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): May 3, 2005
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Pre-Paid Legal Services, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Oklahoma
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(State or Other Jurisdiction of Incorporation)
001-09293 73-1016728
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(Commission File Number) (IRS Employer Identification No.)
One Pre-Paid Way
Ada, OK 74820
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(Address of Principal Executive Offices) (Zip Code)
(580) 436-1234
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(Registrant's Telephone Number, Including Area Code)
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(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
We obtained $2.3 million in additional financing from the Bank of Oklahoma. The
$2.3 million loan was closed on May 3, 2005 and is in addition to our existing
debt outstanding. The new funding is secured by certain aviation related assets
we acquired late last year and is repayable in monthly principal repayments of
$38,560 beginning May 31, 2005 and ending on April 30, 2010 with interest at the
30 day LIBOR Rate plus 2.25%, adjusted monthly. We expect to use proceeds from
the new financing to fund additional treasury stock purchases. We currently have
Board authorization to purchase approximately 618,000 additional treasury shares
and expect to seek authority for additional purchases.
We also received on May 5, 2005 approval for certain modifications to existing
loan agreements we previously requested from our lenders, Bank of Oklahoma,
Comerica Bank and First United Bank and Trust. These modifications allow us to
more aggressively execute our open market treasury share purchase program and
provide greater flexibility for cash dividends. The amendments to our existing
debt agreements include (1) increasing the percentage of quarterly income
available for dividends or stock purchases from 50% to 65%; (2) lowering the
debt coverage ratio from 125% to 110% and (3) adding a covenant that allows for
prepayments of principal on the stock loan to be applied in the direct order of
maturities. These amendments provide us greater flexibility with our stock
repurchase and cash dividend programs.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
See Item 1.01.
Item 9.01 Financial Statements and Exhibits
(c) The following Exhibits are filed as a part of this report:
No. Description
---- -----------
10.1 Promissory Note dated April 30, 2005 between us and Bank of
Oklahoma N.A.
10.2 Loan Agreement dated April 30, 2005 between us and Bank of
Oklahoma, N.A.
10.3 Security Agreement dated April 30, 2005 between us and Bank of
Oklahoma, N.A.
10.4 Second Amendment to Loan Agreement dated May 6, 2005 among us,
Bank of Oklahoma, N.A., Comerica Bank and First United Bank &
Trust.
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: May 6, 2005
EXHIBIT 10.1
PROMISSORY NOTE
$2,313,555 Oklahoma City, Oklahoma
FOR VALUE RECEIVED, PRE-PAID LEGAL SERVICES, INC., an Oklahoma corporation
(the "Maker") promises to pay to the order of BANK OF OKLAHOMA, N.A., a national
banking association ("Bank") at the office of the Bank in Oklahoma City,
Oklahoma, which is located at 201 Robert S. Kerr Ave., or such other place as
may be designated in writing by the Bank, the principal sum of Two Million Three
Hundred Thirteen Thousand Five Hundred Fifty Five and No/100 Dollars
($2,313,555), together with interest at the rate stated herein on such
outstanding principal amount, and on any past due interest payments, payable as
follows:
This Note is subject to the terms and conditions of that certain Loan
Agreement dated April 30, 2005 between the undersigned and the Bank (the "Loan
Agreement"), which terms and conditions are hereby incorporated by reference
herein and shall be controlling over any provision of this Note to the contrary.
Reference is hereby made to the Loan Agreement for a statement of the
calculation and computation of the rate of interest charged on amounts
outstanding under this Note, for a statement of repayment and prepayment rights
and obligations of Maker, for a statement of the terms and conditions under
which the due date of this Note may be accelerated and for statements regarding
other matters affecting this Note (including without limitation the obligations
of the holder hereof to advance funds hereunder, exercise of rights and
remedies, payment of attorneys' fees, court costs and other costs of collection
and certain waivers by Maker and others now or hereafter obligated for payment
of any sums due hereunder). Upon the occurrence of an Event of Default, as that
term is defined in the Loan Agreement, and after the expiration of any grace or
cure period as set forth in the Loan Agreement, the holder hereof (i) may
declare forthwith to be entirely and immediately due and payable the principal
balance hereof and the interest accrued hereon, and (ii) shall have all rights
and remedies of the Bank under the Loan Agreement and Loan Documents. This Note
may be prepaid in accordance with the terms and provisions of the Loan
Agreement. Capitalized terms not otherwise defined herein shall be defined as
set forth in the Loan Agreement.
This Note is the Note, as such term is defined in the Loan Agreement. It is
to be construed according to the laws of the State of Oklahoma.
The undersigned agrees that if, and as often as, this Note is placed in the
hands of an attorney for collection or to defend or enforce any of the holder's
rights hereunder, the undersigned will pay to the holder hereof its reasonable
attorney's fees, together with all court costs and other expenses paid by such
holder.
All payments on this Note shall be made in legal tender of the United
States of America or other immediately available funds at the Agent's or other
holder's address as shown herein or otherwise indicated and any such payment
will not be deemed to have been made until it is received by the holder of this
Note in collected funds.
All agreements between the undersigned and the holder are expressly limited
so that in no event whatsoever, whether by reason of disbursement of the
proceeds hereof or otherwise shall the amount of interest or finance charge (as
defined by the laws of the State of Oklahoma) paid or agreed to be paid by the
undersigned to the holder hereof exceed the highest lawful contractual rate of
interest or the maximum finance charge permissible under the law which a court
of competent jurisdiction, by final non-appealable order, determines to be
applicable hereto. If fulfillment of any agreement between the undersigned and
the holder hereof, at the time the performance of such agreement becomes due,
involves exceeding such highest lawful contractual rate or such maximum
permissible finance charge, then the obligation to fulfill the same shall be
reduced so such obligation does not exceed such highest lawful contractual rate
or maximum permissible finance charge. If by any circumstance the holder shall
ever receive as interest or finance charge an amount which would exceed the
amount allowed by applicable law, the amount which may be deemed excessive shall
be deemed applied to the principal of the indebtedness evidenced hereby and not
to interest. All interest and finance charges paid or agreed to be paid to the
holder hereof shall be prorated, allocated and spread throughout the full period
of this Note. The terms and provisions of this paragraph shall control all other
terms and provisions contained herein and in any other documents executed in
connection herewith. If any provision of this Note, or the application thereof
to any party or circumstance is held invalid or unenforceable, the remainder of
this Note and the application of such provision to other parties or
circumstances shall not be affected thereby, provisions of this Note being
severable in any such instance.
The makers, endorsers, sureties, guarantors and all other persons who
may become liable for all or any part of this obligation severally waive
presentment for payment, protest and notice of nonpayment. Said parties consent
to any extension of time (whether one or more) of payment hereof, any renewal
(whether one or more) hereof, and any release of any such party liable for
payment of this note without notice to any such party and without discharging
the said party's liability hereunder.
The failure of the holder hereof to exercise any of the remedies or options
set forth in this Note or in any instrument securing payment hereof, upon the
occurrence of one or more of the Events of Default shall not constitute a waiver
of the right to exercise the same or any other remedy at any subsequent time in
respect to the same or any other Event of Default. Acceptance by the holder
hereof of any payment which is less than the total of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing remedies or options at that time or at any
subsequent time, or nullify any prior exercise of any such remedy or option,
without the express consent of the holder hereof, except as and to the extent
otherwise provided by law.
IN WITNESS WHEREOF, the undersigned has executed this instrument effective
as of April 30, 2005.
PRE-PAID LEGAL SERVICES, INC.,
an Oklahoma Corporation:
By: /s/ Harland C. Stonecipher
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Name: Harland C. Stonecipher
Title: Chairman and CEO
EXHIBIT 10.2
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Loan Agreement
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PRE-PAID LEGAL SERVICES, INC.
and
BANK OF OKLAHOMA, N.A.
April 30, 2005
1. CERTAIN DEFINITIONS.......................................................................................
1.1 Advance..........................................................................................
1.2 Agreement........................................................................................
1.3 Aircraft.........................................................................................
1.4 Aircraft Security Agreement......................................................................
1.5 Airframes........................................................................................
1.6 Collateral.......................................................................................
1.7 Code.............................................................................................
1.8 Engines..........................................................................................
1.9 Events of Default................................................................................
1.10 Existing Loans...................................................................................
1.11 FAA..............................................................................................
1.12 Governmental Authority...........................................................................
1.13 Governmental Requirement.........................................................................
1.14 Indebtedness.....................................................................................
1.15 LIBOR Rate.......................................................................................
1.16 Lien.............................................................................................
1.17 Loan.............................................................................................
1.18 Loan Documents...................................................................................
1.19 Maturity Date....................................................................................
1.20 Note.............................................................................................
1.21 Parts............................................................................................
1.22 Person...........................................................................................
1.23 Potential Default................................................................................
1.24 Prime Rate.......................................................................................
1.25 Responsible Officer..............................................................................
2. LENDING AGREEMENT.........................................................................................
2.1 Term Loan........................................................................................
2.2 Payments.........................................................................................
2.3 Prepayment and Prepayment Penalty................................................................
2.4 Application of Payments..........................................................................
2.5 Default Interest.................................................................................
2.6 Further Assurance................................................................................
3. COLLATERAL AND OTHER CREDIT ENHANCEMENT...................................................................
4. CONDITIONS OF LENDING.....................................................................................
4.1 Conditions Precedent to Loan.....................................................................
5. REPRESENTATIONS AND WARRANTIES............................................................................
5.1 Organization and Good Standing...................................................................
5.2 Authorization and Power..........................................................................
5.3 Governmental Authorization.......................................................................
5.4 Binding Effect...................................................................................
5.5 Title to Aircraft................................................................................
5.6 Litigation.......................................................................................
5.7 Conflicting Documents or Agreements..............................................................
5.8 Full Disclosure..................................................................................
5.9 No Default.......................................................................................
5.10 Material Agreements..............................................................................
5.11 Principal Office.................................................................................
5.12 Payment of Taxes.................................................................................
5.13 Survival Representations and Warranties..........................................................
6. AFFIRMATIVE COVENANTS.....................................................................................
6.1 Applicable Laws..................................................................................
6.2 Financial Statements.............................................................................
6.3 Maintenance of Existence.........................................................................
6.4 Books and Records; Inspections...................................................................
6.5 Taxes............................................................................................
6.6 Revisions........................................................................................
6.7 Title to Assets and Maintenance..................................................................
6.8 Additional Assurances............................................................................
6.9 Performance of Obligations.......................................................................
6.10 Expenses.........................................................................................
6.11 Payment of Liabilities...........................................................................
6.12 Right to Conduct Business........................................................................
6.13 Other Information................................................................................
6.14 Maintenance of Insurance.........................................................................
6.15 Notices..........................................................................................
7. NEGATIVE COVENANTS........................................................................................
7.1 Security Agreements, Pledges, etc................................................................
7.2 Sale of Assets...................................................................................
7.3 Name.............................................................................................
8. EVENTS OF DEFAULT.........................................................................................
8.1 Nonpayment of Note...............................................................................
8.2 Nonpayment of Interest...........................................................................
8.3 Other Nonpayment.................................................................................
8.4 Breach of Covenants..............................................................................
8.5 Representations and Warranties...................................................................
8.6 Insolvency.......................................................................................
8.7 Voluntary Bankruptcy.............................................................................
8.8 Involuntary Bankruptcy...........................................................................
8.9 Creditor's Proceedings...........................................................................
8.10 Monetary Judgments...............................................................................
8.11 Borrower Dissolution.............................................................................
8.12 Cross Default....................................................................................
9. REMEDIES..................................................................................................
9.1 Immediate Acceleration...........................................................................
9.2 Notice and Demand................................................................................
9.3 Other Rights.....................................................................................
9.4 Deposits; Setoff.................................................................................
9.5 Cumulative Remedies..............................................................................
10. GENERAL CONDITIONS........................................................................................
10.1 Cross-Default....................................................................................
10.2 Notices..........................................................................................
10.3 Amendment; Waiver................................................................................
10.4 Governing Law....................................................................................
10.5 Prohibition Against Assignment...................................................................
10.6 Entire Agreement.................................................................................
10.7 Severability.....................................................................................
10.8 Captions.........................................................................................
10.9 Binding Effect...................................................................................
10.10 Contrary Provisions..............................................................................
10.11 Counterpart......................................................................................
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into this 30th day of April, 2005, by
and between PRE-PAID LEGAL SERVICES, INC., an Oklahoma corporation (the
"Borrower") and BANK OF OKLAHOMA, N.A., a national banking association ("Bank").
