December 1, 2009
Via EDGAR and Facsimile @ (703)813-6986
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Mr. Larry Spirgel
Assistant Director - Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Pre-Paid Legal Services, Inc.
Form 10-K for fiscal year ended December 31, 2008
Filed February 27, 2009
File No. 001-09293
Dear Mr. Spirgel:
Below are our responses to your enumerated comments contained in your letter of
November 19, 2009 to the above referenced filing. We understand the purpose of
your review and comments is to assist us in complying with the applicable
disclosure requirements and to enhance the overall disclosure in our filings. We
look forward to your comments to our responses and once agreed upon, we will
file amended documents in a timely manner.
Item 1 -We note your response to our prior comment one in our letter dated
October 26, 2009. However, the table's value would be enhanced by including a
narrative briefly highlighting the significance of the membership data. We
believe a brief discussion would help investors better understand the annual
membership vesting requirements of the company.
After conversation with the Commission staff, we propose the following expanded
discussion of our quarterly vesting process and the following table with
introductory paragraph and enumerated footnote explanations of the data:
In order to be eligible to receive commissions, sales associates must have an
active Associate Agreement. In order to keep an active Agreement; sales
associates must (1) maintain an active personal legal services membership or (2)
make three personal membership sales per calendar quarter. If a sales associate
fails to do either, his or her Associate Agreement will be placed in a precancel
status for one quarter ("quarterly vesting probationary period"). During this
period, the Associate must either (1) reinstate their personal legal services
membership or (2) make six personal membership sales. If these requirements are
not met, the Associate will go into a dropped status at the end of the
probationary period. Upon the date the Associate Agreement is dropped, the
Associate loses all downline, level, counters and qualifications and forfeits
any pending advanced commission, earnings and bonuses.
The following table recaps, on a quarterly basis for the last two fiscal years,
total vested sales associates that made new Membership sales and those that did
not as well as those that own a Membership and those that do not own a
Membership, by their respective levels of sales:
Assocs Without A Membership
--------------------------- (3)
(1) (2) Assocs Selling (4)
Assocs Selling Assocs Selling With a Assocs Not (5)
Qtr/Year 3 or more Less than 3 Membership Selling Total Assocs
- -------- -------------- --------------- -------------- ----------- ----------------
Q1/07 212 297 34,443 398,956 433,908
Q2/07 152 583 33,092 400,387 434,214
Q3/07 140 540 34,196 408,424 443,300
Q4/07 146 497 34,444 407,274 442,361
Q1/08 93 366 30,174 397,575 428,208
Q2/08 90 358 30,614 401,289 432,351
Q3/08 95 402 31,702 392,118 424,317
Q4/08 98 367 29,177 395,376 425,018
(1) Represents sales associates that do not own a Membership that have
sold 3 or more new Memberships during the quarter indicated.
(2) Represents sales associates that do not own a Membership that have
sold less than 3 new Memberships during the quarter indicated.
(3) Represents sales associates who owned a Membership and sold at least 1
new Membership during the quarter indicated.
(4) Represents sales associates who owned a Membership or were in their
quarterly vesting probationary period but did not sell at least 1 new
Membership during the quarter indicated.
(5) Represents the total vested associates (including those associates in
their quarterly vesting probationary period) during the quarter
indicated.
This table, the introductory language and explanatory footnotes would replace
existing table and last two sentences of existing introductory paragraph at the
top of page 30 of the printed Form 10-K.
We will provide marked copies of the above referenced filing reflecting all
cumulative proposed changes under separate cover to the staff of the Commission.
Should these proposed changes be acceptable to the Commission, we will
immediately begin preparing the amended documents for filing in a timely manner.
We also acknowledge that we are responsible for the adequacy and accuracy of the
disclosure in our filings with the Commission; that staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to our filings, and that we may not assert staff
comments as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.
Sincerely yours,
PRE-PAID LEGAL SERVICES, INC.
/s/ Randy Harp
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Randy Harp
Chief Operating Officer