SECOND
AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO
LOAN AGREEMENT (this “Amendment”) is made effective as
of the 5 th
day of June,
2008, by and between PRE-PAID LEGAL SERVICES, INC., an Oklahoma
corporation (“Borrower”) and BANK OF OKLAHOMA, N.A., a
national banking association (“Bank”).
WHEREAS, on June 11,
2002, Borrower and Bank agreed to an extension of credit in the
principal amount of Thirty Million and No/100 Dollars
($30,000,000.00) from Bank to Borrower consisting of: (i) a
$10,000,000 term loan for the primary purpose of purchasing
Borrower’s shares of stock in the open market, as evidenced
by a promissory note in a like amount; and (ii) a $20,000,000
term loan for the purpose of financing construction costs attendant
to Borrower’s new corporate headquarters in Ada, Oklahoma
(the “Loan”), as evidenced by a promissory note in a
like amount (the “Note”), all as described in that
certain Loan Agreement dated as of such date (the “Loan
Agreement”).
WHEREAS, the
$10,000,000.00 term loan for the stock acquisition has since been
repaid and Bank has no commitment to make Advances
thereunder;
WHEREAS, Borrower and
Bank amended the Loan Agreement for the first time on June 23,
2006 (the “First Amendment”) in order to, among other
things, extend the maturity date and modify certain financial
covenants (the Loan Agreement as amended by the First Amendment is
referred to herein as the “Agreement”);
WHEREAS, Borrower’s
obligations pursuant to the Agreement and Note described therein
are secured by certain collateral as described in the
Agreement;
WHEREAS, the collateral
securing the indebtedness evidenced by or described in the
Agreement and the Note consisting of the real estate and other
property described in the Mortgage 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
Bank desire to amend the Agreement for the second time in order to,
among other things not specifically set forth in this recital,
include an additional term loan, modify certain covenants, and such
other changes as are more specifically set forth herein.
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:
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 definitions for
the terms “Stock Loan”, “Stock Loan
Commitment”, “Stock Note” and “Stock Note
Maturity Date” are herein after deleted from
Sections 1.37, 1.38, 1.39 and 1.40, respectively and the
following definitions are substituted in their place:
1.37 New Term Loan
. The term “New Term Loan” shall refer to that loan
described at Section 2.1 below.
1.38 New Term Loan
Commitment . The term “New Term Loan Commitment”
shall refer to the amount of $10,000,000.00 which amount represents
the maximum amount of credit available to Borrower pursuant to the
New Term Loan.
1.39 New Term Note
. The term “New Term Note” shall mean that certain term
promissory note in an amount not in excess of $10,000,000.00 in the
form of Exhibit “A-1” attached hereto, together with
all renewals, extensions, and modifications thereto.
1.40 New Term Loan
Maturity Date . The term “New Term Loan Maturity
Date” shall mean May 31, 2009.
1.2 The entire
Section 2.1 of the Agreement, Stock Loan , is hereby
deleted and replaced with the following in order to substitute
terms pertaining to a new $10,000,000.00 from Bank to Borrower for
the Stock Loan referenced therein and which shall state as
follows:
2.1 New Term Loan .
The Bank agrees to extend credit to the Borrower as evidenced by
the New Term Note. This New Term Loan is unsecured notwithstanding
any language contained in any mortgage or security agreement
previously executed by Borrower. The New Term Note will be in the
form of an amortizing or term credit and the Bank shall have no
obligation to make additional advances. No negative amortization
will be permitted.
2.1.1 Principal .
The principal amount of the New Term Loan shall not exceed
$10,000,000.00.
2.1.2 Note Interest
Rate . Beginning on the date of the Advance hereunder, and
continuing throughout the life of the New Term Loan, the
outstanding principal amount of the New Term Note shall bear
interest per annum at the LIBOR Rate plus 1.625%. Interest
shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed. The LIBOR Rate shall be adjusted on
the first day of each month commencing July 1, 2008. From the
date hereof through June 30, 2008, the New Term Note shall accrue
interest at the rate of 4.07%.
