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 12, 2000, 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 approve the amendment of the Company's Stock Option Plan to increase
the maximum number of shares of Common Stock in respect of which options may
be granted under the Stock Option Plan from 1,000,000 shares to 2,000,000
shares.
(3) 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
March 24, 2000 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
March 31, 2000
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.
<PAGE>
PROXY STATEMENT
PRE-PAID LEGAL SERVICES, INC.
321 East Main Street
P. 0. Box 145
Ada, Oklahoma 74821-0145
2000 ANNUAL MEETING OF SHAREHOLDERS
The following information is furnished in connection with the 2000
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 12, 2000, at 1:00 p.m., local time. This
Proxy Statement and accompanying materials will be mailed on or about March 31,
2000 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
March 24, 2000. On that date, the Company had 22,554,143 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 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 74821-0145, Attention: Kathryn Walden, Secretary.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine members and is
divided into three classes equal in size, with the term of office of one class
expiring each year. The Board of Directors has nominated and proposes that
Kathleen S. Pinson, David A. Savula and John W. Hail, whose terms as directors
expire as of the Annual Meeting of Shareholders for 2000, 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, David A. Savula and John W. Hail 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.
<PAGE>
The following is certain information about each director of the
Company:
Name Age Director Since Term Expires
---- --- -------------- ------------
Kathleen S. Pinson 47 1990 2000
David A. Savula 52 1998 2000
John W. Hail 69 1998 2000
Shirley A. Stonecipher 59 1998 2001
Peter K. Grunebaum 66 1980 2001
Randy Harp 44 1990 2001
Harland C. Stonecipher 61 1976 2002
Wilburn L. Smith 59 1997 2002
Martin H. Belsky 55 1998 2002
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.
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. 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.
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, interna-
tional law, and oceans policy. Previously, Mr. Belsky was Dean and Professor
of Law at Albany Law School from 1986 to 1995.
Board Meetings and Committees
The Board of Directors held four meetings during the year ended
December 31, 1999. 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 and an Audit Committee
consisting of Messrs. Grunebaum and Belsky. 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. The Audit Committee held four meetings during 1999.
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 (American Stock Exchange prior to May
13, 1999) and expire five years from the date of grant.
The Board of Directors recommends that the shareholders vote "FOR" the
re-election of Kathleen S. Pinson, David A. Savula and John W. Hail to the Board
of Directors.
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO INCREASE SHARES
UNDER STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") is intended to promote and
advance the interests of the Company and its shareholders by providing a means
for the Company to encourage stock ownership by directors, officers and
employees of the Company and its subsidiaries in order to increase the
proprietary interests of such persons in the growth and financial success of the
Company.
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Plan to increase the maximum number of shares of Common Stock
in respect of which options may be granted under the Plan from 1,000,000 shares
to 2,000,000 shares. The amendment was adopted in order to ensure that the
Company will continue to have appropriate equity incentive and compensation
opportunities for its directors, officers, and employees. The Board of Directors
considers the Company's ability to offer competitive compensation opportunities,
including long-term equity based compensation in the form of stock options, as
an important component of the Company's management retention and strategy.
Description of the Plan
Administration. The Plan is administered by the Board of Directors of
the Company. The Board has the authority to appoint a committee ("Committee") of
not less than two members of the Board to administer the Plan and to make
determinations concerning the granting of options thereunder. The Board may
appoint and remove members of the Committee as it sees fit from time to time.
The Board or Committee has sole authority to determine the persons who shall
participate in the Plan and the extent of their participation and to construe
and interpret provisions of the Plan and any option granted thereunder. No
member of the Board or Committee will be liable for any action or determination
made in good faith, and such members will be entitled to indemnification and
reimbursement in the manner provided in the Company's Certificate of
Incorporation, or as otherwise permitted by law.
Shares Subject to the Plan. The maximum number of shares of Common
Stock reserved for issuance under the Plan and in respect of which options may
be granted pursuant to the terms of the Plan will be increased by the proposed
amendment from 1,000,000 shares to 2,000,000 shares. These shares consist of
authorized but unissued shares or treasury shares held by the Company. This
number is subject to appropriate equitable adjustment in the event of any
subdivision or consolidation of shares or other capital adjustment, or the
payment of a stock dividend or other increase or decrease in such shares,
effected without receipt of consideration by the Company. In the event that any
outstanding option under the Plan for any reason expires or is terminated prior
to the end of the period during which options may be granted, the shares of
Common Stock allocable to the unexercised portion of such option may again be
subject to options granted under the Plan.