W I T N E S S E T H:
-------------------
WHEREAS, Borrower and Bank have agreed to an extension of credit in an amount
equal to $2,313,555 consisting of an amortizing term loan (the "Term Loan"), as
evidenced by the promissory note described herein; and
WHEREAS, the Borrower desires to secure its obligation under this Agreement and
the promissory note described herein with certain aircraft and other personal
property related thereto pursuant to the terms and conditions of this Agreement
and other loan and security documents as described herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Bank and Borrower hereby consent and
agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, "Borrower", "Bank", and
"Term Loan" shall have the meanings set forth above and the following terms with
their initial letters capitalized shall have the following meanings except where
the context otherwise requires:
1.1 Advance. The term "Advance" shall mean the disbursement by Bank of
a sum or sums loaned to Borrower pursuant to this Agreement.
1.2 Agreement. The term "Agreement" shall mean this Loan Agreement, as
the same may from time to time be amended, supplemented or modified.
1.3 Aircraft. The term "Aircraft" shall mean (i) that certain 1980
Beechcraft King Air 200, Serial No. BB-711, Registration No. N1162V,
together with engines manufactured by Pratt & Whitney with Model No(s).
PT6A-41 and 4HFR34C754-1, Serial Nos. PCE81679 and PCE81683 and (ii) that
certain 1983 Diamond 1A Mitsubishi Aircraft, MU Model, Serial No. A024
S.A., Registration No. N674AC, together with engines manufactured by Pratt
& Whitney with Model No. JT15D-4D, Serial No(s). PCE70858 and PCE71013; and
(iii) existing avionics, equipment and instrumentation. This term shall
also include the following: (i) the Airframe; (ii) all Engine(s) from time
to time attached thereto; (iii) all Parts relating to the foregoing items
(i) and/or (ii); and (iv) any and all manuals, logbooks, flight records,
maintenance records and other historical records or information relating to
any of the foregoing items.
1.4 Aircraft Security Agreement. The term "Aircraft Security
Agreement" means that certain aircraft chattel mortgage, security
agreement, assignment of rents and leases in a form acceptable to Bank, or
other document in form and substance required by Bank conveying a perfected
security interest in the Aircraft in favor of Bank under the laws of the
applicable jurisdiction, and any and all amendments, modifications,
supplements, renewals, extensions, restatements or replacements thereof.
1.5 Airframes. The term "Airframes" means an aircraft (excluding the
Engines from time to time installed thereon), together with all landing
gear and any and all Parts related thereto.
1.6 Collateral. The term "Collateral" shall have that meaning ascribed
to such term as is provided in Section 3 hereof.
1.7 Code. The term "Code" shall mean the Internal Revenue Code of 1986
as amended from time to time.
1.8 Engines. The term "Engines" means an aircraft engine, together
with any and all Parts related thereto. The term "Engines" shall also refer
to any replacement aircraft engine which is required or permitted, under
this Agreement and/or the Aircraft Security Agreement, to be installed upon
the Airframes and with respect to which Borrower complies with each of the
applicable requirements contained in this Agreement and/or the Aircraft
Security Agreement.
1.9 Events of Default. The term "Events of Default" shall have that
meaning ascribed to such term as is provided in Section 8 hereof.
1.10 Existing Loans. The term "Existing Loans" shall collectively
refer to (i) that certain Loan Agreement dated September 19, 2003 between
Borrower, Bank, Comerica Bank, and First United Bank & Trust, as amended
and (ii) that certain Loan Agreement dated June 11, 2002 by and between
Borrower and Bank, as amended.
1.11 FAA. The term "FAA" means the United States Federal Aviation
Administration (or any successor or replacement Governmental Authority
having the same or similar authority and responsibilities).
1.12 Governmental Authority. The term "Governmental Authority" means
any nation or government, any state or political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
1.13 Governmental Requirement. The term "Governmental Requirement"
means any law, statute, code, ordinance, order, rule, regulation, judgment,
decree, injunction, franchise, permit, certificate, license, authorization
or other directive or requirement of any federal, state, county, municipal,
parish or other Governmental Authority or any department, commission,
board, court, agency or any other instrumentality of any of them.
1.14 Indebtedness. The term "Indebtedness" shall mean: (i) all
obligations of Borrower as evidenced by the Note; (ii) all obligations of
Borrower evidenced by this Agreement; (iii) all obligations of the Borrower
arising from any of the Loan Documents or other agreements covering
property secured by a Lien on any asset of Borrower now or hereafter
contemplated by this Agreement, whether direct or indirect, absolute or
contingent.
1.15 LIBOR Rate. The term "LIBOR Rate" shall mean the arithmetic
average of the rate at which Dollar deposits in immediately available funds
and for a maturity equal to one-month (30 days) are offered or available in
the London Interbank Market for Eurodollars as of 11:00 a.m. (London time)
on the date of determination, as reported in the "Money Rates" section of
The Wall Street Journal or a substitute source reasonably determined by
Bank in the event such source is no longer available. If more than one
month (30 days) LIBOR Rate is published in The Wall Street Journal for any
particular time period then the LIBOR Rate shall be the highest of such
published rates. Beginning May 1, 2005, such rate shall be adjusted as of
the first day of each month during the term hereof.
1.16 Lien. The term "Lien" shall mean, with respect to any asset of
the Borrower, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
1.17 Loan. The term "Loan" shall mean the loan contemplated by this
Agreement and evidenced by the Note, and as evidenced and secured by the
Loan Documents.
1.18 Loan Documents. The term "Loan Documents" shall collectively mean
this Agreement, the Note, Aircraft Security Agreement, security agreements,
financing statements and all other security documents and instruments
executed and delivered in connection with the Loan described herein which
secure the obligations of the Borrower to the Bank and any renewals,
amendments, supplements or modifications thereof or thereto.
1.19 Maturity Date. The term "Maturity Date" shall mean April 30,
2010.
1.20 Note. The term "Note" shall mean that certain promissory note
from Borrower payable to the order of the Bank with an initial principal
balance equal to $2,313,555 and substantially in a form acceptable to Bank.
1.21 Parts. The term "Parts" means any and all appliances, pans,
instruments, appurtenances, accessories, furnishings, seats and other
equipment of whatever nature (other than Engines or other kinds of
engines), which may from time to time be incorporated in or installed in or
attached to the Aircraft, including the Airframe or any Engine.
1.22 Person. The term "Person" shall include an individual, a
corporation, a joint venture, a general or limited partnership, a limited
liability company, a trust, an unincorporated organization or a government
or any agency or political subdivision thereof.
1.23 Potential Default. Any event which with the giving of notice or
lapse of time, or both, would become an Event of Default.
1.24 Prime Rate. The term "Prime Rate" shall refer to that fluctuating
rate of interest designated from time to time by The Wall Street Journal as
the prime rate of interest. This rate is a reference rate and is not
intended to be the lowest or best rate of interest offered to Bank's
customers.
1.25 Responsible Officer. The term "Responsible Officer" shall refer
to Steve Williamson, Borrower's Chief Financial Officer or Randy Harp,
Chief Operating Officer.
2. LENDING AGREEMENT. Subject to the terms and conditions hereof, and the
terms and conditions of the Loan Documents, and in reliance upon the Borrower's
representations and warranties contained herein, the Bank agrees to extend
credit to the Borrower, and the Borrower agrees to such extension of credit from
the Bank on the following terms and conditions:
2.1 Term Loan. The Bank agrees to extend credit to the Borrower as
evidenced by the Note in a principal amount equal to $2,313,555. This Loan
is secured by the Collateral. The Note will be in the form of an amortizing
or term credit upon which the Bank shall have no obligation to make
additional advances.
2.1.1 Principal. The principal amount of the Term Loan shall
equal to $2,313,555.
2.1.2 Note Interest Rate. Beginning on the date of the first
Advance hereunder, and continuing throughout the life of the Loan, the
outstanding principal amount of the Note shall bear interest per annum
at the LIBOR Rate plus two and one quarter of one percent (2.25%)
calculated on the basis of a year of 360 days and the actual number of
days elapsed.
2.1.3 Advances and Purpose. Bank shall advance the entire
proceeds of the Note on or before closing in order to finance the
Aircraft. This Loan is expressly not a revolving credit. Once sums are
advanced they cannot be paid back and readvanced.
2.1.4 Repayment. Beginning May 31, 2005 and continuing on the
last day of each month thereafter through the Maturity Date, Borrower
shall make a monthly payment of principal in the amount of $38,560
together with a payment of all accrued but unpaid interest. All
outstanding principal plus all accrued but unpaid interest is due and
payable in full on the Maturity Date.
2.2 Payments. The principal of and interest on the Note shall be
payable in lawful money of the United States of America, in immediately
available funds, at the principal office of the Bank in Oklahoma City,
Oklahoma. All such payments shall be made not later than 2:00 p.m.,
Oklahoma City time, on the date due, and funds received for principal
payments on the Note after such hour on any day shall be treated for all
purposes of this Agreement as having been received on the next succeeding
business day in Oklahoma City. If any payment made by the Borrower under
this Agreement is to be made on a Saturday, Sunday or legal holiday in
Oklahoma City, Oklahoma, such payment shall be made on the next succeeding
business day.
2.3 Prepayment and Prepayment Penalty. The Borrower may prepay any or
all of the Note, either in whole or in part, on any date without premium or
penalty.
2.4 Application of Payments. Borrower hereby agrees that all Note
payments paid to Bank shall be applied: (1) to any costs which the Borrower
is obligated to pay, (2) to any accrued but unpaid interest, and (3) to the
principal indebtedness of the Note, or to any other indebtedness or
obligations due to Bank.
2.5 Default Interest. While any Event of Default exists hereunder or
under the Note or any of the Loan Documents, in lieu of the interest rate
provided in the Note, all sums owing by Borrower to Bank in connection with
the Loan shall bear interest at the Prime Rate plus five percent (5%) per
annum, accrued from the date of such Event of Default, but after any
applicable grace period to cure certain events of default as provided
herein, to the date on which such default is cured to the reasonable
satisfaction of the Bank.
