UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 10, 2007
-----------------------------
Pre-Paid Legal Services, Inc.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Oklahoma
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
001-9293 73-1016728
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
One Pre-Paid Way
Ada, OK 74820
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(580) 436-1234
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On September 11, 2007, Pre-Paid Legal Services, Inc. ("we" or "us") entered
into an amendment (the "Amendment") to its Credit Agreement dated June 23, 2006
with the lenders named therein and Wells Fargo Foothill, Inc. as administrative
agent (the "Credit Agreement"). The Amendment:
o Reduced the margin on LIBOR rate loans from 2.5% to 1.5% and fixed all
LIBOR rate loans on 30 day interest periods;
o Reduced the margin on base rate loans from 1.5% to 0.0%; and
o Increased the amounts of cash flow that we may use in each quarter to pay
dividends or repurchase shares of common stock by accumulating unused
amounts available for such purposes for up to a 24 month period that will
phase in from June 30, 2007 to June 30, 2008.
Other than as described above, there were no other material amendments to
the Credit Agreement.
Item 9.01 Financial Statements and Exhibits.
See Exhibit Index attached.
SIGNATURES
Pursuant to the requirements 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.
By: /s/ Randy Harp
---------------------------------------------------
Randy Harp, Chief Operating Officer
Date: September 10, 2007
Exhibit Index
--------- ---------------------------------------------------------------------
|No. | Description |
| | |
--------- ---------------------------------------------------------------------
|10.1 | First Amendment to Credit Agreement dated September 10, 2007 between|
| | Pre-Paid Legal Services, Inc. and the lenders named therein and|
| | Wells fargo Foothill, Inc. as administrative agent. |
--------- ---------------------------------------------------------------------
| | |
--------- ----------------------------------------------------------------------
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is made as of
September 10, 2007, by and among PRE-PAID LEGAL SERVICES, INC., an Oklahoma
corporation ("Borrower"), the lenders signatories hereto (the "Lenders") and
WELLS FARGO FOOTHILL, INC., a California corporation, as administrative agent
for the Lenders (in such capacity, together with its successors and assigns in
such capacity, "Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower, Agent and the Lenders are parties to that certain Credit
Agreement dated as of June 23, 2006 (as may be amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement"; unless
otherwise defined herein, all capitalized terms used in this Amendment shall
have the meanings ascribed to such terms in the Credit Agreement);
WHEREAS, Borrower has requested that Agent and the Lenders agree to certain
amendments to the Credit Agreement; and
WHEREAS, Agent and the Lenders have agreed to amend the Credit Agreement on
the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Amendment to Section 2.13 of the Credit Agreement. Section 2.13 of the
Credit Agreement, LIBOR Option, is hereby amended by deleting such section in
its entirety and substituting the following in lieu thereof:
"2.13 LIBOR Option.
----------------------
(a) Interest and Interest Payment Dates. In lieu of having interest
charged at the rate based upon the Base Rate, Borrower shall have the
option (the "LIBOR Option") to have interest on all or a portion of the
Advances or the Term Loan be charged (whether at the time when made (unless
otherwise provided herein), upon conversion from a Base Rate Loan to a
LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate
Loan) at a rate of interest based upon the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last day of the
Interest Period applicable thereto, (ii) the date on which all or any
portion of the Obligations are accelerated pursuant to the terms hereof, or
(iii) the date on which this Agreement is terminated pursuant to the terms
hereof. On the last day of each applicable Interest Period, unless Borrower
has provided a written request in writing to Agent that all or a portion of
such LIBOR Rate Loan be converted to a Base Rate Loan, the interest rate
applicable to such LIBOR Rate Loan shall automatically continue as a LIBOR
Rate Loan at the rate of interest then applicable to LIBOR Rate Loans for
such new Interest Period. At any time that an Event of Default has occurred
and is continuing, Borrower no longer shall have the option to request that
Advances or the Term Loan bear interest at a rate based upon the LIBOR Rate
and Agent shall have the right to convert, as of the date any such Event of
Default first occurred, the interest rate on all outstanding LIBOR Rate
Loans to the rate then applicable to Base Rate Loans hereunder.
(b) LIBOR Election. Unless Borrower has otherwise provided prior
written notice to Agent to the contrary, Borrower shall be deemed to have
requested that all outstanding Advances and the Term Loan bear interest at
the LIBOR Rate.