Eligibility. Persons eligible to participate in the Plan consist of
such directors, officers and employees of the Company and its subsidiaries as
the Board or Committee may determine from time to time. There is no limit to the
total number of eligible persons to whom options may be granted under the Plan.
The Board or Committee will determine in accordance with the Plan the persons to
whom option awards are granted, the size of any option awards and the conditions
applicable thereto.
Exercise of Options. Options may be exercised solely by the optionee
during the optionee's lifetime at the rate of 20% of the number of shares
covered thereby per year beginning one year from the date of grant, unless
otherwise provided by the Board or Committee at the time the option is granted.
After becoming exercisable, options granted under the Plan may be exercised, in
whole or in part, at any time prior to the expiration or termination of the
options. The exercise price of options granted under the Plan is determined by
the Board or the Committee, but may not be less than the fair market value of
the Common Stock on the date of grant of the option. The exercise price of
options granted under the Plan must be paid upon the exercise of the option and
may be paid in cash or, if so determined by the Board or the Committee, the
exercise price may be paid in property or installment payments.
Nontransferability. Options granted under the Plan are not assignable
or transferable by the optionee except by will or by the laws of descent and
distribution, and are exercisable during the optionee's lifetime only by the
optionee.
Effect of Death, Termination of Employment and Retirement. If an
optionee dies while employed by the Company at a time when the optionee is
entitled to exercise an option granted pursuant to the Plan, then at any time or
times within 12 months after the optionee's death the options may be exercised
by the optionee's estate, personal representative, beneficiary or other person
upon whom such right devolves by will or the laws of descent and distribution,
and except as so exercised, will expire at the end of such 12-month period. If
the optionee's employment is terminated as a result of a violation of law or for
cause, the optionee's options whether or not then exercisable will terminate
immediately. If the termination is for a reason other than a violation of law or
for cause, the optionee will have the right to exercise his or her options at
any time within 30 days after such termination, except if the termination is as
a result of retirement as described below. In the event an optionee's
termination of employment is as a result of retirement with the consent of the
Company, the optionee will have the right to exercise his or her option within
three months after retirement to the extent exercisable on the day of
retirement. However, in any event, no option may be exercised after its
expiration date set forth in the applicable option agreement.
Option Awards to Non-Employee Directors. Each member of the Board of
Directors who is not an employee of the Company (a "Non-Employee Director") is
eligible to receive option grants under the Plan on the same basis as other
eligible persons. In addition, each Non-Employee Director receives annual grants
of stock options to purchase 10,000 shares of Common Stock on March 1st of each
year during the term of the Plan, subject to there being at the time of any such
grant sufficient remaining shares of Common Stock available for awards under the
Plan. The purchase price for each share placed under an annual option grant for
a Non-Employee Director is equal to 100% of the fair market value of such share
on the date the option is granted. No options will be granted to a Non-Employee
Director after any date that the Non-Employee Director ceases to be a director
of the Company. All stock options granted to a Non-Employee Director shall
consist of options that do not qualify as incentive stock options under the
Code.
Except as otherwise provided in the Plan, the annual option grants to
Non-Employee Directors are fully vested and immediately exercisable as to 2,500
shares on the date of grant and will become vested and exercisable in additional
increments of 2,500 shares on June 1, September 1, and December 1 in the year
the option is granted; provided however, that it is a condition to the vesting
of each incremental portion of the option that the Non-Employee Director
continue to be a Non-Employee Director of the Company through the applicable
vesting date. The period during which such Non-Employee Director options may be
exercised is 5 years from the date of grant, subject to earlier termination as
provided in the Plan.
Recapitalization or Reorganization. In the event of a subdivision or
consolidation of shares or other capital adjustment, or the payment of a stock
dividend or other increase or decrease in such shares effected without receipt
of consideration by the Company, the number of shares covered by each
outstanding option and the price of each outstanding option will be
proportionately adjusted.
Subject to any required action by the shareholders, if the Company is a
party to a merger or consolidation which does not result in a change of control
of the Company, any option granted under the Plan will apply to the securities
to which a holder of the number of shares of Common Stock subject to the option
would have been entitled. If, however, the Company dissolves, liquidates, or is
reorganized in a manner which results in a change in control of the Company, or
in the event of a tender or exchange offer which results in a change in control
of the Company, the Board or Committee will determine: (i) whether all or any
part of the unexercised portion of any option outstanding under the Plan will
terminate; (ii) whether the options will become immediately exercisable; or
(iii) whether such options may be exchanged for options covering securities of
any surviving or resulting corporation, subject to the agreement of any such
surviving or resulting corporation, on terms and conditions substantially
similar to options under the Plan.