2.6 Further Assurance. The Borrower shall, from time to time, execute
and deliver, or cause to be executed and delivered, to the Bank such
mortgages, deeds of trust, instruments, agreements, assignments, financing
statements, continuation statements and other documents, and take or cause
to be taken such actions as Bank may reasonably require, to provide Bank
with and to perfect the security interests and mortgage liens required
hereunder and to establish and maintain the priority of such security
interests and liens.
3. COLLATERAL AND OTHER CREDIT ENHANCEMENT.
The Loan shall be secured by a first, valid and enforceable lien and security
interest evidenced by the personal property described in the Aircraft Security
Agreement.
4. CONDITIONS OF LENDING.
4.1 Conditions Precedent to Loan. The obligation of the Bank to
perform this Agreement and to extend the Loan is subject to the performance
of the following conditions precedent in form satisfactory to the Bank:
4.1.1 Loan Documents. This Agreement, the Note, the Aircraft
Security Agreement, financing statements, and all other Loan Documents
not specifically mentioned but heretofore required by the Bank shall
have been duly executed, acknowledged (where appropriate) and
delivered to the Bank, all in form and substance satisfactory to the
Bank, and all such applicable documents shall have been properly
recorded in all appropriate recording offices. Permission is hereby
granted and Bank is hereby authorized to file such financing
statements pursuant to the Uniform Commercial Code in effect in the
State of Oklahoma as Bank deems necessary to perfect its interest in
the Collateral.
4.1.2 Resolutions of Borrower. Resolutions of the Borrower
approving the execution, delivery and performance of this Agreement,
the Note, the Aircraft Security Agreement and all other Loan Documents
and the transactions contemplated herein and therein, duly adopted by
Borrower's board of directors and accompanied by a Certificate of the
Responsible Officer stating that such Resolutions are true and
correct, have not been altered or repealed and are in full force and
effect shall have been delivered to the Bank.
4.1.3 Incumbency Certificate. A signed certificate of Borrower's
secretary or assistant secretary which shall certify the name of the
officers of Borrower authorized to sign each Loan Document together
with the true signatures of each of such officers shall have been
delivered to the Bank. The Certificate of Incorporation and a
Certificate of Good Standing for the Borrower issued by the Secretary
of State of the State of Oklahoma shall have also been delivered to
the Bank.
4.1.4 Bylaws. A copy of the bylaws of the Borrower, and all
amendments thereto, certified by the Responsible Officer as being
true, correct and complete as of the date of such certification.
4.1.5 Liens. Bank shall have a first lien, security interest, or
other interest on or in the Aircraft, Airframe, Engine and Parts.
4.1.6 Title Evidence. The Bank shall have received, at Borrower's
expense, an attorney's opinion and/or title insurance covering the
Aircraft indicating that it will be secured by the first lien of the
Aircraft Security Agreement, subject only to such exceptions as are
approved by the Bank.
4.1.7 Other Insurance. In addition to the insurance required in
the Aircraft Security Agreement, the Bank shall have received
satisfactory original certificates of fire and extended coverage
insurance at replacement cost, together with standard clauses naming
the Bank as secured party. The Bank shall also have received
satisfactory original certificates of general public liability
insurance, naming the Bank as an additional insured. Any insurer
issuing any of the above insurance shall be satisfactory to the Bank.
All premiums on such policies shall be prepaid by the Borrower. The
Bank shall not unreasonably withhold its consent to Borrower's
insurers.
4.1.8 Appraisal. Bank shall receive, at Borrower's expense, a
current appraisal of the Collateral in form and substance satisfactory
to Bank.
4.1.9 Perfection; Recording and Filing. All actions shall have
been taken as are necessary and appropriate for Bank to maintain a
valid and perfected first lien and security interest in and to the
Aircraft and personal property detailed in the Aircraft Security
Agreement, including without limitation, the filing and recording of
such Loan Documents as may be necessary and appropriate.
4.1.10 Information. The Borrower shall have furnished to the Bank
such financial statements and other information and/or documents as
the Bank shall have requested including, but not limited to, lien
searches in Oklahoma County and with the FAA for Borrower.
4.1.11 No Default. No Events of Default shall have occurred and
be continuing under this Agreement or the Loan Documents or the
Existing Loans and the representation and warranties set forth herein
and in all other Loan Documents shall be true and correct in all
material respects.
4.1.12 No Adverse Change. There shall not have occurred any
change in any information relied upon by Bank in entering into this
transaction which, in the sole judgment of Bank, is materially adverse
on the financial conditions, results of operations, businesses or
prospects of Borrower, which a request for funds has been submitted,
or any of them.
5. REPRESENTATIONS AND WARRANTIES. To induce the Bank to extend the Loan
and enter into this Agreement, Borrower represents and warrants to the Bank as
of the date hereof and on any and all renewals and extensions thereof, as
follows:
5.1 Organization and Good Standing. The Borrower is a corporation duly
organized and existing in good standing under the laws of the State of
Oklahoma and has the requisite power and authority to own its properties
and assets and to transact the business in which it is engaged.
5.2 Authorization and Power. The Borrower has the requisite power and
authority to execute, deliver and perform the Loan Documents. The Borrower
has taken all necessary corporate action to authorize such execution,
delivery and performance of the Loan Documents. The Borrower is and will
continue to be duly authorized to perform the Loan Documents.
5.3 Governmental Authorization. The execution, delivery, and
performance by the Borrower of this Agreement requires no approval of or
filing with any Governmental Authority.
5.4 Binding Effect. This Agreement and the other Loan Documents, when
duly executed and delivered, will constitute legal, valid, and binding
obligations of the Borrower, fully enforceable in accordance with their
respective terms (subject to limitations on enforceability resulting from
bankruptcy and other similar laws relating to creditor's rights and
principles of equity) and will secure the payment and performance of the
Loan as described herein.
5.5 Title to Aircraft. The Borrower has good and marketable title to
all the Aircraft, including without limitation all real estate collateral,
free and clear of all liens, pledges, restrictions, and encumbrances except
for any liens permitted hereunder.
5.6 Litigation. There are no pending legal or governmental actions,
proceedings, or investigations to which Borrower is a party or to which any
property of Borrower is subject which might result in any material adverse
change in the business or financial condition of Borrower and to the best
of said party's knowledge, no such actions or proceedings are threatened or
contemplated by governmental authorities or any other persons.
5.7 Conflicting Documents or Agreements. There are no provisions
pursuant to existing indentures, leases, security agreements, contracts,
notes, instruments, or any other agreements or documents binding on
Borrower or affecting the Aircraft, which would conflict with or in any way
prevent the execution, delivery or performance of the Loan Documents by
Borrower.
5.8 Full Disclosure. There is no material fact that Borrower has not
disclosed to Bank which could have a material adverse effect on the
properties, business, prospects or condition (financial or otherwise) of
Borrower. Neither the financial statements relied upon by the Bank, nor any
certificate or statement delivered herewith or heretofore by Borrower to
Bank in connection with the negotiations of this Agreement, contain any
untrue statement of a material fact or omits to state any material fact
necessary to keep the statements herein or therein from being misleading.
5.9 No Default. No event has occurred and is continuing which
constitutes an Event of Default or a Potential Default or a default or
event of default pursuant to the Existing Loans.
5.10 Material Agreements. Borrower is not in default in any material
respect under any contract, Lease, loan agreement, indenture, mortgage,
security agreement or other material agreement or obligation to which it is
a party or by which any of its properties is bound.
5.11 Principal Office. The principal place of business of Borrower in
Oklahoma is at One Pre-Paid Way, Ada, Oklahoma 74820.
5.12 Payment of Taxes. Borrower has filed all required federal, state
and local tax returns and have paid all taxes as shown on such returns as
they become due with any exceptions or claims being contested having been
disclosed in writing to Bank.
5.13 Survival Representations and Warranties. All representations and
warranties by Borrower herein shall survive delivery of the Note and any
investigation at any time made by or on behalf of Bank shall not diminish
Bank's right to rely thereon.
6. AFFIRMATIVE COVENANTS. Until payment in full of the Note, and any
renewals and extensions thereof, the Borrower agrees, unless the Bank shall
otherwise consent in writing, to perform or cause to be performed the following
agreements:
6.1 Applicable Laws. Borrower will comply in all material respects
with all applicable laws, rules, regulations, and orders which are material
to the conduct of its businesses as a whole.
6.2 Financial Statements. Borrower shall provide all financial
statements as are required pursuant to the Existing Loans (regardless as to
whether such loans have been paid).
6.3 Maintenance of Existence. The Borrower shall preserve and maintain
its corporate existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business, and conduct
its business in an orderly and efficient manner consistent with good
business practices.
6.4 Books and Records; Inspections. Accurate books and records shall
be kept by the Borrower, and the Bank will have the right to inspect, upon
reasonable advance notice, the Aircraft, and to examine and copy such books
and records, to discuss the affairs, finances and accounts of the Borrower,
and to be informed as to the same at such times and intervals as the Bank
might reasonably request under its normal course of business.
6.5 Taxes. All taxes, assessments, governmental charges and levies
imposed on the Borrower and its assets, income and profits will be paid
prior to the date on which penalties attach thereto unless being contested
in good faith.
6.6 Revisions. Borrower shall promptly notify Bank in writing of any
material change made in any document which has been delivered to Bank for
the purposes of credit consideration.
6.7 Title to Assets and Maintenance. Borrower shall defend and
maintain title to the Aircraft. Borrower shall keep all of the Aircraft in
good order and condition consistent with industry practice and shall make
all necessary repairs, replacements and improvements as may be required
from time to time.
6.8 Additional Assurances. The Borrower agrees to execute, acknowledge
and deliver to the Bank such instruments, documents, and any other items in
a form acceptable to Bank as the Bank may reasonably require in order to
more fully carry out the transactions contemplated herein.
6.9 Performance of Obligations. The Borrower shall pay the Note
according to the reading, tenor and effect thereof, and Borrower will do
and perform every act and discharge all obligations provided herein to be
performed and discharged or as contemplated hereby, at the time or times
and in the manner specified.
6.10 Expenses. The Borrower covenants and agrees to pay all costs and
expenses required to satisfy the conditions of this Agreement. Further,
Borrower covenants and agrees to pay all costs and expenses incurred in
preparation for the closing hereof, including but not limited to attorneys'
fees, inspection fees, appraisal fees, and title and recording fees.
6.11 Payment of Liabilities. Borrower shall pay all liabilities as
they become due unless they are contested in good faith by appropriate
actions or legal proceedings and Borrower establishes adequate reserves
therefor in accordance with generally accepted accounting principles.
6.12 Right to Conduct Business. The Borrower shall take all necessary
actions to preserve its right to conduct business in any applicable
jurisdictions; to obtain and retain all necessary governmental authorities
approvals, consents, permits, licenses and certificates; to comply in all
material respects with all valid and applicable statutes, rules and
regulations; and to continue to conduct his businesses in substantially the
same manner as such businesses are now conducted.
6.13 Other Information. The Borrower will furnish to the Bank such
other information concerning the financial status of the Borrower as the
Bank may reasonably request.
