UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________
Commission File Number: 1-9293
--------------------------------------------------------------
PRE-PAID LEGAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1016728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
321 East Main
Ada, Oklahoma 74820
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (580) 436-1234
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $0.01 Par Value New York Stock Exchange
Securities registered under Section 12 (g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ( ).
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within the past 60 days prior to the date of
the filing: As of February 28, 2002 - $370,000,000.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: As of February 28,
2002 there were 20,168,524 shares of Common Stock, par value $.01 per share,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Company's definitive proxy statement for its 2002 annual
meeting of shareholders are incorporated into Part III of this Form 10-K by
reference.
The undersigned registrant hereby amends the following items, financial
statements, exhibits of other portions of its Annual Report on Form 10-K
pursuant to Section 13 of the Securities and Exchange Act of 1934 for the fiscal
year ended December 31, 2001, as set forth below and in the pages attached
hereto.
Part IV, Item 14 - "Exhibits and Reports on Form 8-K" is amended (i) to
include as Exhibit 99.1 the attached financial information relating to The
Employee Stock Option Ownership and Thrift Plan and Trust ("Plan"), as required
by Form 11-K, for the fiscal year of the Plan ended December 31, 2001, which is
filed as an exhibit pursuant to Rule 15d-21 under the Securities Exchange Act of
1934, and (ii) to include as Exhibit 23.2 and 23.3 the consents of Grant
Thornton LLP and Deloitte & Touche LLP, respectively relating to the use of
their reports which are included as part of Exhibit 99.1.
The full text of Item 14 and the Exhibit Index, as amended, referred to
therein are as set forth below.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
------------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements: See Index to Consolidated Financial Statements
and Consolidated Financial Statement Schedule set forth on page 35 of
this report.
(2) Exhibits: For a list of the documents filed as exhibits to this
report, see the Exhibit Index following the signatures to this report.
(b) Reports on Form 8-K: None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRE-PAID LEGAL SERVICES, INC.
Date: July 1, 2002 By: /s/ Randy Harp
-------------------------------------------
Randy Harp
Chief Operating Officer
INDEX TO EXHIBITS
Exhibit No. Description
------------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended (Incorporated by reference to Exhibit 4.1 of the Company's Report
on Form 8-K dated January 10, 1997)
3.2 Amended and Restated Bylaws of the Company (Incorporated by reference to
Exhibit 3.1 of the Company's Report on Form 10-Q for the period ended
September 30, 1996)
*10.1Employment Agreement effective January 1, 1993 between the Company and
Harland C. Stonecipher (Incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1992)
*10.2Agreements between Shirley Stonecipher, New York Life Insurance Company
and the Company regarding life insurance policy covering Harland C.
Stonecipher (Incorporated by reference to Exhibit 10.21 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1985)
*10.3Amendment dated January 1, 1993 to Split Dollar Agreement between Shirley
Stonecipher and the Company regarding life insurance policy covering
Harland C. Stonecipher (Incorporated by reference to Exhibit 10.3 of the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1992)
*10.4Form of New Business Generation Agreement Between the Company and Harland
C. Stonecipher (Incorporated by reference to Exhibit 10.22 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1986)
*10.5Amendment to New Business Generation Agreement between the Company and
Harland C. Stonecipher effective January, 1990 (Incorporated by reference
to Exhibit 10.12 of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1992)
*10.6Amendment No. 1 to Stock Option Plan, as amended effective May 2000
(Incorporated by reference to Exhibit 10.6 of the Company's Annual Report
on Form 10-K for the year ended December 31, 2000)
*10.7Demand Note of Wilburn L. Smith and Carol Smith dated December 11, 1992 in
favor of the Company (Incorporated by reference to Exhibit 10.15 of the
Company's Form SB-2 filed February 8, 1994)
*10.8Demand Note of Wilburn L. Smith and Carol Smith dated December 31, 1996 in
favor of the Company (Incorporated by reference to Exhibit 10.8 of the
Company's Form 10-K filed for the year ending December 31, 1997)
*10.9Security Agreement between the Company, Wilburn L. Smith and Carol Smith
dated December 11, 1992 (Incorporated by reference to Exhibit 10.16 of the
Company's Form SB-2 filed February 8, 1994)
*10.10 Letter Agreements dated July 8, 1993 and March 7, 1994 between the
Company and Wilburn L. Smith (Incorporated by reference to Exhibit 10.17 of
the Company's Form 10-KSB filed for the year ending December 31, 1993)
10.11Agreement and Plan of Reorganization dated as of September 23, 1998
between the Company and TPN, Inc. (Incorporated by reference to Exhibit 2.1