Modification and Termination of the Plan. The Board of Directors may
from time to time amend, alter, suspend, or discontinue the Plan or alter or
amend (including any decrease of the option price by cancellation and
substitution of options or otherwise) any and all options granted thereunder.
However, the Board may not, without shareholder approval, alter the Plan so as
to (i) materially increase the benefits accruing to participants under the Plan;
(ii) materially increase the number of securities which may be issued under the
Plan; or (iii) materially modify the requirements as to eligibility for
participation in the Plan. Additionally, no amendment may affect any then
outstanding options or unexercised portions thereof without the consent of the
optionee. The Plan will terminate on December 12, 2005, except with respect to
awards then outstanding.
Special Provisions Applicable to Incentive Stock Options. The Board or
the Committee will determine at the time of any option grant whether such option
will be an incentive stock option intended to qualify under Section 422 of the
Internal Revenue Code or a nonstatutory stock option. Options granted to
Non-Employee Directors will not qualify as incentive stock options. Incentive
stock options granted pursuant to the Plan will comply with all the previously
mentioned provisions of the Plan modified by the following special terms and
conditions:
(i) Eligibility. Persons eligible to receive incentive stock
options are employees (including officers and directors who are
employees) of the Company or its subsidiaries only.
(ii) Limitations on Aggregate Value of Shares Subject to
Incentive Stock Options. The aggregate fair market value as of the date
of the grant of shares with respect to which incentive stock options
are exercisable for the first time by an optionee during any calendar
year will not exceed $100,000.
(iii) Term of Incentive Stock Options. Each Incentive stock
option granted under the Plan will not be exercisable more than 10
years from the date the option is granted.
(iv) Limitations for Certain Shareholders. Any person who
owns, directly or indirectly, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or
its subsidiaries may not receive an incentive stock option under the
Plan, unless at the time the option is granted to such person the
exercise price is at least 110% of the fair market value of the shares
covered by the option and the option is not exercisable after the
expiration of five years from the date of the grant.
Federal Income Tax Consequences. An optionee receiving an option
qualifying as an "incentive stock option" under Section 422 of the Internal
Revenue Code will not recognize taxable income upon the grant or exercise of the
option. Upon disposition of the shares acquired, the optionee will recognize a
capital gain or loss based on the difference between the amount realized and the
option price, assuming certain holding period requirements are satisfied and the
shares are held as a capital asset. However, alternative minimum tax may be
applicable. The Company will not receive any tax deduction in connection with
the grant or exercise of an incentive stock option or, assuming the holding
period requirements are satisfied, sale of the shares by an optionee.
An optionee receiving a nonstatutory stock option will not recognize
taxable income on the grant of an option, but will be deemed to have received
ordinary income on the exercise of an option equal in amount to the difference
between the fair market value of the shares acquired as of the date of exercise
and the option price. The Company will be entitled to a tax deduction at the
same time in the same amount. An optionee's tax basis in the shares acquired
will be equal to the fair market value of the shares as of the date of exercise
for purposes of measuring any gain or loss on subsequent disposition of the
shares.
<PAGE>
Summary of Award Activity Pursuant to the Plan
The following table indicates as of March 24, 2000 the number of shares
authorized for issuance under the Plan (including the proposed increase in the
authorized number of shares), the aggregate number of shares subject to
outstanding awards (net of cancellations), the number of shares issued pursuant
to prior awards, and the number of shares available for future awards (including
the proposed increase in the authorized number of shares):
<TABLE>
<CAPTION>
Subject to Outstanding Available for Future
Authorized (including Awards (net of Issued Pursuant to Awards (including
proposed increase) cancellations)(1) Prior Awards proposed increase)
--------------------- ---------------------- ------------------ --------------------
<S> <C> <C> <C>
2,000,000 741,000 455,500 803,500
- -----------------------
</TABLE>
(1) Includes options to purchase 602,000 shares of Common Stock granted to
executive officers and eligible employees of the Company at exercise
prices ranging from $9.25 to $43.13 per share. The exercise prices of
such options are 100% of the market value of the Common Stock on the
date of grant. The expiration dates of such options range from December
2000 to April 2004. Of such options, 527,000 were granted to executive
officers of the Company and 75,000 were granted to employees of the
Company other than executive officers. Also includes 139,000 options
granted to Non-Employee Directors pursuant to the annual grant
provisions described above at exercise prices ranging from $8.13 to
$42.13 per share.