6.14 Maintenance of Insurance. In addition to insurance required to be
maintained as may be specified in the Aircraft Security Agreement, maintain
insurance with responsible insurance companies on such of its properties,
in such amounts and against such risks as is customarily maintained by
similar businesses operating in the same vicinity, specifically to include
fire and extended coverage insurance covering all assets, business
interruption insurance, workers compensation insurance and liability
insurance.
6.15 Notices. The Borrower will give prompt written notice to the Bank
of any Event of Default under any of the Loan Documents or the Existing
Loans; all material litigation affecting the Borrower or the Aircraft; and
any other matter which has resulted in, or would reasonably be expected to
result in, a material adverse change in the Borrower's financial condition.
7. NEGATIVE COVENANTS. Prior to the payment in full of the Note and any
renewals and extensions thereof, the Borrower agrees that, unless the Bank
otherwise gives its prior consent in writing, the Borrower will not perform or
permit to be performed any of the following acts:
7.1 Security Agreements, Pledges, etc. Borrower shall not create,
incur, assume, or permit to exist any pledge, lien, or other encumbrances
of any kind upon, or any security interest in, on, or to the Aircraft,
other than the liens in favor of the Bank.
7.2 Sale of Assets. The Borrower will not sell, enter into sale-lease
back agreements, exchange or transfer title to the Aircraft, except with
Bank's express written consent.
7.3 Name. Borrower shall not change its name, provided, however,
Borrower may change its name if it has taken such action as Bank deems
necessary to continue the perfection of any Liens securing payment of the
Indebtedness.
8. EVENTS OF DEFAULT. The following shall constitute Events of Default
hereunder and under each of the Loan Documents:
8.1 Nonpayment of Note. Failure to make payment, when due, of any
principal due and owing on the Note.
8.2 Nonpayment of Interest. Failure to make payment, when due, of any
interest on the Note.
8.3 Other Nonpayment. Failure to make payment, when due, of any other
amount payable to the Bank under the terms of this Agreement, the Note, the
Loan Documents or any other obligation or agreement between the Borrower
and the Bank.
8.4 Breach of Covenants. Default by the Borrower in the performance or
observance of any covenant or agreement contained in this Agreement, the
Note, the Aircraft Security Agreement, any of the other Loan Documents not
specifically set forth in this paragraph, or any agreement in connection
therewith, or under the terms of any other instrument delivered to the Bank
in connection with this Agreement.
8.5 Representations and Warranties. Any representation or warranty
herein, or any representation, statement, certificate, schedule or report
made or furnished to the Bank on behalf of the Borrower, proves to be false
or erroneous in any material respect at the time of making thereof.
8.6 Insolvency. The Borrower: (i) applies for or consents to the
appointment of a receiver, trustee or liquidator of the properties of the
Borrower; (ii) admits in writing the inability to pay debts as they mature;
(iii) makes a general assignment for the benefit of creditors; or (iv) has
any significant portion of its assets or property placed in the hands of a
receiver, trustee or other officers or representatives of a court or of
creditors.
8.7 Voluntary Bankruptcy. The Borrower shall be adjudged bankrupt, or
any voluntary proceeding shall be instituted by Borrower in insolvency or
bankruptcy, or for readjustment, extension or composition of debts or for
any other relief of debtors.
8.8 Involuntary Bankruptcy. Any involuntary proceeding shall be
instituted against Borrower in insolvency or for readjustment, extension,
or composition of debts, which proceeding is not dismissed within ninety
(90) days from the filing of the commencement of the same.
8.9 Creditor's Proceedings. The institution of any levy or attachment
against the Real Property of the Borrower and such levy or attachment shall
continue in place and in effect for a period of 60 consecutive days without
being vacated, discharged, satisfied, stayed, or removed.
8.10 Monetary Judgments. One or more judgments, decrees, or orders for
the payment of money in excess of $500,000.00 in the aggregate shall be
rendered against Borrower and such judgments, decrees, or orders shall
continue unsatisfied and in effect for a period of 60 consecutive days
without being vacated, discharged, satisfied, or stayed or bonded pending
appeal.
8.11 Borrower Dissolution. The occurrence of any act causing a
dissolution of the Borrower.
8.12 Cross Default. The occurrence of any event of default set forth
in any other note, credit agreement, loan agreement or other form of
indebtedness by and between Borrower in favor of Bank and/or the occurrence
of any event of default set forth in the Existing Loans.
9. REMEDIES.
9.1 Immediate Acceleration. Upon the occurrence of an Event of Default
specified in Sections 8.6, 8.7, 8.8, 8.9, and 8.10 immediately and without
notice, (i) all obligations hereunder and under the Note shall
automatically become immediately due and payable, without presentment,
demand, protest, notice of protest, default or dishonor, notice of intent
to accelerate maturity, notice of acceleration of maturity or other notice
of any kind, except as may be provided to the contrary elsewhere herein,
all of which are expressly waived by the Borrower, and (ii) the Bank is
hereby authorized at any time and from time to time, without notice to the
Borrower (and any such notice being expressly waived by the Borrower), to
set-off and apply any and all deposits of the Borrower (general or special,
time or demand, provision or final) held by the Bank owing by the Bank to
or for the credit or account of the Borrower against any and all of the
debt evidenced by the Note or other obligations set forth in any Loan
Document.
9.2 Notice and Demand. Upon the occurrence of an Event of Default
other than those specified in the sections referenced in Section 9.1 above,
Borrower shall have thirty (30) days after receiving written notification
of the Event of Default to cure such default (in the event of an Event of
Default specified in Sections 8.1, 8.2, and 8.3 Borrower shall have five
(5) business days to cure after receipt of written notification). In the
event Borrower shall fail to effectuate such a cure, Bank may declare all
debt evidenced by any and all Loan Documents to be immediately due and
payable without presentment, demand, protest, notice of protest, default or
dishonor, notice of intent to accelerate maturity, notice of acceleration
of maturity or other notice of any kind, except as may be provided to the
contrary elsewhere herein, all of which are hereby expressly waived by the
Borrower, and in such event, the Bank is hereby authorized at any time and
from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all
deposits containing funds of the Borrower (general or special, time or
demand, provision or final) held by the Bank, and any and all other
indebtedness at any time owing by the Bank or to or for credit or account
of the Borrower against any and all of the debt evidenced by any Loan
Document. In the event Borrower is diligently pursuing a cure to any Event
of Default but such cure cannot be accomplished within the time periods set
forth herein, Bank may, in its sole discretion, extend any such cure
period.
9.3 Other Rights. Subject to the provisions of this Agreement and
after the giving of any required notice and the expiration of any
applicable cure period, upon the occurrence of any Event of Default the
Bank may, in addition to the foregoing, exercise any or all of its rights
and remedies provided by law or pursuant to any other Loan Document.
9.4 Deposits; Setoff. Regardless of the adequacy of any other
collateral held by the Bank, any deposits or other sums credited by or due
from the Bank to the Borrower will at all times constitute collateral
security for all indebtedness and obligations of the Borrower which are
owed to the Bank and may be set off against any and all liabilities, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to the Bank.
9.5 Cumulative Remedies. No failure on the part of the Bank to
exercise and no delay in exercising any right hereunder shall operate as a
waiver hereof, nor shall any single or partial exercise by Bank of any
right hereunder preclude any other or further right of exercise thereof or
the exercise of any other right. The remedies herein provided are
cumulative and not alternative.
10. GENERAL CONDITIONS. The following conditions shall be applicable
throughout the term of this Agreement:
10.1 Cross-Default. A default by Borrower in this Agreement shall
constitute a default under the Note and other Loan Documents, and any other
instrument given by Borrower to Bank pursuant to this Agreement. A default
under the Note or other Loan Documents shall constitute an Event of Default
by Borrower under the terms of this Agreement and the Note and Loan
Documents.
10.2 Notices. All notices hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when
presented as set forth below to any party hereto at the following address:
To Borrower: Pre-Paid Legal Services, Inc.
One Pre-Paid Way
Ada, Oklahoma 74820
Telecopier number: 580/436-7410
Attn: Steve Williamson, Chief Financial
Officer
To Bank: BANK OF OKLAHOMA, N.A.
201 Robert S. Kerr
P.O. Box 24128
Oklahoma City, Oklahoma 73124
Telecopier number: 405/272-2588
Attn: Laura Christofferson, Senior Vice
President
or at such other address of which it shall have notified the party giving such
notice in writing. Any notice, demand or communication under or in connection
with this Loan Agreement shall be deemed effective when received by the party to
whom addressed in the case of personal delivery, telefax, or by telex wire, or
if sent by mail shall be deemed effective three business days after deposited in
any post office of the United States Post Office Department, registered or
certified mail, postage fully prepaid, return receipt requested.
10.3 Amendment; Waiver. This Agreement may not be amended, modified,
waived, discharged or terminated in any way, except by an instrument in
writing executed by all parties hereto.
10.4 Governing Law. This Agreement, the Note, the Loan Documents and
all other documents issued and executed hereunder shall be deemed to be a
contract made under the laws of the State of Oklahoma and shall be
construed by and governed in accordance with the laws of the State of
Oklahoma.
10.5 Prohibition Against Assignment. Borrower shall not assign nor
transfer voluntarily or by operation of law, or otherwise dispose of this
Agreement or any rights hereunder, however the Bank shall have full right
and power to assign this Agreement. An assignment or transfer in violation
of this provision shall be invalid, and an assignment or transfer by
operation of law shall be deemed to be an invalid transfer.
10.6 Entire Agreement. This Agreement, the Note, the Loan Documents
and the other instruments, statements or documents described herein
constitute the entire agreement between Borrower and Bank, with any and all
prior agreements and understandings being canceled and merged herein.
10.7 Severability. In case any one or more of the provisions contained
in this Agreement, the Note or any other Loan Documents should be deemed
invalid, illegal or unenforceable in any respect in any jurisdiction, the
validity, legality and enforceability of such provision or provisions will
not in any way be affected or impaired thereby in any other jurisdiction
and the validity, legality and enforceability of the remaining provisions
contained herein and therein will not in any way be affected or impaired
thereby.
10.8 Captions. The captions and headings of this loan agreement are
for convenience only and in no way define, limit or describe the scope or
intent of any provision of this Agreement.
10.9 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
10.10 Contrary Provisions. The terms and conditions of this Agreement
shall govern and control any and all contrary provisions of the Loan
Documents.
10.11 Counterpart. This Agreement may be executed in one or more
counterpart and all such counterparts shall be construed together as the
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
BORROWER:
PRE-PAID LEGAL SERVICES, INC.
an Oklahoma corporation
/s/ Harland C. Stonecipher
------------------------------------------------------
By: Harland C. Stonecipher
Title: Chairman and CEO
BANK:
BANK OF OKLAHOMA, N.A.
/s/ Laura Christofferson
------------------------------------------------------
By: Laura Christofferson
Title: Senior Vice President
EXHIBIT 10.3
AIRCRAFT CHATTEL MORTGAGE, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
This Aircraft Chattel Mortgage, Security Agreement and Assignment of Rents is
entered into as of April 30, 2005 between PRE-PAID LEGAL SERVICES, INC., an
Oklahoma corporation ("Debtor") and BANK OF OKLAHOMA, N.A. ("Secured Party").