(c) Conversion. Borrower may convert LIBOR Rate Loans to Base Rate
Loans at any time.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with respect to any
Lender on a prospective basis to take into account any additional or
increased costs to such Lender of maintaining or obtaining any
eurodollar deposits or increased costs, in each case, due to changes
in applicable law occurring subsequent to the commencement of the then
applicable Interest Period, including changes in tax laws (except
changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, which additional or increased costs would increase
the cost of funding or maintaining loans bearing interest at the LIBOR
Rate. In any such event, the affected Lender shall give Borrower and
Agent notice of such a determination and adjustment and Agent promptly
shall transmit the notice to each other Lender and, upon its receipt
of the notice from the affected Lender, Borrower may, by notice to
such affected Lender (y) require such Lender to furnish to Borrower a
statement setting forth the basis for adjusting such LIBOR Rate and
the method for determining the amount of such adjustment, or (z) repay
the LIBOR Rate Loans with respect to which such adjustment is made.
(ii) In the event that any change in market conditions or any
law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of any Lender, make it unlawful
or impractical for such Lender to fund or maintain LIBOR Rate Loans or
to continue such funding or maintaining, or to determine or charge
interest rates at the LIBOR Rate, such Lender shall give notice of
such changed circumstances to Agent and Borrower and Agent promptly
shall transmit the notice to each other Lender and (y) in the case of
any LIBOR Rate Loans of such Lender that are outstanding, the date
specified in such Lender's notice shall be deemed to be the last day
of the Interest Period of such LIBOR Rate Loans, and interest upon the
LIBOR Rate Loans of such Lender thereafter shall accrue interest at
the rate then applicable to Base Rate Loans, and (z) Borrower shall
not be entitled to elect the LIBOR Option until such Lender determines
that it would no longer be unlawful or impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to
fund or otherwise match fund any Obligation as to which interest accrues at
the LIBOR Rate. The provisions of this Section shall apply as if each
Lender or its Participants had match funded any Obligation as to which
interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for
each Interest Period in the amount of the LIBOR Rate Loans."
2. Amendment to Section 6.10 of the Credit Agreement. Section 6.10 of the
Credit Agreement, Distributions, is hereby amended by deleting such section in
its entirety and substituting the following in lieu thereof:
""6.10 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of Borrower's Stock, of any class,
whether now or hereafter outstanding; provided that so long as (a) no
Default or Event of Default exists at the time of such purchase or payment
or would result therefrom, and (b) the sum of Excess Availability plus
Qualified Cash is greater than or equal to $10,000,000 both before and
after giving effect to such purchase or payment, Borrower may purchase its
Stock or pay dividends on its common Stock, in each case (i) using the
proceeds of the Term Loan in an aggregate amount not to exceed
$58,758,466.40, or (ii) during the fiscal quarter immediately following
either (A) a fiscal quarter for which an Excess Cash Flow Certificate is
delivered, or (B) a fiscal year for which an Excess Cash Flow Certificate
is delivered, using cash from operations in an amount not to exceed the
amount of the Excess Cash Flow Surplus for the applicable Excess Cash Flow
Test Period; provided, further, that, with respect to any such purchase by
Borrower of its Stock (x) Borrower and its agents and representatives
comply with all laws, rules, regulations and requirements applicable
thereto, including, without limitation, all federal and state securities
laws and all rules and regulations promulgated thereunder, the corporate
laws of the State of Oklahoma and all requirements of all regulatory
agencies and authorities having jurisdiction over the Borrower and it
agents and representatives, including the New York Stock Exchange and the
National Association of Securities Dealers, (y) such purchase does not and
will not trigger any right of first refusal, preemptive right or similar
right of any Person or result in the Borrower or any of its Affiliates
having any liability thereunder, and (z) such purchase does not and will
not violate or result in any breach of any charter document of Borrower or
result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any right of termination,
amendment, acceleration, suspension, revocation or cancellation of, any
material note, bond, mortgage or indenture, contract, agreement, lease,
license, permit or other material instrument or arrangement to which
Borrower or any of its Affiliates is a party or by which any of them is
bound."
3. Amendment to Article 16. Article 16 of the Credit Agreement, "General
Provisions", is modified and amended by adding the following new Section 16.10
thereto in proper numerical sequence:
"16.10 USA Patriot Act. Each Lender that is subject to the
requirements of the USA Patriot Act (Title 111 of Pub. L. 107-56 (signed
into law October 26, 2001)) (the "Act") hereby notifies Borrower, on behalf
of itself and its Subsidiaries, that pursuant to the requirements of the
Act, it is required to obtain, verify and record information that
identifies Borrower and its Subsidiaries, which information includes the
name and address of Borrower and its Subsidiaries and other information
that will allow such Lender to identify Borrower and its Subsidiaries in
accordance with the Act."