of the Company's Current Report on Form 8-K dated October 2, 1998)
10.12Stock Purchase Agreement dated as of October 5, 1998 between the Company
and Pioneer Financial Services, Inc. (Incorporated by reference to Exhibit
2.1 of the Company's Current Report on Form 8-K dated December 30, 1998)
*10.13 Demand Note of Wilburn L. Smith dated October 8, 1998 in favor of the
Company (Incorporated by reference to Exhibit 10.13 of the Company's Form
10-K filed for the year ended December 31, 1998)
*10.14 Stock option agreement with David A. Savula dated February 6, 1998
(Incorporated by reference to Exhibit 10.14 of the Company's Form 10-K
filed for the year ended December 31, 1998)
*10.15 Stock option agreement with David A. Savula dated July 2, 1998
(Incorporated by reference to Exhibit 10.15 of the Company's Form 10-K
filed for the year ended December 31, 1998)
*10.16 Stock option agreement with David A. Savula dated July 2, 1998
(Incorporated by reference to Exhibit 10.16 of the Company's Form 10-K
filed for the year ended December 31, 1998)
10.17Demand Note of Randy Harp dated December 22, 2000 in favor of the Company
(Incorporated by reference to Exhibit 10.17 of the Company's Annual Report
on Form 10-K for the year ended December 31, 2000)
10.18Loan agreement dated November 6, 2001 between Bank of Oklahoma, N.A. and
the Company (Incorporated by reference to Exhibit 10.18 of the Company's
Annual Report on Form 10-K for the year ended December 31, 2000)
10.19Security agreement dated November 6, 2001 between Bank of Oklahoma, N.A.
and the Company (Incorporated by reference to Exhibit 10.19 of the
Company's Annual Report on Form 10-K for the year ended December 31, 2000)
21.1 List of Subsidiaries of the Company (Incorporated by reference to Exhibit
21.1 of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001)
23.1 Consent of Grant Thornton LLP (Incorporated by reference to Exhibit 23.1 of
the Company's Annual Report on Form 10-K for the year ended December 31,
2001)
23.2 Consent of Grant Thornton LLP relating to report concerning plan financial
information included as part of Exhibit 99.1
23.3 Consent of Deloitte & Touche LLP relating to report concerning plan
financial information included as part of Exhibit 99.1
99.1 Financial information relating to the Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust, as required by Form
11-K for the fiscal year of the plan ended December 31, 2001
--------------------
* Constitutes a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this report.
Exhibit 23.2 - Consent of Grant Thornton LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We have issued our report dated June 20, 2002, accompanying the financial
statements and schedules of the Pre-Paid Legal Services, Inc. Employee Stock
Ownership and Thrift Plan and Trust for the year ended December 31, 2001,
included in this Amendment No. 1 on Form 10-K/A of Pre-Paid Legal Services, Inc.
for the year ended December 31, 2001. We hereby consent to the incorporation by
reference of said report in the Registration Statement of Pre-Paid Legal
Services, Inc. on Form S-8 (File No. 33-82144, effective July 28, 1994).
GRANT THORNTON LLP
Oklahoma City, Oklahoma
June 20, 2002
Exhibit 23.3 - Consent of Deloitte & Touche LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-82144 of Pre-Paid Legal Services, Inc. on Form S-8 of our report dated June
15, 2001 on the financial statements of the Pre-Paid Legal Services, Inc.
Employee Stock Ownership and Thrift Plan and Trust for the year ended December
31, 2000 appearing in this Amendment No. 1 on Form 10-K/A of Pre-Paid Legal
Services, Inc. for the year ended December 31, 2001.
/s/DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Tulsa, Oklahoma
June 28, 2002
Exhibit 99.1 - Financial Statements and Report of independent certified public
accounts for the Pre-Paid Legal Services, Inc. Employee Stock Ownership and
Thrift Plan Trust for the fiscal year of the plan ended December 31, 2001
Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan and Trust
December 31, 2001 and 2000
C O N T E N T S
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTAL SCHEDULES
SCHEDULE H, LINE 4i - ASSETS HELD FOR INVESTMENT PURPOSES
SCHEDULE H, LINE 4j - REPORTABLE TRANSACTIONS
Report of Independent Certified Public Accountants
--------------------------------------------------
Trustee and Participants
Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan and Trust
We have audited the accompanying statement of net assets available for benefits
of Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan and
Trust as of December 31, 2001, and the related statement of changes in net
assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Pre-Paid Legal
Services, Inc. Employee Stock Ownership and Thrift Plan and Trust as of December
31, 2001, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole as of and for the year ended December 31,
2001. The supplemental schedules of assets held for investment purposes and
reportable transactions are presented for the purpose of additional analysis and
are not a required part of the basic financial statements but are supplemental
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. Such supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
June 20, 2002
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
Pre-Paid Legal Services, Inc.