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
definitions:
1.1 The term "this Agreement" means and includes this Aircraft Chattel
Mortgage, Security Agreement and Assignment of Rents, any concurrent or
subsequent exhibits or schedules to this Aircraft Chattel Mortgage, Security
Agreement and Assignment of Rents, and any extensions, supplements, amendments
or modifications to this Aircraft Chattel Mortgage, Security Agreement and
Assignment of Rents, and/or to any such exhibits or schedules.
1.2 The term "Aircraft" means and includes: (i) the Airframes; (ii) the
Avionics; (iii) the Engines; and (iii) all loose equipment and spare parts
relating to the foregoing items (i) and/or (ii) and/or (iii); (iv) any and all
manuals, logbooks, flight records, maintenance records, and other historical
records or information of Debtor relating to the foregoing items (i), (ii),
(iii), and/or item (iv).
1.3 The term "Airframes" means and includes each of those certain airframes
identified on Exhibit "1.3" attached hereto and incorporated herein by this
reference and each airframe identified on any supplement to Exhibit 1.3 executed
from time to time hereafter, together with any and all parts, appliances,
components, instruments, accessories, accessions, attachments, equipment, or
avionics (including, without limitation, communications, radar, navigation
systems, or other electronic equipment) installed in, appurtenant to, or
delivered with or in respect of each such airframe.
1.4 The term "Avionics" means and includes any avionic instruments or
equipment which either now or in the future are installed on, appurtenant to, or
delivered with or in respect of the Aircraft, together with any and all parts,
appliances, components, accessories, accessions, attachments or equipment
installed on, appurtenant to, or delivered with or in respect of such avionics.
The term "Avionics" shall also refer to any replacement avionic equipment which
Debtor is required or permitted, under this Agreement, to install upon the
Airframes or to the Aircraft and to which Debtor complies with each of the
applicable requirements contained in this Agreement.
1.5 The term "the Code" means and refers to the Uniform Commercial Code as
enacted by the State of Oklahoma, and any and all terms used in this Agreement
which are defined in the Code shall be construed and defined in accordance with
the meaning and definition ascribed to such terms under the Code.
1.6 The term "Collateral" means and includes each and all of the following,
whether now existing or hereafter arising, and wherever located: (i) the
Aircraft; (ii) the Avionics; (iii) the Engines; (iv) all right, title and
interest of Debtor in, to and under any sales agreement or contract, lease,
rental agreement, charter agreement, or other agreement(s) respecting any of the
Aircraft and/or any of the Engines, including, but not limited to, Debtors right
to receive, either directly or indirectly, from any party or person, any rents
or other payments due under such agreement(s); and (v) the proceeds of any of
the foregoing items (i) through (iv), including, but not limited to, proceeds of
insurance covering the Airframes, the Engines, the Avionics and/or any other
portion of the Collateral, and any and all accounts, general intangibles,
contract rights, inventory, equipment, money, drafts, instruments, deposit
accounts, or other tangible and intangible property of Debtor resulting from the
sale (authorized or unauthorized) or other disposition of the Collateral, or any
portion thereof, and the proceeds of such proceeds.
1.7 The term "Debtor" means and refers to PRE-PAID LEGAL SERVICES, INC., an
Oklahoma corporation, with an office located at One Pre-Paid Way, Ada, Oklahoma
74820.
1.8 The term "Engines" means and includes those certain aircraft engines
identified on Exhibit "1.3" attached hereto and incorporated herein by this
reference, each aircraft engine identified on any supplement to Exhibit 1.3
executed from time to time hereafter, and any other aircraft engines which
either now or in the future are installed on, appurtenant to, or delivered with
or in respect of the Airframes, together with any and all parts, appliances,
components, accessories, accessions, attachments or equipment installed on,
appurtenant to, or delivered with or in respect of such engines. The term
"Engines" shall also refer to any replacement aircraft engine which Debtor is
required or permitted, under this Agreement, to install upon the Airframes and
to which Debtor complies with each of the applicable requirements contained in
this Agreement.
1.9 The term "FAA" means and refers to the United States Federal Aviation
Administration, or any successor or replacement administration or governmental
agency having the same or similar authority and responsibilities.
1.10 The term "Geneva Convention" means and refers to the Convention on the
International Recognition of Rights in Aircraft made in Geneva, Switzerland on
June 19, 1948, (effective 17 September 1953), together with the necessary
enacting rules and regulations promulgated by any particular signatory country.
1.11 The term "Insolvency Proceeding" means and includes any proceeding
commenced by or against any person or entity, under any provision of the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including, but not limited to, assignments for the benefit of creditors, formal
or informal moratoriums, compositions or extensions with some or all creditors.
1.12 The term "Judicial Officer or Assignee" means and includes any
trustee, receiver, controller, custodian, assignee for the benefit of creditors
or any other person or entity having powers or duties like or similar to the
powers and duties of a trustee, receiver, controller, custodian or assignee for
the benefit of creditors.
1.13 The term "Loan Agreement" means and includes that certain Loan
Agreement dated as of April 30, 2005, between Secured Party, as lender, and
Debtor, as borrower, pursuant to which Secured Party has extended, or has agreed
to extend certain financial accommodations to Debtor, together with any and all
concurrent or subsequent exhibits, schedules, extensions, supplements,
amendments or modifications thereto.
1.14 The term "Note" means and includes that certain Promissory Note, dated
of even date herewith, in the original principal amount of Two Million Three
Hundred Thirteen Thousand Five Hundred Fifty Five and no/100 Dollars
($2,313,555), which Debtor has executed, or is in the process of executing to
the order of Secured Party, together with any and all concurrent or subsequent
extensions, amendments, or modifications thereto, and any and all replacements
thereof.
1.15 The term "Obligations" means and includes any and all loans, advances,
overdrafts, debts, liabilities, obligations (including, without limitation, any
and all amounts evidenced by the Note and the Loan Agreement, any amounts
charged to Debtor's account with Secured Party pursuant to any present or future
agreement authorizing Secured Party to so charge such account, any and all
interest which is not paid when due, and any and all Secured Party Expenses
which Debtor is required to pay or reimburse by this Agreement, by law, or
otherwise), guaranties, covenants and duties owing by Debtor to Secured Party,
of any kind or description, arising out of or in connection with, or related to
the transactions contemplated by the Loan Agreement, the Note, this Agreement,
and/or any other agreement(s) between Debtor and Secured Party entered into in
connection therewith (collectively, the "Loan Documents"), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising.
1.16 The term "Secured Party" shall mean and refer to Bank of Oklahoma,
N.A., with a place of business located at 201 Robert S. Kerr Ave., Oklahoma
City, Oklahoma 73102.
1.17 The term "Secured Party Expenses" means and includes (i) all costs or
expenses which Debtor is required to pay or cause to be paid under this
Agreement and which are paid or advanced by Secured Party pursuant to the
provisions of this Agreement; (ii) all taxes and insurance premiums of every
nature and kind which Debtor is required to pay or cause to be paid under this
Agreement or the Loan Agreement and which are paid or advanced by Secured Party
pursuant to the provisions of this Agreement; (iii) all filing, recording,
publication and search fees paid or incurred by Secured Party (with or without
suit), to correct any default or enforce any provisions of this Agreement, the
Loan Agreement, the Note, or any other Loan Document, or in gaining possession
of, maintaining, handling, preserving, storing, refurbishing, appraising,
selling, preparing for sale and/or advertising to sell the Collateral, whether
or not a sale is consummated; (v) all costs and expenses of suit paid or
incurred by Secured Party in enforcing or defending the Obligations, this
Agreement, the Loan Agreement, the Note, or any other Loan Document, or any
portion of any thereof; and (vi) attorneys' fees and expenses paid or incurred
by Secured Party in advising, structuring, drafting (after the date hereof),
reviewing (after the date hereof), amending, terminating, enforcing, defending
or concerning this Agreement, the Loan Agreement, the Note, or any other Loan
Document, or any portion of any thereof, whether or not suit is brought, and
including any action brought in any insolvency Proceeding.
1.18 Terms used herein which are defined in the Loan Agreement shall,
unless otherwise defined, have the meanings set forth in the Loan Agreement.
ARTICLE 2
CREATION OF SECURITY INTEREST
2.1 Security Interest in Collateral. Debtor grants to Secured Party a
continuing, first priority security interest in and lien upon the Collateral in
order to secure prompt repayment of any and all Obligations owed by Debtor to
Secured Party and in order to secure prompt performance of any and all other
Obligations to be performed by Debtor. Secured Party's security interest in and
lien upon the Collateral shall attach to all of the Collateral upon the
execution and delivery of this Agreement, without further act being required on
the part of either Secured Party or Debtor. As between Secured Party and Debtor,
any liens filed against the Collateral after the date of this Agreement shall be
subordinate in all respects to the lien of this Agreement, for the full amount
of the loan evidenced by the Note.
2.2 Security Instruments: Further Assurances. Debtor will perform, or will
cause to be performed, each and all of the following:
(a) record, register and file this Agreement, as well as such notices,
financing statements, and/or other documents or instruments as may, from time to
time, be requested by Secured Party to fully carry out the intent of this
Agreement, with: (a) the FAA in Oklahoma City, Oklahoma, United States of
America, promptly after the execution and delivery of this Agreement; (b) the
County Clerk of Oklahoma County, State of Oklahoma; and (c) such other
administrations or governmental agencies, whether domestic or foreign, as may be
determined by Secured Party to be necessary or advisable in order to perfect,
establish, confirm, maintain and/or perfect the security interest and lien
created hereunder, as a legal, valid, and binding, first priority security
interest and lien upon the Collateral;
(b)furnish to Secured Party evidence of every such recording, registering and
filing; and
(c)execute and deliver or perform, or cause to be executed and delivered or
performed, such further and other instruments and/or acts as Secured Party
determines are necessary or required to fully carry out the intent and purpose
of this Agreement or to subject the Collateral to the security interest and lien
created hereunder, including, without limitation: (a) any and all acts and
things which may be reasonably requested by Secured Party with respect to
complying with or remaining subject to the Geneva Convention, the laws and
regulations of the FAA, or the laws and regulations of any of the various states
or countries in which any of the Aircraft (1) is flying over, operating in, or
located in, or (2) may fly over, operate in, or become located in; and (b)
defending the title of Debtor to the Collateral by means of negotiation and, if
necessary, appropriate legal proceedings, against each and every party claiming
an interest therein contrary or adverse to Debtors title to same.