4. Amendment to Schedule C-1 to the Credit Agreement. Schedule C-1 to the
Credit Agreement is hereby amended by deleting such Schedule in its entirety and
replacing it with Schedule C-1 attached hereto.
5. Amendment to Schedule 1.1 to the Credit Agreement. Schedule 1.1 to the
Credit Agreement, Definitions, is hereby amended by deleting the definitions of
"Base LIBOR Rate", "Base Rate Margin", "Excess Cash Flow Surplus", "Interest
Period", and "LIBOR Rate Margin" in their entirety and inserting the following
in lieu thereof:
""Base LIBOR Rate" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or
other quotation sources as it considers appropriate, to be the rate at
which Dollar deposits (for delivery on the first day of the requested
Interest Period) are offered to major banks in the London interbank market
2 Business Days prior to the commencement of the applicable Interest
Period, for a term of 30 days and in the amount of the LIBOR Rate Loan
requested (or deemed requested) by Borrower in accordance with the
Agreement, which determination shall be conclusive in the absence of
manifest error."
""Base Rate Margin" means 0.00 percentage points."
""Excess Cash Flow Surplus" means, with respect to any Excess Cash
Flow Test Period, the amount of (i) Excess Cash Flow of Borrower and its
Subsidiaries for such period, less (ii) any payments made, or required to
be made, under Section 2.4(c)(v)(A) or Section 2.4(c)(v)(B), as the case
may be, with respect to such period, less (iii) the amount cash purchase
price paid to repurchase Borrower's Stock during such period, less, (iv)
the amount of any cash dividends paid with respect to Borrower's Stock
during such period."
""Interest Period" means, with respect to each LIBOR Rate Loan, a
period commencing on the first calendar day of each month and ending on the
last calendar day of such month."
""LIBOR Rate Margin" means 1.50 percentage points."
6. Amendment to Schedule 1.1 to the Credit Agreement. Schedule 1.1 to the
Credit Agreement, Definitions, is hereby further amended by deleting the
definitions of "Funding Losses" and "LIBOR Deadline" in their entirety.
7. Amendment to Schedule 1.1 to the Credit Agreement. Schedule 1.1 to the
Credit Agreement, Definitions, is hereby further amended by inserting the
following definition of Excess Cash Flow Test Period in the appropriate
alphabetical order:
"Excess Cash Flow Test Period" means, as of any date of determination
for which an Excess Cash Flow Certificate has been delivered, the
twenty-four (24) month period immediately prior to such date; provided,
however, with respect to the Excess Cash Flow Test Period for (i) the
period ended June 30, 2007, the Excess Cash Flow Test Period shall be
deemed to equal the twelve (12) month period ending on such date, (ii) the
period ended September 30, 2007, the Excess Cash Flow Test Period shall be
deemed to equal the fifteen (15) month period ending on such date; (iii)
the period ended December 31, 2007, the Excess Cash Flow Test Period shall
be deemed to equal the eighteen (18) month period ending on such date; and
(iv) the period ended March 31, 2008, the Excess Cash Flow Test Period
shall be deemed to equal the twenty-one (21) month period ending on such
date.
8. Amendment to Schedule 5.2 to the Credit Agreement. Schedule 5.2 to the
Credit Agreement is hereby amended by deleting such Schedule in its entirety and
replacing it with Schedule 5.2 attached hereto.
9. Conditions of Effectiveness. This Amendment shall become effective as of
the date hereof when, and only when, Agent shall have received:
(a) a counterpart of this Amendment duly executed by Borrower and the
Lenders; and
(b) such other information, documents, instruments or approvals as
Agent or Agent's counsel may require.
10. Representations and Warranties. Borrower hereby represents and warrants
as follows:
(a) Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Oklahoma;
(b) the execution, delivery and performance by Borrower of this
Amendment are within Borrower's corporate powers, have been duly authorized
by all necessary corporate action and do not (i) contravene Borrower's
charter or by-laws, or (ii) violate the law or any material contractual
restriction binding on or affecting Borrower;
(c) no authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by Borrower of this Amendment;
(d) each representation or warranty of Borrower set forth in the
Credit Agreement is hereby restated and reaffirmed as true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof) on and as of the date of
this Amendment, as if such representation or warranty were made on and as
of such date (except to the extent that any such representations and
warranties relate solely to an earlier date);
(e) this Amendment constitutes the legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms; and
(f) after giving effect to this Amendment, no Default or Event of
Default is existing.