Employee Stock Ownership and
Thrift Plan and Trust:
We have audited the accompanying statement of net assets available for benefits
of the Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan
and Trust (the "Plan") as of December 31, 2000, and the related statements of
changes in net assets available for benefits for the year then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31,
2000, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Tulsa, Oklahoma
June 15, 2001
Pre-Paid Legal Services, Inc. Employee Stock Ownership
and Thrift Plan and Trust The
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2001 2000
---- ----
ASSETS
Cash and cash equivalents $ 296,455 $ 224,112
Investments, at fair value
Pre-Paid Legal Services, Inc. common stock 4,108,747 4,355,987
Participant-directed mutual funds 842,959 937,921
Participant notes 50,502 -
Receivables
Employer contributions 210,671 161,973
Participants' elective deferrals 8,831 7,133
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $5,518,165 $5,687,126
------------ ------------
The accompanying notes are an integral part of these statements.
Pre-Paid Legal Services, Inc. Employee Stock Ownership
and Thrift Plan and Trust
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31,
2001 2000
---- ----
Additions
Employer contributions (Pre-Paid Legal Services, Inc.
common stock) $ 210,671 $ 161,973
Participant contributions 375,299 292,978
Interest and dividend income 36,537 50,735
Net appreciation in fair value of investments - 256,883
------------ ------------
Total additions 622,507 762,569
Deductions
Benefits paid to participants 155,530 119,312
Net depreciation in fair value of investments 635,938 -
------------ ------------
Total deductions 791,468 119,312
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (168,961) 643,257
Net assets available for benefits at beginning of year 5,687,126 5,043,869
------------ ------------
Net assets available for benefits at end of year $5,518,165 $5,687,126
------------ ------------
The accompanying notes are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - DESCRIPTION OF PLAN AND SUMMARY OF ACCOUNTING POLICIES
The Pre-Paid Legal Services, Inc. Employee Stock Ownership and Thrift Plan
and Trust (the "Plan") was established on January 1, 1988 for the benefit
of the employees of Pre-Paid Legal Services, Inc. and its subsidiaries (the
"Company"). The Plan is administered by a committee of two employees
appointed by the Company (the "Committee"). The Committee also serves as
the Plan's Trustee and Investment Manager.
Under the terms of the Plan, the Committee may acquire, hold and dispose of
all cash and investments, including common and preferred stock of the
Company, through a trust fund. Participants who have attained the age of 55
have the right to make an election to direct the Committee as to the
investment of their accounts. Such participants may elect to diversify up
to 100% of their deferred compensation accounts and the vested portion of
their Company Contributed Accounts in one or more "no load" mutual funds of
any regulated investment company as defined by Section 851 of the Internal
Revenue Code.
Each participant or beneficiary shall have the sole right to vote shares of
Company common stock allocated to such participant's account. The right to
vote such shares shall be exercised by directing the Committee as to the
manner in which the shares shall be voted.
The following is a summary of the Plan's significant accounting policies.
1. Basis of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting in conformity with accounting principles generally accepted in
the United States of America.
2. Cash and Cash Equivalents
Cash and cash equivalents consist of the Plan's linked cash and money fund
accounts at a national brokerage firm. Money fund amounts have a unit value
of $1 and balances are immediately accessible by the Plan.
3. Investments
Investments are presented at fair value as measured by market prices in
active markets, including national securities exchanges. The cost of
Company common stock sold is determined on the basis of average cost.
Actual cost is used as a basis for sales of all other investments.
Investment transactions are recorded on a trade date basis.
4. Participant Notes
Effective July 1, 2001, the Plan began to permit participant notes.
Participant notes are approved by the Committee and cannot be made for an
amount less than $1,000 or exceed the lesser of $50,000 reduced by the
excess of the highest outstanding balance of loans during the one-year
period ending on the day before the loan is made or one-half of the
participant's vested balance. The notes are secured by the participant's
vested interest in the Plan, bear interest and are repayable based upon
rates and terms set forth in the Plan.
5. Noncash Contributions
Contributions of Company common stock are recorded at fair value as
determined by using the average closing price of Company common stock as
quoted on the New York Stock Exchange for each day when the stock is traded
during the 20 day period immediately preceding the date of contribution.
6. Expenses
The Company elected to pay all of the Plan's administration expenses in
2001 and 2000 although it is not obligated to do so. Any expenses not paid
by the Company would be paid by the Plan.
7. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of net assets available for
benefits and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of changes in net assets
available for benefits during the reporting period. Actual results could
differ from those estimates. Investment securities, in general, are exposed
to various risks, such as interest rate, credit and overall market
volatility. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the statements of net
assets available for plan benefits.
NOTE B - PLAN DESCRIPTION
The following brief description of the provisions of the Plan is provided
for general information purposes only. Participants should refer to the
Plan agreement for more complete information.
1. General
The Plan is a defined contribution plan covering certain employees of the
Company and employees of affiliated companies which are included in the
Company's consolidated tax return. The Plan year end is December 31. All
employees at least 21 years of age are eligible to enroll in the Plan on
January 1 or July 1 following the date the employee completes one year of
service (1,000 hours) within 12 consecutive months of their employment
date.
2. Discretionary Matching Company Contributions
The Company may make discretionary contributions to the Plan for each plan
year. The contributions may vary from year to year and are determined by
written action of the Board of Directors of the Company. Contributions may
be made only out of the Company's consolidated net profits before federal
and state income taxes from the current or a preceding plan year. The
Company's contribution may be paid to the Trustee either in cash, qualified
employer securities or in other property. In 2001 and 2000, all Company
contributions were made in qualified employer securities.
The Discretionary Matching Company Contribution is an amount determined, in
the sole discretion of the Company and added to amounts forfeited by other
participants, to match the following percentages of participants' deferred
compensation contributions (up to a maximum of 6%) for the plan year. The
Discretionary Matching Company Contribution is allocated at the end of each
plan year to each participant's Company Contribution Account based on the
following percentages:
Years of service
on first day of Matching
Plan year percentages
---------------- -----------
0 - 5 50%
6 - 10 75%
11 or more 100%
3. Employee Deferred Compensation Contributions
A participant may elect to defer a portion of his compensation in the form
of a contribution to his deferred compensation account under the Plan.
Participants contribute to the Plan on a pre-tax basis only. Subject to the
limitations contained in the Plan, a participant may elect to defer any
portion of his compensation. However, a participant may never defer more
than the lesser of the Internal Revenue Service limitation ($10,500 in 2001
and 2000) in any plan year or a percentage of compensation greater than the
maximum percentage of compensation determined annually by the Committee.
Separate accounts are maintained for each participant in the Plan. When an
election is made by the participant to defer part of his compensation, an
Employee Deferred Compensation Account is established. Each participant
will also have a Company Contribution Account consisting of discretionary
matching contributions made by the Company and a proportionate share of
forfeitures.
All amounts in the participant's accounts are placed in a trust fund and
invested by the Trustee. The Trustee must invest the trust fund solely in
the interest of and for the exclusive purpose of providing benefits to the
participants and their beneficiaries while minimizing the expenses of
administering the Plan. Under the terms of the Plan, all Company
contributions and up to 75% of the participant's contributions may be
invested in common stock of the Company or in preferred stock convertible
into common stock of the Company at a conversion price which, as of the
date of acquisition by the Plan, is reasonable. Such securities are termed
qualified employer securities.
Participants who have reached the age of 55 may elect to diversify up to
100% of their Employee Deferred Compensation Accounts and the vested
portion of their Company Contribution Accounts in one or more qualifying
"no load" mutual funds.
A participant will be entitled to his Employee Deferred Compensation
Account at the normal retirement date (age 59 1/2), or upon permanent
disability, death, separation from employment or in the case of hardship
(as determined by the Committee).
A participant will be entitled to the full amount credited to his Company
Contribution Account at the normal retirement date or upon permanent
disability or death. If a participant terminates employment for any reason
after he has completed at least one year of service, he will be entitled to
receive a portion or all of his account, depending on his years of service.
The percentage of the Company Contribution Account to which a participant
is entitled and the percentage forfeited if a participant leaves the
Company for reasons other than retirement, permanent disability or death
prior to becoming fully vested is computed according to the following
formula:
Vested Forfeited
Years of service percentage percentage
------------------ ---------- ----------
Less than 1 0% 100%
1 but less than 2 20% 80%
2 but less than 3 40% 60%
3 but less than 4 60% 40%
4 but less than 5 80% 20%
5 or more 100% 0%
A participant will always be fully vested in his Employee Deferred
Compensation Account, regardless of his years of service.
The Company may amend the Plan at any time to conform to the Internal
Revenue Code, Treasury Regulations and Rulings thereunder. The Company has
the right to terminate the Plan at any time upon prior written notice to
the Trustee and may direct the Trustee to liquidate the shares of
participants in the trust fund. Upon termination or permanent suspension of
contributions, the accounts of all participants affected thereby shall
become nonforfeitable and shall be distributed.