2.3 Power of Attorney. Debtor hereby irrevocably appoints Secured Party as
its attorney-in-fact and agent with full power of substitution and
re-substitution for Debtor and in its name to do, at Secured Party's option, any
one or more of the following acts, upon the occurrence of an Event of Default:
(i) to receive, open and examine all mail addressed to Debtor and to retain any
such mail relating to the Collateral and to return to Debtor only that mail
which is not so related; (ii) to endorse the name of the Debtor on any checks or
other instruments or evidences of payment or other documents, drafts, or
instruments arising in connection with or pertaining to the Collateral, to the
extent that any such items come into the possession of the Secured Party; (iii)
to compromise, prosecute or defend any action, claim, or proceeding concerning
the Collateral; (iv) to do any and all acts which Debtor is obligated to do
under this Agreement or under the Loan Agreement; (v) to exercise such rights as
Debtor might exercise relative to the Collateral, including, without limitation,
the leasing, chartering, or other utilization thereof; (vi) to give notice of
Secured Party's security interest in and lien upon the Collateral, including,
without limitation, notification to lessees and/or other account debtors of the
Secured Party's security interest in the rents and other payments due to Debtor
relative to the Collateral, and the collection of any such rents or other
payments; and (vii) to execute in Debtors name and/or to simply file any
notices, financing statements, and other documents or instruments Secured Party
determines are necessary or required to fully carry out the intent and purpose
of this Agreement or to perfect Secured Party's security interest and lien in
and upon the Collateral. Debtor hereby ratifies and approves all that Secured
Party shall do or cause to be done by virtue of the power of attorney granted in
this Section 2.3 and agrees that neither Secured Party, nor any of its
employees, agents, officers, or its attorneys, will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law made while
acting, pursuant to the provision of this Section 2.3 and in good faith. The
appointment of Secured Party as Debtor's attorney-in-fact, and each and every
one of Secured Party's rights and powers in connection therewith, being coupled
with an interest, are and shall remain irrevocable until all of Debtor's
Obligations have been fully paid and performed.
ARTICLE 3
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF DEBTOR
By executing and delivering this Agreement, and continually thereafter until
each and all Debtor's Obligations have been fully paid and performed, Debtor
represents, warrants, and covenants to Secured Party as follows:
3.1 Compliance with Laws. Debtor will neither use the Collateral, nor
permit the Collateral to be used, for any unlawful purpose or contrary to any
statute, law, ordinance or regulation relating to the registration, use,
operation or control of the Collateral. Debtor will comply with, or cause to be
complied with, at all times and in all respects, all statutes, laws, ordinances
and regulations of the United States (including, without limitation, the FAA),
the State of Oklahoma, and of all other governmental, regulatory, or judicial
bodies applicable to the use, operation, maintenance, overhauling, or condition
of the Collateral, or any part thereof, and with all requirements under any
licenses, permits, or certificates relating to the use or operation of the
Collateral which are issued to Debtor or to any other person having operational
control of the Collateral; provided, however, that Debtor may, in good faith and
by appropriate legal or other proceedings, contest the validity of any such
statutes, laws, ordinances or regulations, or the requirements of any such
licenses, permits, or certificates, and pending the determination of such
contest may postpone compliance therewith, unless the rights of Secured Party
hereunder are or may be materially adversely affected thereby.
Debtor agrees that at no time shall any of the Aircraft be operated or located
in, or relocated to, by Debtor, or any other person or entity, any jurisdiction
other than North America or the Caribbean. The foregoing authority to use any of
the Aircraft to the contrary notwithstanding, at no time shall any of the
Aircraft be operated in or over any area which may expose Secured Party to any
penalty, fine, sanction or other liability, whether civil or criminal, under any
applicable law, rule, treaty or convention, nor may any of the Aircraft be used
in any manner which is or is declared to be illegal and which may thereby render
any of the Aircraft liable to confiscation, seizure, detention or destruction.
3.2 Maintenance and Repair.
(a) During the effectiveness of this Agreement, Debtor shall, at its
expense, do or cause to be done each and all of the following:
(i) maintain and keep the Collateral in as good condition and
repair as it is on the date of this Agreement, ordinary wear and tear
excepted;
(ii) maintain and keep each Aircraft in good order and repair and
airworthy condition in accordance with the requirements of each of the
manufacturers' manuals and mandatory service bulletins which relate to
airworthiness;
(iii) replace in or on each Airframe, any and all Engines, parts,
appliances, instruments or accessories which may be worn out, lost,
destroyed or otherwise rendered unfit for use; and
(iv) without limiting the foregoing, cause to be performed, on
all parts of each of the Aircraft, all applicable mandatory
Airworthiness Directives, Federal Aviation Regulations, Special
Federal Aviation Regulations, and manufacturers' service bulletins
relating to airworthiness, the compliance date of which shall occur
during the term of this Agreement.
(b) Debtor shall be responsible for all required inspections of each
Aircraft in accordance with all applicable FAA and other governmental
requirements. Debtor shall at all times cause each of the Aircraft to have,
on board and in a conspicuous location, a current Certificate of
Airworthiness issued by the FAA.
(c) All inspections, maintenance, modifications, repairs, and
overhauls of any of the Aircraft (including those performed on each
Airframe, the Engines, and/or any components, appliances, accessories,
instruments, or equipment) shall be performed by personnel authorized by
the FAA to perform such services.
(d) If any Engine, component, appliance, instrument, equipment or part
of any of the Aircraft shall reach such a condition as to require overhaul,
repair or replacement, for any cause whatever, in order to comply with the
standards for maintenance and other provisions set forth in this Agreement,
Debtor may:
(i) install on such Aircraft such items of substantially the same
type in temporary replacement of those then installed on such
Aircraft, pending overhaul or repair of the unsatisfactory item;
provided, however, that such replacement items must be in such a
condition as to be permissible for use upon such Aircraft in
accordance with the standards for maintenance and other provisions set
forth in this Agreement; provided further, however that Debtor must,
at all times, retain unencumbered title to any and all items
temporarily removed; or
(ii) install on such Aircraft such items of substantially the
same type in permanent replacement of those then installed on such
Aircraft; provided, however, that such replacement items must be in
accordance with the standards for maintenance and other provisions set
forth in this Agreement; provided further, however, that Debtor must
first comply with each of the requirements of subsection (e)
hereinbelow.
(e) If during the effectiveness of this Agreement, Debtor is required
or permitted to install upon any Airframe or any Engine, components,
appliances, accessories, instruments, engines, equipment or parts in
permanent replacement of those then installed on such Airframe or Engine,
Debtor may do so provided that, in addition to any other requirements
provided for in this Agreement:
(i) Secured Party is not divested of its security interest in and
lien upon any item removed from the applicable Aircraft and that no
such removed item shall be or become subject to the lien or claim of
any Person, unless and until such item is replaced by an item of the
type and condition required by this Agreement, title to which, upon
its being installed or attached to such Airframe, is validity vested
in Debtor, free and clear of any liens and/or claims, of any kind or
nature, of any Person other than Secured Party;
(ii) Debtor's title to every substituted item shall immediately
be and become subject to the security interest and lien of Secured
Party, and each of the provisions of this Agreement, and each such
item shall remain so encumbered and so subject unless it is, in turn,
replaced by a substitute item in the manner permitted herein; and
(iii) if an item is removed from any Aircraft and replaced in
accordance with the requirements of this Agreement, and if the
substituted item satisfies the requirements of this Agreement,
including the terms and conditions of subsections (i) and (ii)
hereinabove, then the item which is removed shall thereupon, and only
thereupon, be free and clear of the security interest and lien of
Secured Party.
(iv) if any Engine, component, appliance, accessory, instrument,
equipment or part is installed upon any Airframe, and is not in
substitution for or in replacement of an existing item, such
additional item shall be considered as an accession to such Airframe.
3.3 Insurance. Debtor will at all times, at its own cost and expense,
maintain, or cause to be maintained, a policy or policies of insurance with
respect to the Collateral, in accordance with the following provisions:
(a) With respect to the use and operation of any of the Aircraft,
Debtor will maintain a policy or policies of insurance covering such risks,
providing such degree of protection in such amounts and with such insurers
as are acceptable to the Secured Party.
(b) Debtor will name Secured Party or cause Secured Party to be named
as an additional insured party on all policies of liability insurance, and
as the loss payee, on all policies of casualty insurance. Debtor shall
obtain or deliver to Secured Party, from the issuer of each insurance
policy, a waiver of warranties with respect to Secured Party's rights under
such policies, and will cause all parties who may have an interest in the
proceeds of such policies to acknowledge, in writing, that Secured Party
has a prior interest in such proceeds. Each and every such policy shall
also contain an agreement by the insurer that, notwithstanding any right of
cancellation having been given to Secured Party no change in the policy
limits or types of coverage in any such policy shall be made except after
thirty (30) days prior written notice thereof having been given to Secured
Party.
(c) Debtor shall provide Secured Party with insurer's certifications
with respect to the types, amounts and policy numbers of insurance in
effect as of the date of execution and delivery of this Agreement.
(d) If Debtor should, for any reason, fail to renew or cause to be
renewed any such policy or contract of insurance, Secured Party has the
option to pay the premiums on any such policy or contract of insurance, or
to take out new insurance in such amounts, types, coverages, and terms as
Secured Party determines to be prudent; and any sums paid therefore shall
constitute Secured Party Expenses, shall be payable by Debtor on demand,
and shall be added to and be a part of and included in the Obligations.
(e) Debtor shall not use or permit the Collateral to be used in any
manner or for any purpose excepted from or contrary to the requirements of
any insurance policy or policies required to be carried and maintained
hereunder or for any purpose excepted or exempted from or contrary to said
insurance policies, and do any other act or permit anything to be done
which could reasonably be expected to invalidate or limit any such
insurance policy or policies.
3.4 Chief Executive Office. Debtor represents that its chief executive
office is located at the address indicated in Section 1.7 of this Agreement and
agrees that such chief executive office will not be changed without prior
written notice to Secured Party.
3.5 Further Representations, Warranties, and Covenants. Debtor further
represents, warrants, and covenants with Secured Party as follows:
(a) Debtor will pay, or cause to paid, when due all taxes,
assessments, charges (including license and registration fees and all
taxes, levies, imposts, duties, charges or withholdings of any nature
whatsoever, together with any penalties, fines or interest thereon) imposed
upon Debtor by any federal, state or local government or taxing authority
upon or with respect to the Collateral or any portion thereof, or upon the
purchase, ownership, delivery, leasing, possession, use, operation, return
or other disposition thereof, or upon the rentals, receipts or earnings
arising there from, or upon or with respect to this Agreement, or any of
the other agreements relating hereto, excepting from such requirements any
taxes or charges which are based on, or measured by, the net income of
Secured Party.
(b) At any reasonable time, on demand by Secured Party, Debtor will
cause the Collateral (including the logs, books, manuals, and records
comprising the Collateral) to be exhibited to Secured Party, (or persons
designated by Secured Party) for purposes of inspection and copying.
(c) Debtor is the registered owner of each of the Aircraft pursuant to
a proper registration under the Federal Aviation Act of 1958, as amended,
and Debtor qualifies in all respects as a citizen of the United States as
defined in said Act.
(d) Debtor will keep accurate and complete logs, manuals, books, and
records relating to the Collateral, and provide Secured Party with copies
of reports and information relating to the Collateral as Secured Party may
reasonably require from time to time.
(e) Except upon the prior written consent of Secured Party, Debtor
shall not sell or otherwise dispose of or transfer the Collateral, or any
right or interest of Debtor therein.
(f) Debtor will not suffer or permit any security interest, lien,
charge or other encumbrance to attach to or exist relative to the
Collateral, whether voluntarily or involuntarily, and whether by issuance
of judicial process, levy or otherwise, until all of the Obligations have
been completely discharged; provided, however, that this subsection shall
not prohibit Borrower from incurring any materialmen's, mechanics',
workmen's, employees' or other like liens, arising in the ordinary course
of business, the payment for which is not due and payable, or liens for
taxes, assessments or governmental charges or levies, the payment for which
is not yet due and payable.
