SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Frontier Adjusters of America, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
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3) Filing party:
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4) Date filed:
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<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 10, 1997
-----------------------------------------------------
The Annual Meeting of Shareholders of Frontier Adjusters of America,
Inc., an Arizona corporation (the "Company"), will be held on Friday, October
10, 1997 at 9:00 a.m. (Phoenix, Arizona time) at the Company's principal
executive office located at 45 East Monterey Way, Phoenix, Arizona for the
following purposes:
1. To elect directors to serve until the next annual meeting of
shareholders and until their successors are elected and qualified.
2. To ratify the appointment of McGladrey & Pullen, LLP, Certified
Public Accountants, as the auditors of the Company for the Company's fiscal year
ending June 30, 1998.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record as of the close of business on August 20,
1997 are entitled to notice of, and to vote at, the meeting and adjournment
thereof.
All shareholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
/s/ James S. Rocke
James S. Rocke
Secretary
Phoenix, Arizona
September 5, 1997
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
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PROXY STATEMENT
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General
The enclosed Proxy is solicited on behalf of Frontier
Adjusters of America, Inc. an Arizona corporation (the "Company"), by the
Company's board of directors (the "Board of Directors") for use at the Annual
Meeting of Shareholders to be held on Friday, October 10, 1997 at 9:00 a.m.
(Phoenix, Arizona time) (the "Meeting"), and at any and all adjournments
thereof, for the purposes set forth in this proxy statement and in the
accompanying Notice of Annual Meeting of Shareholders. The Meeting will be held
at the Company's principal executive office, located at 45 East Monterey Way,
Phoenix, Arizona 85012.
These proxy solicitation materials were mailed to all
shareholders entitled to notice of, and to vote at, the Meeting on or about
September 5, 1997.
Record Date
The Board of Directors has fixed the close of business on
August 20, 1997 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting.
Revocability of Proxies
Any person giving a proxy may revoke the proxy at any time
before its use by delivering to the Secretary of the Company written notice of
revocation or a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person.
Voting Solicitation
As of the close of business on the Record Date, there were
4,605,358 shares of the Company's common stock, par value $.01 per share
("Common Stock"), outstanding excluding 176,652 shares held by the Company as
treasury stock. The Company has no other category of stock outstanding. The
presence in person or by proxy of the holders of a majority of the outstanding
shares of Common Stock is required to constitute a quorum at the meeting.
Votes cast by proxy or in person at the Meeting will be
tabulated by the election inspectors appointed for the Meeting and will
determine whether a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted to the stockholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Shareholders have cumulative voting rights in the election of
directors. Each shareholder is entitled to that number of votes equal to the
number of shares of Common Stock owned by him or her multiplied by that number
of directors to be elected. The shareholder may cumulate the shares of Common
Stock and give one nominee all of the shareholder's votes or may distribute his
or her votes on the same principle among as many nominees as he or she thinks
fit to serve. The enclosed proxy does not seek discretionary authority to
cumulate votes in the election of directors.
With respect to all other matters to be submitted to
shareholders at the Meeting, each shareholder is entitled to one vote per share
with respect to each matter presented. The affirmative vote of the holders of a
majority of the shares of Common Stock then represented at the Meeting will
constitute the act of the shareholders.
See "Security Ownership of Principal Shareholders and
Management" with respect to the percentage of the outstanding shares of Common
Stock beneficially owned by the Company's directors and executive officers.
<PAGE>
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for expenses incurred in forwarding
solicitation material to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors and officers, personally or by telephone
or telegram, without additional compensation.
The 1997 Annual Report to Stockholders, which was mailed to
stockholders with or preceding this Proxy Statement, contains financial and
other information about the activities of the Company but is not incorporated
into this Proxy Statement and is not to be considered a part of these proxy
soliciting materials. The information contained in the "Report of Compensation
Committee" below and "Company Performance" below shall not be deemed "filed"
with the Securities and Exchange Commission or subject to Regulations 14A or 14C
or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The Company will provide upon written request, without charge
to each shareholder of record as of the Record Date, a copy of the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1997 as filed with
the SEC. Any exhibits listed in the Form 10-K report also will be furnished upon
request at the actual expense incurred by the Company in furnishing such
exhibit. Any such requests should be directed to the Company's Secretary at the
Company's executive offices set forth in this Proxy Statement.
Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Amount of Beneficial Ownership
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Common Stock $.01 Par Value
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Name and Address (1) Number of Shares (1) Percent (2)
- ---------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Patric R. Greer (3) 66,316 1.42%
George M. Hill (4) 150,000 3.26%
Francis J. LaPallo and Wendy J. Harrison, his wife (5) 54,782 1.19%
Louis T. Mastos and Eva B. Mastos, his wife (6) 208,703 4.53%
William J. Rocke and Garnet Rocke, his wife (7) 442,268 9.50%
P. O. Box 7641
Phoenix, Arizona 85011
James S. Rocke (8) 471,803 10.14%
P. O. Box 7641
Phoenix, Arizona 85011
Jean E. Ryberg (9) 160,589 3.45%
Merlin J. Schumann and Donna L. Schumann, his wife 20,114 *
William W. Strawther, Jr. and Marjorie A. Strawther,
his wife (10) 444,138 9.60%
7108 North 15th Street
Phoenix, Arizona 85020
R. Scott Younker and Sandra L. Younker, his wife 90,669 1.97%
All officers and directors as a group
(ten persons) (11) 1,819,382 37.55%
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</TABLE>
*Less than 1%
(1) The number of shares shown in the table, including the notes thereto, have
been rounded to the nearest whole share. Includes, when applicable, shares
owned of record by such person's minor children and spouse and by other
related individuals and entities over whose shares of Common Stock such
person has custody, voting control or power of disposition. Also includes
shares of Common Stock that the identified person had the right to acquire
within 60 days of August 1, 1997 by the exercise of stock options.
(2) The percentages shown include the shares of Common Stock which the person
will have the right to acquire within 60 days of August 1, 1997. In
calculating the percentage of ownership, all shares of Common Stock which
the identified person will have the right to acquire within 60 days of
August 1, 1997 are deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by such person, but are
not deemed to be outstanding for the purpose of computing the percentage of
shares of Common Stock owned by any other stockholders.
<PAGE>
(3) Includes 51,346 shares subject to currently exercisable stock options at
an average of $3.005 per share.
(4) Excludes 50,000 shares held by Nell S. Hill, Mr. Hill's wife, and 134,258
shares held by Mr. Hill's children and grandchildren, in which shares he
disclaims any beneficial interest.
(5) Includes 34,782 shares subject to currently exercisable stock options at
an average of $2.875 per share.
(6) Includes 183,180 shares which are held in a trust under an agreement dated
February 10, 1981, in which Mr. and Mrs. Mastos hold equal beneficial
interests, and 25,523 shares which are held by the Louis T. Mastos &
Associates, Inc. Employees Profit Sharing Plan, of which Mr. Mastos is a
trustee and the majority beneficial owner.
(7) Includes 290,000 shares held by Old Frontier Investment, Inc., of Arizona,
of which Mr. William J. and Garnet Rocke holds 51% of the outstanding
stock. Includes 48,654 shares subject to currently exercisable stock
options at $3.2829 per share.
(8) Includes 290,000 shares held by Old Frontier Investment, Inc. of Arizona
of which Mr. James S. Rocke holds 49% of the outstanding stock. Includes
48,653 shares subject to currently exercisable stock options at an average
of $3.2829 per share.
(9) Includes 51,347 shares subject to currently exercisable stock options at
an average of $3.005 per share.
(10) Held as trustees under Trust Agreement, dated June 7, 1989, establishing
the William W. Strawther, Jr. and Marjorie A. Strawther Living Trust, of
which Mr. and Mrs. Strawther are beneficiaries. Excludes an aggregate of
200,000 shares beneficially owned by Mr. and Mrs. Strawther's son, in
which shares Mr. and Mrs. Strawther disclaim any beneficial interest.
(11) Excludes all duplicate reporting of holdings.
To the best of knowledge of the Company, no person or groups of persons, other
than officers and directors, beneficially own more than five percent of the
Frontier Adjusters of America, Inc. Common Stock (based upon present records of
the transfer agent).
PROPOSAL ONE
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ELECTION OF DIRECTORS
Nominees
A Board of ten directors is to be elected at the Meeting. The
nominees for directors are Patric R. Greer, George M. Hill, Francis J. LaPallo,
Louis T. Mastos, William J. Rocke, Jean E. Ryberg, Merlin J. Schumann, William
W. Strawther, Jr., R. Scott Younker and James S. Rocke, all of whom currently
are directors of the Company. In the absence of direction by shareholders
executing proxies, the persons named in the enclosed proxy will vote FOR the
nominees named herein. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee designated by the current Board of Directors to fill the
vacancy. It is not presently expected that any nominee will be unable or will
decline to serve as a director. The term of office of each person elected as a
director will continue until the next annual meeting of shareholders and until a
successor has been elected and qualified. Biographical information with respect
to the nominees for directors is set forth below and under the heading
"Information Concerning Directors and Executive Officers of the Company".