NOTE C - INVESTMENTS
At December 31, 2001 and 2000, the Plan held 187,614 and 170,823 shares,
respectively, of the Company's common stock with a cost of $1,544,034 and
$1,126,512, respectively. Other than the Company's common stock (which is a
nonparticipant-directed investment), investments of the Plan which
represented 5% or more of the Plan's net assets available for benefits at
December 31, 2001 and 2000 were participant-directed investments of
$372,802 and $452,415, respectively, held in the Federated Investors
Automated Cash Management Trust SS. In addition, the Plan's
nonparticipant-directed Merrill Lynch CMA Government Securities Fund
balance of $296,455 represented 5.37% of net assets available for benefits
at December 31, 2001.
NOTE D - NONPARTICIPANT-DIRECTED INVESTMENTS
Information regarding the Plan's nonparticipant-directed investment in the
Company's common stock at December 31, 2001 and 2000 is included in Note C
above. Significant components of the changes in net assets relating to
nonparticipant-directed investments (including activity in the Plan's cash
and cash equivalents) for the years ended December 31, 2001 and 2000 is as
follows:
2001 2000
---- ----
Net investment gain (loss) $(601,372) $254,731
Contributions
Employer 210,671 161,973
Employee 375,299 292,978
Benefits paid to participants (60,074) (119,312)
Transfers to participant-directed investments, net (48,919) (65,768)
--------- ---------
$(124,395) $524,602
======== =======
NOTE E - TAX STATUS
A favorable determination letter dated June 22, 1993 was received from the
Internal Revenue Service indicating that the Plan, as amended through
December 17, 1991, qualifies under Section 401(a) of the Internal Revenue
Code and is exempt from Federal income taxes under Section 501(a) of the
Code. The Plan has been amended since receiving the determination letter.
However, the Company and the Committee believe that the Plan is currently
designed and operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, the Company and the Committee believe
that the Plan continues to be qualified and no provision for income taxes
has been included in the Plan's financial statements.
NOTE F - DISTRIBUTIONS
Former participants may request distribution of their accounts in the form
of Company common stock or cash. The ability of the Plan to make
distributions in cash depends, in part, on the cash available within the
Plan to purchase the former participants' vested shares of the Company's
common stock. Former participants who have elected to diversify all or a
portion of their Plan accounts into qualified "no load" mutual fund
investments will receive a distribution of mutual fund shares or cash.
Distributions made in 2001 consisted of 1,089 shares of the Company's
common stock and cash of $134,717. Distributions made in 2000 consisted of
1,932 shares of the Company's common stock and cash of $63,380.
Former participants who terminated employment during 2001 and had not yet
received distribution of their account at December 31, 2001 will receive
distribution in 2002. The balance due former participants at December 31,
2001 included 270 shares of the Company's common stock and cash of $2,000.
The balance due former participants at December 31, 2000 included 592
shares of the Company's common stock and cash of $4,365.
SUPPLEMENTAl SCHEDULES
----------------------
Pre-Paid Legal Services, Inc. Employee Stock Ownership
and Thrift Plan and Trust
SCHEDULE H, LINE 4i - ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 2001
-----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Identity of issuer, borrower, lessor, Current
or similar party; description of investment Units Cost value
----------------------------------------- -------------------- -------------- -------------
Corporate common stock
*Pre-Paid Legal Services, Inc. 187,614 shares $1,544,034 $4,108,747
Short-term funds
Federated Investors
Automated Cash Management Trust SS 372,802 units 372,802 372,802
Merrill Lynch - Money Funds
CMA Government Securities Fund 296,455 units 296,455 296,455
American Funds
U.S. Treasury Money Fund of America 227,827 units 227,827 227,827
Morgan Stanley Dean Witter
Dividend Growth Securities B 3,619 units 187,067 166,569
Liquid Asset Fund 1 unit 1 1
Vanguard Group
Health Care Fund 614 units 66,427 71,785
500 Index Fund 38 units 4,785 3,975
------------ ------------
1,155,364 1,139,414
$2,699,398 $5,248,161
========= =========
* Party-in-interest to the Plan
SCHEDULE H, LINE 4j--REPORTABLE TRANSACTIONS
Year ended December 31, 2001
-------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Identity of Expense Current value of Net
party Description of Purchase Selling Lease incurred with Cost of asset on gain
involved asset Price Price Rental Transaction Asset transaction date (loss)
----------- -------------- -------- ------- ------ ------------- -------- ---------------- ------
*Pre-Paid Legal Common stock, $447,537 $ $ $ - $447,537 $447,537 $ -
Services, Inc. 8 purchases - -
* Party in interest