock as to which he has sole voting and dispositive power and
Tryforos beneficially owns 11,500 shares of Common Stock as to which he has
sole voting and dispositive power. This information is based on a Schedule
13D and amendments thereto filed by Smith and Tryforos with the Securities
and Exchange Commission and is as of March 12, 1997.
The following table sets forth certain information concerning the
beneficial ownership of shares of Common Stock of the Company as of April 15,
1997 by (a) each director of the Company, (b) each executive officer of the
Company, and (c) all of the directors and executive officers of the Company as a
group.
Security Ownership of Directors and Executive Officers
Beneficial Ownership
--------------------
Number Percent
of of
Name of Director or Executive Officer Shares Class (1)
- --------------------------------------------------------------------------------
Harland C. Stonecipher
321 East Main Street
Ada, Oklahoma 74820............................... 1,333,142 (2) 6.1
Randy Harp............................................ 102,034 (3) *
Wilburn L. Smith...................................... 81,329 (4) *
Kathleen S. Pinson.................................... 68,368 (5) *
Peter K. Grunebaum.................................... 68,000 (6) *
Charles H. Walls...................................... 28,500 (7) *
Francis A. Tarkenton.................................. 2,500 (8) *
All directors and executive officers
as a group (7 persons).............................. 1,683,873 (9) 7.6
- ---------------------
* 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) Includes 16,045 shares owned under the ESOP as to which Mr. Stonecipher
has sole voting power, but shared dispositive power and 25,000 shares
issuable upon exercise of outstanding options.
(3) Includes 14,534 shares owned under the ESOP as to which Mr. Harp has sole
voting power, but shared dispositive power and 62,500 shares issuable upon
exercise of outstanding options.
(4) Includes 32,068 shares owned under the ESOP as to which Mr. Smith has sole
voting power, but shared dispositive power.
(5) Includes 17,329 shares owned under the ESOP as to which Ms. Pinson has
sole voting power, but shared dispositive power and 15,000 shares issuable
upon the exercise of outstanding options. Also, includes 2,132 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 and 766 shares issuable upon exercise of outstanding options held by
Ms. Pinson's husband. Ms. Pinson disclaims beneficial ownership of shares
that are owned by her husband.
(6) Includes 25,000 shares issuable upon exercise of outstanding options.
(7) Consists of 28,500 shares issuable upon exercise of outstanding options.
(8) Consists of 2,500 shares issuable upon exercise of outstanding options.
(9) Includes 159,266 shares issuable upon exercise of outstanding options and
82,108 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
Harland C. Stonecipher, Chairman of the Board of Directors and Chief
Executive Officer of the Company, owns all of the outstanding shares of PPL
Agency, Inc. ("Agency") as a nominee for the Company. Any income of Agency
accrues to the Company and the Company has agreed to indemnify and hold harmless
Mr. Stonecipher for any personal losses as a result of his ownership of Agency.
Agency's financial position and results of operations are included in
the Company's financial statements on a consolidated basis. Agency earned
commissions during 1996 and 1995 of $130,016 and $413,000, respectively, through
its sales of insurance products of an unaffiliated company. Annual management
fees paid to the Company in 1996 and 1995 were $72,000 for each year. Agency had
net income for the years ended December 31, 1996 and 1995 of $56,206 and $599,
respectively, after the payment of commissions to Mr. Stonecipher of $49,496 and
$44,924, respectively.
Wilburn L. Smith, President and a director of the Company, has a loan
from the Company which was made prior to the time Mr. Smith became an executive
officer and director. The largest balance of this loan during the year ended
December 31, 1996 was $281,000. The outstanding balance of this loan as of
December 31, 1996 was $281,000. The loan bears annual interest at the rate of 3%
in excess of the prime rate, adjusted on January 1 of each year, and is secured
by Mr. Smith's commissions from the Company.
Mr. Smith owns interests ranging from 10% to 67% in 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 1996 and 1995 of $54,000 and $55,000,
respectively.
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 1996.
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, except as described below, during 1996, all
Section 16(a) filing requirements applicable to its executive officers,
directors and 10% shareholders were met. Kathleen S. Pinson, Vice President,
Controller and a director of the Company, inadvertently failed to file a
required report relating to the acquisition of 5,000 shares of Common Stock
pursuant to the exercise of previously reported options to purchase Common
Stock. Harland C. Stonecipher also inadvertently failed to file a report
pertaining to the disposition by gift of 19,000 shares of Common Stock.
Appropriate filings were made upon the discovery of these filing delinquencies.
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 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 nominee for election as director
will be counted for purposes of determining the number of shares represented by
proxy at the Annual 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 Deloitte & Touche LLP as its independent
accountants in September 1994. Deloitte & Touche LLP served as the Company's
independent accountants for the year ended December 31, 1996. Representatives of
Deloitte & Touche 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. A decision concerning the selection of the
Company's independent auditors for 1997 has not yet been made. Management of the
Company intends to evaluate the services and prices available from other
accounting firms before making a final recommendation.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended December
31, 1996, 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, 1996 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 74820.
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. According to the rules of the
Securities and Exchange Commission and the Company's bylaws, in order for a
shareholder proposal to be included in the Company's Proxy Statement relating to
the 1998 Annual Meeting of Shareholders, a written proposal complying with the
requirements established by the Securities and Exchange Commission and the above
requirements must be received by the Secretary of the Company at P. O. Box 145,
Ada, Oklahoma 74820, no later than December 30, 1997.
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.