2.1.3 Advances and
Purpose . A single Advance in the amount of $10,000,000.00 in
the aggregate will be available on the request of the Borrower
until June 16, 2008. This New Term Loan is expressly not a
revolving credit. Once sums are advanced they cannot be paid back
and re-advanced.
2.1.4 Repayment .
Beginning June 30, 2008 and continuing on the last day of each
month thereafter through the New Term Loan Maturity Date, Borrower
shall make a payment of principal in the amount of $833,333.33
together with a payment of all accrued but unpaid interest on the
New Term Note. All outstanding principal plus all accrued but
unpaid interest is due and payable on the New Term Loan Maturity
Date.
1.3 The definitions of
the terms “Loan”, “Loan Documents, and
“Fixed Charge Coverage Ratio” set forth at
Sections 1.17, 1.18 and 1.46 of the Agreement are hereby
amended and restated in its entirety as follows:
1.17 Loan . The
term “Loan” shall mean each of the Real Estate Loan
which is evidenced by the Note and the New Term Loan which is
evidenced by the New Term Note.
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1.18 Loan Documents
. The term “Loan Documents” shall collectively mean
this Agreement, as amended, the Note, the New Term Note, the
Mortgage, all 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.
1.46 Fixed Charge
Coverage Ratio . The term “Fixed Charge Coverage
Ratio” shall mean, with respect to Borrower for any period,
the ratio of (a) EBITDA for such period minus the sum of
(i) income taxes paid (to the extent not already incurred in a
prior period) or incurred during such period, (ii) Capital
Expenditures made (to the extent not already incurred in a prior
period) or incurred during such period, and (iii) dividends
paid by Borrower on its common Stock during such period in
accordance with Section 6.10 of the Wells Fargo Credit
Agreement (but excluding dividends paid with identifiable proceeds
of loans made pursuant to the Wells Fargo Credit Agreement) to
(b) Fixed Charges for such period.
1.4 The entire
Section 7.6 of the Agreement, Dividends and
Distributions , is hereby deleted and replaced in its entirety
with the following:
7.6 Dividends and
Distributions. Borrower shall not make any distributions or
declare or pay any dividends (in cash or other property, other than
common Stock) on, or purchase, acquire, redeem, or retire any of
Borrower’s Stock, of any class, whether now or hereafter
outstanding; provided that so long as (a) no Default or
Event of Default exists at the time of such purchase or payment or
would result therefrom, and (b) “Qualified Cash” is
greater than or equal to $10,000,000.00 both before and after
giving effect to such purchase or payment. Borrower may purchase
its common stock or pay dividends on its common stock, in each case
(i) using the proceeds of the Wells Fargo Loan, or
(ii) using the proceeds of the New Term Loan. For purposes of
this section 7.6, “Qualified Cash” shall be defined as
cash not held by a Subsidiary of the Borrower that is deemed to be
an insurance company, but shall exclude unused proceeds from the
Well Fargo Loan or the New Term Loan, provided that the Borrower
shall not be prohibited from using the proceeds from the New Term
Loan to purchase Borrower’s shares in the open
market.
1.5 All references to the
term “Note” set forth in Section 10 of the
Agreement, EVENTS OF DEFAULT , are hereby deemed to refer to
each of the Real Estate Note and the New Term Note.
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 Bank by Borrower to induce Bank 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 Bank are and will be, when furnished, accurate and correct in
all material respects and complete insofar as completeness may be
necessary to give Bank 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 Borrower.
2.3 With the exception of
Section 5.5 of the Agreement, all of the Borrower’s
representations and warranties set forth in Section 5 of the
Agreement, REPRESENTATIONS AND WARRANTIES , as amended
hereby, are true and correct on and as of the date hereof after
giving effect to this Amendment with the same effect as though made
and repeated by Borrower as of the date hereof.
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CONDITIONS
PRECEDENT TO AMENDMENT
Banks’ obligations
pursuant to this Amendment are subject to the following
conditions:
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