(g) Debtor will promptly give Secured Party notice of any Event of
Default or event which, after notice or lapse of time or both, would
constitute an Event of Default, under the Loan Agreement.
(h) Debtor will indemnify Secured Party from and against any and all
claims, losses and liabilities growing out of or resulting from this
Agreement (including enforcement of this Agreement) or the use, sale,
operation or possession of the Collateral, WHETHER OR NOT SUCH CLAIMS,
LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING
OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, except to the extent such
claims, losses or liabilities are proximately caused by Secured Party's
individual gross negligence or willful misconduct.
ARTICLE 4
EVENTS OF DEFAULT AND REMEDIES
4.1 Remedies Upon Default.
(a) Upon the occurrence of an Event of Default, Secured Party may, at
its election, and without notice and without demand, do any one or more of
the following, all of which are authorized by Debtor:
(i) take possession, by its agents or otherwise, of the
Collateral wherever found, with or without notice of process of law,
and hold, store and/or use, operate, manage and control the
Collateral, and collect and receive all rents, revenues, issues and
profits of the Collateral and every part thereof;
(ii) grant extensions and compromise claims with respect to the
Collateral, and settle claims with respect to the Collateral for less
than face value, all without prior notice to Debtor;
(iii) retain the Collateral in full satisfaction of the
Obligations secured thereby, or sell the Collateral at either a public
or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and such places as
is commercially reasonable.
(b) The requirements of reasonable notice shall be met as follows:
(i) Secured Party shall give Debtor and each holder of a security
interest in the Collateral who has filed with Secured Party a written
request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral,
the time on or after which the private sale or other disposition is to
be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Debtor's address appearing in this Agreement (or at such
other address as Debtor advises Secured Party of in writing), at least
ten (10) calendar days before the date fixed for the public sale, or
at least ten (10) calendar days before the date on or after which the
private sale or other disposition is to be made. Notice to persons
other than Debtor claiming an interest in Collateral shall be sent to
such addresses as they have furnished to Secured Party.
(c) All costs and expenses incurred by Secured Party in connection
with the enforcement or exercise of and of its rights or remedies herein
shall be immediately payable by Debtor, upon demand, and shall constitute
Secured Party Expenses hereunder, whether or not suit is commenced;
(d) Prior to the disposition of the Collateral, Secured Party may, but
shall not be required to assemble, process, repair or recondition,
maintain, store, refurbish, have appraised, or otherwise prepare the
Collateral for disposition, and in connection therewith, use any trademark,
trade name, trade style, copyright or patent used by Debtor;
(e) With or without taking possession of the Collateral, Secured Party
may take legal proceedings for:
(i) the specific performance of any covenant or agreement
contained herein, or the execution of any right or power herein
granted;
(ii) foreclosure hereunder;
(iii) the sale, under the judgment or decree of any court of
competent jurisdiction, of all or any part of the Collateral;
(iv) the appointment of a receiver or receivers of all or any
part of the Collateral pending any foreclosure hereunder or the sale
of all of the Collateral, by any court of competent jurisdiction or
under executory or other legal process;
(v) the recovery of the unpaid balance of the Obligations; and
(vi) the enforcement of any other appropriate remedy, whether
under this Agreement, under the Loan Agreement, or otherwise.
(f) Secured Party may exercise any and all other rights and remedies
of a secured party under the Code.
4.2 Waiver. Demand, presentment for payment, protest and notice of
nonpayment, or protest or dishonor, and all demands and any notices of any
action taken by Secured Party under this Agreement and notice of intent to
accelerate, and notice of acceleration of, the Obligations and any part thereof
are expressly waived by Debtor and all other parties liable in respect of the
Obligations.
4.3 Application of Proceeds. The proceeds of any disposition of any of the
Collateral, the net earnings of any lease or other agreement relative to the use
of the Collateral, and any amounts received as a result of the exercise of any
of the rights, powers and remedies of Secured Party herein granted, including
the right to collect proceeds of any claims for damages on account of the
Collateral and the right to collect proceeds of any insurance received on
account of the Collateral, shall be applied as follows:
(a) First, to the repayment of all Secured Party Expenses;
(b) Second, to the repayment of all other Obligations;
(c) Third, and subject to the rights of any junior lienholders, any
remaining amount shall be paid, without interest, to Debtor.
4.4 Right of Set-off. Debtor agrees that Secured Party may exercise a right
of set-off with respect to any amounts owed to Secured Party in the same manner
as if the amounts owed were unsecured.
4.5 Exercise of Remedies. Each right, power and remedy herein granted
Secured Party is cumulative and in addition to every other right, power and
remedy herein specifically given or now or hereafter existing under or by virtue
of the provisions of any other Agreement between Debtor and Secured Party or in
equity, at law or by virtue of statute or otherwise. No failure to exercise, and
no delay in exercising, any right, power or remedy held by Secured Party
hereunder or otherwise, shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy held hereunder otherwise,
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
4.6 Termination. If all of the Secured Obligations are fully paid and
performed, then the security interest and lien of Secured Party in the
Collateral shall terminate. In any such case, Secured Party shall, upon the
request of Debtor and at Debtor's expense, execute and deliver to Debtor proper
instruments acknowledging the termination of the security interest and liens.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 Successors and Assigns. All the covenants, stipulations and agreements
contained herein shall bind each party and its successors and assigns, and shall
inure to the benefit of the other party and its respective successors and
assigns.
5.2 Entire Agreement. This Agreement, together with the Exhibits and other
agreements referred to herein, constitutes the entire understanding between the
parties with respect to the subject matter hereof. All prior agreements,
understandings, representations, warranties and negotiations, if any, are merged
into this Agreement, and this Agreement is the entire agreement between Debtor
and Secured Party relating to the subject matter hereof. This Agreement cannot
be changed or terminated orally.
5.3 Captions. Captions to the Articles and Sections of this Agreement are
for the convenience of the parties, are not a part of this Agreement, and shall
not be used for the interpretation of any provision hereof.
5.4 Notices. Any notice given with respect to this Agreement may be given
as provided in the Loan Agreement.
5.5 Severability. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision hereof.
5.6 Governing Law. This Agreement is performable in Oklahoma County,
Oklahoma, and the law of the State of Oklahoma shall govern the validity,
construction, enforcement and interpretation of this Agreement and all documents
executed in connection herewith.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall for all purposes be deemed to be
an original, and all such counterparts shall constitute one and the same
instrument.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
DEBTOR:
PRE-PAID LEGAL SERVICES, INC.
an Oklahoma corporation
/s/ Harland C. Stonecipher
------------------------------------------------------
By: Harland C. Stonecipher
Title: Chairman and CEO
SECURED PARTY:
BANK OF OKLAHOMA, N.A.
/s/ Laura Christofferson
------------------------------------------------------
By: Laura Christofferson
Title: Senior Vice President
EXHIBIT 1.3
SCHEDULE OF AIRCRAFT AND ENGINES
Airframe
The following aircraft:
--------------------------------------------------------------------------------
Manufacturer Model Manufacturer's United States
Serial No. Registry No.
--------------------------------------------------------------------------------
Beechcraft King Air 200 BB-711 N1162V
--------------------------------------------------------------------------------
Aircraft Engines
The following engines, each engine 750 or more rated takeoff horsepower or the
equivalent thereof:
--------------------------------------------------------------------------------
Manufacturer Model Manufacturer's
Serial No.
--------------------------------------------------------------------------------
Pratt & Whitney PT6A-41 PCE81679
--------------------------------------------------------------------------------
Pratt & Whitney 4HFR34C754-1 PCE81683
--------------------------------------------------------------------------------
Any and all components, instruments, equipment and other features associated
with the aforementioned Airframes and Engines.
Airframe
The following aircraft:
--------------------------------------------------------------------------------
Manufacturer Model Manufacturer's United States
Serial No. Registry No.
--------------------------------------------------------------------------------
Mitsubishi MU 300 A024 S.A. N674AC
--------------------------------------------------------------------------------
Aircraft Engines
The following engines, each engine 750 or more rated takeoff horsepower or the
equivalent thereof:
--------------------------------------------------------------------------------
Manufacturer Model Manufacturer's
Serial No.
--------------------------------------------------------------------------------
Pratt & Whitney JT15D-4D PCE70858
--------------------------------------------------------------------------------
Pratt & Whitney PCE71013
--------------------------------------------------------------------------------
Any and all components, instruments, equipment and other features associated
with the aforementioned Airframes and Engines.
EXHIBIT 10.4
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made
effective as of the 6th day of May, 2005, by and between PRE-PAID LEGAL
SERVICES, INC., an Oklahoma corporation (the "Borrower") and BANK OF OKLAHOMA,
N.A., a national banking association ("BOK"), COMERICA BANK ("Comerica"), FIRST
UNITED BANK & TRUST, a state banking corporation ("FUB"), and each of the
financial institutions which may from time to time become a party hereto
pursuant to the provisions of Section 12.1 of the Loan Agreement or any
successor or assignee thereof (hereinafter collectively referred to as "Banks",
and individually, "Bank") and BOK, as Agent ("Agent").
W I T N E S S E T H:
WHEREAS, on September 19, 2003, Borrower and Banks agreed to an extension
of credit in the principal amount of Twenty Five Million and No/100 Dollars
($25,000,000.00) from the Banks to the Borrower consisting of a term loan for
the primary purpose of purchasing Borrower's shares of stock in the open market
all as described in that certain Loan Agreement dated as of such date and on
August 26, 2004, Borrower and Banks agreed to an increase in the extension of
credit to the principal amount of Thirty One Million, Five Hundred Thousand and
No/100 Dollars ($31,500,000.00) from the Bank to the Borrower consisting of a
term loan for the purpose of purchasing the Borrower's shares of stock in the
open market all as described in that certain First Amendment to Loan Agreement
(the "Agreement").
WHEREAS, the Borrower's obligations pursuant to the Agreement and
promissory notes described therein are secured by certain collateral as
described in the Agreement;
WHEREAS, all collateral securing the indebtedness evidenced by or described
in the Agreement and the Note shall continue to secure the indebtedness
described in the Agreement, as hereby amended;
WHEREAS, all capitalized terms not otherwise defined herein shall have
those meanings assigned to such terms in the Agreement; and
WHEREAS, Borrower and Banks desire to amend the Agreement for the second
time in order to, among other things not specifically set forth in this recital,
redefine the debt coverage ratio, amend the allowable dividends and
distributions, and allow for the prepayment of scheduled payments of principal
in the direct order of maturities.
NOW, THEREFORE, in consideration of the foregoing and for such other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
CHANGES TO THE LOAN AGREEMENT
Borrower and Bank have agreed to modify, supplement and amend certain
portions and/or terms of the Agreement. The Agreement is hereby amended as
follows:
1.1 The definition of the term "Debt Service Coverage Ratio" set forth at
Section 1.10 of the Agreement is hereby amended and restated in its entirety, as
follows:
1.10 Debt Coverage Ratio. The term "Debt Coverage Ratio" shall mean
(A) for the previous three-months annualized, Net Income plus depreciation
and amortization, plus interest expense minus (i) $1,000,000 (representing
a mutually agreed level of anticipated annual maintenance capital
expenditures) and (ii) stock purchases for the previous three (3) months
annualized and not paid for from loan proceeds, but excluding stock
purchases from unrestricted cash reserves DIVIDED BY (B) for the next
ensuing twelve-months, principal payments due on all Funded Debt plus
interest expense for the previous three (3) months annualized plus
dividends declared for the previous twelve (12) months.