The number of shares subject to outstanding awards plus the number
issued pursuant to prior awards exceeds the existing Plan limit by 196,500
shares. This was inadvertent. The approval of the amendment to the Plan will
also constitute a ratification of the existing grants of options for 196,500
shares in excess of the Plan limit. If the amendment to the Plan is not
approved, these options will remain outstanding under the same terms and will be
deemed to have been granted outside the Plan and without shareholder approval.
Based on the closing sale price of the Common Stock as reported by the
New York Stock Exchange on March 24, 2000 of $31.50 per share, the market value
of the total number of shares of Common Stock previously issued pursuant to
exercise of option awards under the Plan was $14.3 million, the market value of
shares underlying outstanding awards under the Plan was $23.3 million and the
market value of shares available for future awards (including the proposed
increase in the number of shares authorized for issuance under the Plan) was
$25.3 million.
Consequences of Non-Approval
If the proposed amendment of the Plan is not approved by the
shareholders, no further awards will be made pursuant to the Plan. In addition,
as described above, option awards granted under the Plan in excess of the
existing Plan limit will remain outstanding under the same terms and be deemed
to have been granted outside the Plan and without shareholder approval. Such
options will not qualify as incentive stock options.
Recommendation
Provided that the shareholders approve the proposed amendment of the
Plan, the increased number of shares will be available for awards to all
eligible participants in the Plan. Except as described above in connection with
the annual awards to Non-Employee Directors and with respect to ratification of
existing awards, the Board of Directors has not at this time considered or
approved any future awards under the Plan, and, as a result, the identity of
future award recipients and the size and terms of future awards are not known at
this time.
The Board of Directors recommends that the shareholders for "FOR" the
proposed amendment to increase the number of shares under the Stock Option Plan.
<PAGE>
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 compensation paid by the Company and
its subsidiaries for services rendered during the twelve months ended December
31, 1999, 1998 and 1997 to the chief executive officer and to each other person
serving as an executive officer of the Company as of December 31, 1999 whose
compensation exceeded $100,000 during 1999. 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.......... 1999 $157,755 $ 947,720 100,000 $12,274
Chairman of the Board and 1998 157,755 654,835 100,000 12,554
Chief Executive Officer 1997 157,755 419,555 100,000 12,811
Wilburn Smith................... 1999 - 1,075,742 - 5,250
President 1998 - 871,122 30,000 5,250
1997 - 682,468 - 5,250
Randy Harp...................... 1999 120,865 40,000 50,000 3,900
Chief Operating Officer and 1998 129,615 40,000 50,000 3,900
Chief Financial Officer 1997 107,169 20,000 50,000 3,900
</TABLE>
- -------------
(1) Bonus to Mr. Stonecipher consists primarily of override commissions earned
by Mr. Stonecipher pursuant to his employment agreement with the Company of
$213,467, $156,339 and $109,424 during 1999, 1998 and 1997, respectively,
and override commissions earned by Mr. Stonecipher with respect to
commissions earned by PPL Agency, Inc., a Company affiliated insurance
agency, of $46,493, $38,306 and $49,907 during 1999, 1998 and 1997,
respectively. Additionally, Mr. Stonecipher received $687,760, $460,190 and
$259,830 during 1999, 1998 and 1997 representing a payment of $10 for each
marketing associate who participated in the Company's "Fast Start to
Success" training program which 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 Mr. Harp consisted of a performance bonus based upon the achieve-
ment by the Company of certain earnings per share goals.
(2) All Other Compensation of Mr. Stonecipher includes $5,964, $6,244 and
$6,501 for the years 1999, 1998 and 1997, 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 $6,310 for each
year representing vested contributions by the Company to the Employee Stock
Ownership and Thrift Plan and Trust (the "ESOP").
All Other Compensation of Messrs. Smith and Harp consists of vested contri-
butions by the Company to the ESOP.
The following table contains information concerning the grant of stock
options during the year ended December 31, 1999 under the Company's Stock Option
Plan to each of the named executive officers who received option grants during
such year.
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term (3)
- ------------------------------------------------------------------------------- ----------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (1) Year ($/Sh) (2) Date 5% 10%
---- ------------ ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Harland C. Stonecipher 100,000 13.9% $26.13 04/23/2004 $ 722,000 $ 1,595,000
Randy Harp 50,000 6.9 26.13 04/23/2004 361,000 797,500
</TABLE>
- -----------------
(1) All options granted to Messrs. Stonecipher and Harp during 1999 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 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, 1999. 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.