11. Reference to and Effect on the Loan Documents.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement
as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and all
other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Borrower has no
knowledge of any challenge to Agent's or any Lender's claims arising under
the Loan Documents or the effectiveness of the Loan Documents.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of Agent or any Lender under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents. This
Amendment shall not constitute a modification of the Credit Agreement or a
course of dealing with Agent or any Lender at variance with the Credit
Agreement such as to require further notice by Agent or any Lender to
require strict compliance with the terms of the Credit Agreement and the
other Loan Documents in the future, except as expressly set forth herein.
12. Costs and Expenses. Borrower agrees to pay on demand all reasonable
costs and expenses in connection with the preparation, execution, delivery,
administration, modification and amendment of this Amendment and the other
instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent
with respect thereto and with respect to advising Agent as to its rights and
responsibilities hereunder and thereunder.
13. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflict of
laws principles of such state.
14. Loan Document. This Amendment shall be deemed to be Loan Documents for
all purposes.
15. Counterparts. This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts, each of which shall be
deemed an original and all of which, taken together, shall be deemed to
constitute one and the same instrument. Delivery of an executed counterpart of
this Amendment by facsimile or by other electronic method of transmission shall
be as effective as delivery of a manually executed counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first above written.
BORROWER: PRE-PAID LEGAL SERVICES, INC., an Oklahoma corporation
By: /s/ Steve Williamson
--------------------------------------------------
Name: Steve Williamson
Title: Chief Financial Officer
AGENT AND THE LENDERS: WELLS FARGO FOOTHILL, INC., as Agent and a Lender
By: /s/ Kristy S. Loucks
--------------------------------------------------
Name: Kristy S. Loucks
Title: Vice President
COMERICA BANK, as a Lender
By: /s/ Gary L. Emery
--------------------------------------------------
Name: Gary L. Emery
Title: Vice President
TEXAS CAPITAL BANK, N.A., as a Lender
By: /s/ Richard L. Rogers
--------------------------------------------------
Name: Richard L. Rogers
Title: Senior Vice President
AIB DEBT MANAGEMENT LIMITED, as a Lender
By: /s/ Joanna McFadden
--------------------------------------------------
Name: Joanna McFadden
Title: Assistant Vice President
LASALLE BANK NATIONAL ASSOCIATION, as a Lender
By: /s/ Scott E. Rubenstein
--------------------------------------------------
Name: Scott E. Rubenstein
Title: Vice President
Schedule C-1
------------
Lenders and Lenders' Commitments
------------------------------------ ------------------------ ------------------------- -----------------------------
| LENDER | TERM LOAN COMMITMENT | REVOLVER COMMITMENT | TOTAL COMMITMENT |
------------------------------------ ------------------------ ------------------------- -----------------------------
| WELLS FARGO FOOTHILL, INC. | $20,000,000 | $5,000,000 | $25,000,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
| COMERICA BANK | $13,750,000 | $0 | $13,750,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
| TEXAS CAPITAL BANK, N.A. | $7,500,000 | $0 | $7,500,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
| AIB DEBT MANAGEMENT LIMITED | $15,000,000 | $0 | $15,000,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
| LASALLE BANK NATIONAL ASSOCIATION | $18,750,000 | $0 | $18,750,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
Total | $75,000,000 | $5,000,000 | $80,000,000 |
------------------------------------ ------------------------ ------------------------- -----------------------------
Schedule 5.2
------------
Provide Agent (and if so requested by Agent, with sufficient copies for
each Lender) with each of the documents set forth below at the following times
in form satisfactory to Agent:
===============================================================================
|Monthly (not later |(a) a detailed report regarding Borrower and its Subsid- |
|than the 15th day of|Subsidiaries' cash and Cash Equivalents including an |
| |indication of which amounts constitute Qualified Cash, |
| | |
| |(b) a summary roll-forward, in a format reasonably |
| |acceptable to Agent, of Borrower's and its Subsidiaries' |
| |Members. |
--------------------- ----------------------------------------------------------
|Upon request by |(b) such other reports as to the Collateral or the |
|Agent |financial condition of Borrower and its Subsidiaries, as |
| |Agent may reasonably request. |
================================================================================