1.2 The definition of "Majority Banks" set forth in Section 1.25 of the
Agreement is hereby amended and restated in its entirety and replaced, as
follows:
1.25 Majority Banks. The term "Majority Banks" shall mean two or more
Banks, one of which must be the Agent, holding 70% or more of the
Commitment.
1.3 Section 2.5 of the Agreement, Prepayment and Prepayment Penalty, is
hereby amended and restated in its entirety as follows:
2.5 Prepayment and Prepayment Penalty. Except as set forth
herein, the Borrower may prepay any or all of the Loan, either in
whole or in part at any time and from time to time, on any date
without premium or penalty. Further, prepayments of principal shall be
applied in the direct order of maturities.
1.4 The reference to "50%" set forth in the Section 7.5 of the Agreement,
Dividends and Distributions, is hereby deleted and replaced with "65%".
1.5 The reference to "125%" set forth in Section 8.1 of the Agreement, Debt
Service Coverage, is hereby deleted and replaced with "110%".
1.6 To evidence the Borrower's continuing obligation to repay the Loan, The
Borrower shall make and deliver to the Banks an Amended and Restated Promissory
Note in the form of Annex "1" hereto attached (the "Replacement Note"), which
such Replacement Note shall substitute and replace in its entirety the Notes
referred to in the Agreement, without cancellation, novation or payment.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 This Amendment, when duly executed and delivered, will constitute the
legal, valid and binding obligation of Borrower, enforceable in accordance with
its terms.
2.2 All balance sheets, income statements and other financial data which
have been or are hereafter furnished to Agent by the Borrower to induce the
Banks to make or extend the loans hereunder due, and as to subsequent financial
statements will, fairly represent Borrower's financial condition as of the dates
for which the same are furnished. All such financial statements, reports, papers
and other data furnished to Agent are and will be, when furnished, accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give the Banks a true and accurate knowledge of the subject matter
and, since the date of such financial statements, no material adverse change has
occurred in the operations or condition, financial or otherwise, of the
Borrower.
2.3 All of the Borrower's representations and warranties set forth in
Section 5 of the Agreement, REPRESENTATIONS AND WARRANTIES, are true and correct
on and as of the date hereof with the same effect as though made and repeated by
the Borrower as of the date hereof.
ARTICLE 3
CONDITIONS PRECEDENT TO AMENDMENT
Banks' obligations pursuant to this Amendment are subject to the following
conditions:
3.1 The Banks and the Borrower shall have executed and delivered this
Amendment.
3.2 The Borrower shall have executed and delivered to each Bank a
Replacement Note. The Borrower shall have executed and delivered to each Bank
any amendments to the other Loan Documents (other than the Agreement) as
required by each Bank.
3.3 The Borrower shall have paid the Agent an amendment fee in the amount
of $65,000.00 for the ratable benefit of the Banks.
3.4 The Borrower's representations and warranties set forth in Article 2
hereof shall be true and correct on and as of the date hereof.
3.5 As of the date hereof, no Event of Default nor any event which, with
the giving of notice or lapse of time, would constitute an Event of Default
shall have occurred and be continuing.
ARTICLE 4
OTHER COVENANTS AND MISCELLANEOUS TERMS
4.1 Except as expressly amended and supplemented hereby, the Agreement
shall remain unchanged and in full force and effect, and the same is hereby
ratified and extended.
4.2 The indebtedness described in the Agreement, including but not limited
to the indebtedness or exposure evidenced by the Note, shall continue to be
secured by the Collateral, without interruption or impairment of any kind.
4.3 This Amendment shall be construed in accordance with and governed by
the laws of the State of Oklahoma, and shall be binding on and inure to the
benefit of the Borrower and Banks, and their respective successors and assigns.
All obligations of the Borrower under the Agreement and all rights of each Bank
and any other holder of the Note, whether expressed herein or in any Note, shall
be in addition to and not in limitation of those provided by applicable law.
Borrower and Banks irrevocably agree that all suits or proceedings arising from
or related to the Agreement, as amended, or the Note shall be litigated in
courts (whether State or Federal) sitting in Oklahoma City, Oklahoma, and the
Borrower and Banks hereby irrevocably waive any objection to such jurisdiction
and venue.
4.4 This Amendment may be executed in as many counterparts as are deemed
necessary or convenient, and it shall not be necessary for the signature of more
than any one party to appear on any single counterpart. Each counterpart shall
be deemed an original, but all shall be construed together as one and the same
instrument. The failure of any party to sign shall not affect or limit the
liability of any party executing any such counterpart.
Executed effective as of May 6, 2005.
BORROWER: PRE-PAID LEGAL SERVICES, INC.,
an Oklahoma Corporation:
By: /s/ Randy Harp
---------------------------------------------
Name: Randy Harp
Title: Chief Operating Officer
BANK: BANK OF OKLAHOMA, N.A.
/s/ Laura Christofferson
---------------------------------------------
By: Laura Christofferson
Its: Senior Vice President
COMERICA BANK
/s/ Rick L. Rogers
---------------------------------------------
By: Rick L. Rogers
Title: Sr. Vice President
FIRST UNITED BANK & TRUST,
a state banking corporation
/s/ John Martin
---------------------------------------------
By: John Martin
Title: Sr. Vice President
ANNEX NO. 1
AMENDED AND RESTATED PROMISSORY NOTE
$________________ Oklahoma City, Oklahoma
FOR VALUE RECEIVED, PRE-PAID LEGAL SERVICES, INC., an Oklahoma corporation
(the "Maker") promises to pay to the order of BANK OF OKLAHOMA, N.A., a national
banking association ("Bank") at the office of Bank of Oklahoma, N.A. (the
"Agent") in Oklahoma City, Oklahoma, which is located at 201 Robert S. Kerr
Ave., or such other place as may be designated in writing by the Agent, the
principal sum of __________ Million ___________ and __/100 Dollars
($_____________), or so much thereof as shall be disbursed, together with
interest at the rate stated herein on such outstanding principal amount, and on
any past due interest payments, payable as follows:
This Note is subject to the terms and conditions of that certain Loan
Agreement dated September 19, 2003, as amended by that certain First
Amendment to Loan Agreement dated August 26, 2004, as amended by that
certain Second Amendment to Loan Agreement of even date herewith as the
same may be further amended, modified or restated from time to time
hereafter, between Bank of Oklahoma, N.A., as Agent and a Bank, Comerica
Bank and First United Bank & Trust (as amended, the "Loan Agreement"),
which terms and conditions are hereby incorporated by reference herein and
shall be controlling over any provision of this Note to the contrary.
Reference is hereby made to the Loan Agreement for a statement of the
calculation and computation of the rate of interest charged on amounts
outstanding under this Note, for a statement of repayment and prepayment
rights and obligations of Maker, for a statement of the terms and
conditions under which the due date of this Note may be accelerated and for
statements regarding other matters affecting this Note (including without
limitation the obligations of the holder hereof to advance funds hereunder,
exercise of rights and remedies, payment of attorneys' fees, court costs
and other costs of collection and certain waivers by Maker and others now
or hereafter obligated for payment of any sums due hereunder). Upon the
occurrence of an Event of Default, as that term is defined in the Loan
Agreement, and after the expiration of any grace or cure period as set
forth in the Loan Agreement, the holder hereof (i) may declare forthwith to
be entirely and immediately due and payable the principal balance hereof
and the interest accrued hereon, and (ii) shall have all rights and
remedies of the Banks under the Loan Agreement and Loan Documents. This
Note may be prepaid in accordance with the terms and provisions of the Loan
Agreement. Capitalized terms not otherwise defined herein shall be defined
as set forth in the Loan Agreement.
This Note is one of the Notes, as such term is defined in the Loan
Agreement.
This Note is to be construed according to the laws of the State of
Oklahoma.
The undersigned agrees that if, and as often as, this Note is placed in the
hands of an attorney for collection or to defend or enforce any of the holder's
rights hereunder, the undersigned will pay to the holder hereof its reasonable
attorney's fees, together with all court costs and other expenses paid by such
holder.
All payments on this Note shall be made in legal tender of the United
States of America or other immediately available funds at the Agent's or other
holder's address as shown herein or otherwise indicated and any such payment
will not be deemed to have been made until it is received by the holder of this
Note in collected funds.
All agreements between the undersigned and the holder are expressly limited
so that in no event whatsoever, whether by reason of disbursement of the
proceeds hereof or otherwise shall the amount of interest or finance charge (as
defined by the laws of the State of Oklahoma) paid or agreed to be paid by the
undersigned to the holder hereof exceed the highest lawful contractual rate of
interest or the maximum finance charge permissible under the law which a court
of competent jurisdiction, by final non-appealable order, determines to be
applicable hereto. If fulfillment of any agreement between the undersigned and
the holder hereof, at the time the performance of such agreement becomes due,
involves exceeding such highest lawful contractual rate or such maximum
permissible finance charge, then the obligation to fulfill the same shall be
reduced so such obligation does not exceed such highest lawful contractual rate
or maximum permissible finance charge. If by any circumstance the holder shall
ever receive as interest or finance charge an amount which would exceed the
amount allowed by applicable law, the amount which may be deemed excessive shall
be deemed applied to the principal of the indebtedness evidenced hereby and not
to interest. All interest and finance charges paid or agreed to be paid to the
holder hereof shall be prorated, allocated and spread throughout the full period
of this Note. The terms and provisions of this paragraph shall control all other
terms and provisions contained herein and in any other documents executed in
connection herewith. If any provision of this Note, or the application thereof
to any party or circumstance is held invalid or unenforceable, the remainder of
this Note and the application of such provision to other parties or
circumstances shall not be affected thereby, provisions of this Note being
severable in any such instance.
The makers, endorsers, sureties, guarantors and all other persons who may
become liable for all or any part of this obligation severally waive presentment
for payment, protest and notice of nonpayment. Said parties consent to any
extension of time (whether one or more) of payment hereof, any renewal (whether
one or more) hereof, and any release of any such party liable for payment of
this note without notice to any such party and without discharging the said
party's liability hereunder.
The failure of the holder hereof to exercise any of the remedies or options
set forth in this Note or in any instrument securing payment hereof, upon the
occurrence of one or more of the Events of Default shall not constitute a waiver
of the right to exercise the same or any other remedy at any subsequent time in
respect to the same or any other Event of Default. Acceptance by the holder
hereof of any payment which is less than the total of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing remedies or options at that time or at any
subsequent time, or nullify any prior exercise of any such remedy or option,
without the express consent of the holder hereof, except as and to the extent
otherwise provided by law.
IN WITNESS WHEREOF, the undersigned has executed this instrument effective
as of May 6, 2005.
PRE-PAID LEGAL SERVICES, INC.,
an Oklahoma Corporation:
By:
---------------------------------------------
Name: Randy Harp
Title: Chief Operating Officer