<TABLE>
<CAPTION>
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, 1999 December 31, 1999 (1)
--------------------------- -------------------------
Shares
Acquired Value
Name on Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ----------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harland C. Stonecipher - - 300,000 - $ 975,000 -
Wilburn L. Smith - - 30,000 - - -
Randy Harp 3,000 73,890 197,000 - 1,180,750 -
</TABLE>
- ----------------------------
(1) Value of unexercised in-the-money options at December 31, 1999 is
calculated based on the market price per share of Common Stock of $24.00 per
share on December 31, 1999 less the option exercise price.
(2) Value realized is calculated based on the market price per share of Common
Stock of $33.88 on the date of exercise less the option 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 $157,750
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 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, 1999 are reflected in the summary compensation table set
forth above. Mr. Stonecipher has deferred payments under this agreement of
$381,317 at December 31, 1999. 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 $249. 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.
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 1999 was determined
pursuant to his employment agreement and other arrangements with the Company
approved by the Board of Directors prior to 1999, the Board of Directors did not
have any deliberations during 1999 relating to Mr. Stonecipher's cash
compensation for such year. However, during 1999, the Board of Directors
approved the grant of stock options to Mr. Stonecipher and Randy Harp and
Kathleen S. Pinson, each executive officers and directors of the Company, for
the purchase of 100,000, 50,000 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 1999 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 1999 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 $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. During
1999, Mr. Stonecipher received $259,960 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 1999, new membership sales increased 34% to 525,352 compared to 391,827
during 1998, and active memberships in force of 827,979 at December 31, 1999
increased 37% compared to 603,017 memberships in force at December 31, 1998.
Since 1993 the Company's active membership base has grown by an average of 35%
per year and earnings per share has grown from $.01 per share to $1.67 per share
for 1999.
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 audios,
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
$687,760 during 1999. 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
1999. 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 1999 to the Company's executive
officers as follows: Harland C. Stonecipher - 100,000; Randy Harp - 50,000 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 2000.
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 Peter K. Grunebaum Randy Harp
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, 1999 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 January 1, 1995 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]
<TABLE>
<CAPTION>
=============================================================================================
FISCAL YEAR ENDING
COMPANY 1994 1995 1996 1997 1998 1999
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PRE-PAID LEGAL SERVICES, INC. 100.00 518.75 912.50 1709.38 1650.00 1200.00
RUSSELL 2000 INDEX 100.00 128.44 149.77 183.23 178.09 212.98
PEER GROUP 100.00 127.42 147.30 211.97 219.00 180.26
=============================================================================================
</TABLE>
<PAGE>
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.
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..................... 3,390,201 (1) 15.0
Thomas N. Tryforos
323 Railroad Avenue
Greenwich, CT 06830..................... 2,501,243 (1) 11.1
- ---------------------
(1) Included in the shares of Common Stock indicated as beneficially owned by
Thomas W. Smith ("Smith") and Thomas N. Tryforos ("Tryforos") are 2,459,000
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 931,201 shares of
Common Stock as to which he has sole voting and dispositive power and
Tryforos beneficially owns 42,243 shares of Common Stock as to which he has
sole voting and dispositive power.
The following table sets forth certain information concerning the
beneficial ownership of shares of Common Stock of the Company as of March 15,
2000 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.
<TABLE>
<CAPTION>
Security Ownership of Directors and Executive Officers
Beneficial Ownership (1)
-----------------------------
Number Percent
of of
Name of Director or Executive Officer Shares Class
------------------------------------- -------------------- --------
<S> <C> <C>
Harland C. Stoneicpher
321 East Main Street
Ada, Oklahoma 74820.......................................... 1,367,033 (2)(3) 6.0
Randy Harp.................................................... 230,765 (4) *
Wilburn L. Smith.............................................. 113,186 (5) *
Kathleen S. Pinson............................................ 64,161 (6) *
Peter K. Grunebaum............................................ 54,400 (7) *
John W. Hail.................................................. 24,375 (8) *
David A. Savula............................................... 70,278 (9) *
Martin H. Belsky.............................................. 19,350 (10) *
Shirley A. Stonecipher........................................ 1,071,725 (2)(11) 4.8
All directors and executive officers as a group (9 persons)... 1,943,548 (12) 8.4
</TABLE>
- --------------------
* 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 1,049,225 shares as to which they have shared
voting and shared dispositive power.
(3) Includes 17,808 shares owned under the ESOP as to which Mr. Stonecipher
has sole voting power, but shared dispositive power, and 300,000 shares
issuable upon exercise of outstanding options.
(4) Includes 15,765 shares owned under the ESOP as to which Mr. Harp has sole
voting power, but shared dispositive power, and 197,000 shares issuable
upon exercise of outstanding options.
(5) Includes 33,695 shares owned under the ESOP as to which Mr. Smith has
sole voting power, but shared dispositive power, and 30,000 shares
issuable upon exercise of outstanding options.
(6) Includes 18,166 shares owned under the ESOP as to which Ms. Pinson has
sole voting power, but shared dispositive power, and 7,500 shares
issuable upon the exercise of outstanding options. Also, includes 2,588
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.
(7) Includes 42,500 shares issuable upon exercise of outstanding options.
(8) Includes 500 shares owned by a corporation that Mr. Hail controls and
22,500 shares issuable upon exercise of outstanding options.
(9) Includes 30,000 shares issuable upon exercise of outstanding options.
(10) Includes 19,000 shares issuable upon exercise of outstanding options.
(11) Includes 22,500 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.
(12) Includes 648,500 shares issuable upon exercise of outstanding options and
89,722 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 combined basis. Agency earned
commissions, net of amounts paid directly to its agents by the underwriter,
during 1999 and 1998 of $121,000 and $119,000, respectively, through its sales
of insurance products of an unaffiliated company. Annual management fees paid to
the Company in 1999 and 1998 were $36,000 in each year. Agency had a net loss
for the years ended December 31, 1999 and 1998 of $18,148 and $10,694,
respectively, after the payment of commissions to Mr. Stonecipher of $49,000 and
$47,000, respectively.
Mr. Stonecipher and Shirley A. Stonecipher own Stonecipher Aviation LLC
("SA"). The Company has agreed to reimburse SA for certain expenses pertaining
to trips made by Company personnel for Company business purposes using aircraft
owned by 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 1999 and 1998,
the Company paid $276,000 and $279,000, respectively, to SA as reimbursement for
such transportation expenses.
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, 1999
was $511,000. The outstanding balance of the loans as of December 31, 1999 was
$510,745. 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 1999 and 1998 of $14,000 and $39,000,
respectively.
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 1999 and
1998, such override commissions on renewals totaled $90,839 and $93,867,
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 1999 and 1998 of $301,021 and
$284,344, 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 1999 and 1998, Mr. Savula received from the Company $815,460
and $651,215, 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.
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 1999. 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 1999, all Section 16(a)
filing requirements applicable to its executive officers, directors and 10%
shareholders were met, except as described below.
Randy Harp, Chief Financial Officer and Chief Operating Officer and a
director of the Company, inadvertently failed to file a required report relating
to the acquisition of 3,000 shares of Common Stock pursuant to the exercise of
previously reported options to purchase Common Stock. An appropriate filing was
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. The affirmative vote of
the holders of a majority of the shares of Common Stock which are present in
person or represented by proxy at the Annual Meeting is required to approve the
amendment and restatement of the Stock Option Plan. 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. 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 nominees for election as
directors and proxies which are marked "abstain" on the proposal to approve the
amendment of the Stock Option Plan will be counted for the purpose of
determining the number of shares represented by proxy at the meeting. As a
result, proxies marked "abstain" with regard to the approval of the amendment of
the Stock Option Plan will have the same effect as if the shares represented
thereby were voted against approval. 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, 1999. 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.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended December
31, 1999, 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, 1999 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.
<PAGE>
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 2001 Annual Meeting must be received no later
than December 1, 2000. To be considered for presentation at the 2001 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 2001 Annual Meeting will confer discretionary authority to
vote on any such shareholder proposal presented at the 2001 Annual Meeting
unless the Company is provided with notice of such proposal no later than
February 15, 2001.
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.
<PAGE>
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 12, 2000
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 March 31,
2000, and hereby appoints Harland C. Stonecipher and Randy Harp, 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 2000 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 12, 2000, 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.
Kathleen S. Pinson David A. Savula John W. Hail
(2) Approval of amendment to increase number of shares under Stock
Option Plan.
____ FOR ____ AGAINST ____ ABSTAIN
(3) 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.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE NOMINEES LISTED IN ITEM 1 AND "FOR" THE PROPOSAL LISTED
IN ITEM 2. 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: ___________________________, 2000
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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).