<PAGE>
Information Concerning Directors and Executive Officers of the Company
The following table sets forth certain information regarding
the Company's directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position(s) With the Company Director Since
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<S> <C> <C> <C>
Patric R. Greer 42 Director, Chief Financial Officer, 1994
Controller
George M. Hill 89 Director, Vice President, Assistant 1978
Secretary, Member Audit Committee
Francis J. LaPallo 49 Director, Executive Vice President 1996
Louis T. Mastos 76 Director, Member Audit Committee, 1978
Member Compensation Committee
James S. Rocke 29 Director, Secretary/Treasurer 1993
William J. Rocke 73 Director, Chairman of the Board, 1975
Chief Executive Officer
Jean E. Ryberg 65 Director, President 1975
Merlin J. Schumann 53 Director, Member Audit Committee, 1984
Member Compensation Committee
William W. Strawther, Jr. 71 Director, Vice Chairman of the Board 1978
R. Scott Younker 61 Director 1992
</TABLE>
Patric R. Greer is a certified public accountant and has been
with the Company as Controller since 1985. Mr. Greer was appointed Chief
Financial Officer in January 1997. Mr. Greer graduated from Northern Arizona
University with a B.S. degree in accounting. An employment agreement between Mr.
Greer and the Company provides that Mr. Greer will serve as an officer of the
Company through June 30, 2000.
George M. Hill has been associated with the Company in an
advisory capacity for more than 25 years, has been a Vice President of the
Company since 1985 and has been the Assistant Secretary of the Company since
1990. He is a senior partner in the Phoenix law firm of George M. Hill &
Associates and has been a practicing attorney in Arizona for over 50 years. Mr.
Hill is a Director and Secretary of National Car Rental, Phoenix, Denver and
Colorado Springs, and Director and Vice President of Precise Metal Products Co.,
Phoenix and Salt Lake City.
Francis J. LaPallo joined the Company on June 24, 1996. From
1977 until joining the Company he practiced law in Maryland, the District of
Columbia and California. From 1990 until joining the Company he was a partner
with the law firm Manatt, Phelps & Phillips in Los Angeles, California. He
represented the Company in various legal matters from 1994 until joining the
Company. An employment agreement between the Company and Mr. LaPallo provides
that Mr. LaPallo will serve as an executive officer of the Company through June
30, 2001.
Louis T. Mastos has been the President of Louis T. Mastos &
Associates, Inc., a managing general agency located in Reno, Nevada, since 1971.
He is past President of the American Association of Managing General Agents. He
was the Insurance Commissioner of the State of Nevada from 1965 to 1971.
<PAGE>
James S. Rocke has been employed by the Company since 1982 and
currently is an adjuster in the Company's Phoenix office. Mr. Rocke was elected
Secretary/Treasurer of the Company on January 29, 1993. Mr. Rocke graduated from
Arizona State University in 1991 with a B.S. degree in Finance. Mr. Rocke is the
son of William J. Rocke.
William J. Rocke is the founder of the Company and has served
as President of the Company and its predecessor entities since 1957. Mr. Rocke
has been in the claims adjusting business since 1952. He has a law degree from
the University of Denver and is a member of the Colorado Bar Association. An
agreement between Mr. Rocke and the Company provides that Mr. Rocke will serve
as the Chief Executive Officer of the Company through June 30, 2000. Mr. Rocke
is the father of James S. Rocke.
Jean E. Ryberg has been employed by the Company and its
predecessors since 1962. She has held several positions with the Company and has
been the Secretary/Treasurer of the Company and its predecessor entities since
1975. She also manages the Company's claims adjusting operations in Phoenix,
Arizona. An agreement between Mrs. Ryberg and the Company provides that Mrs.
Ryberg will serve as an executive officer of the Company through June 30, 2000.
Merlin J. Schumann has been a certified public accountant with
the firm of Murray & Murray, P.C., located in Phoenix, Arizona, for over 20
years. Since December, 1990, Mr. Schumann has also held the position of General
Securities Representative with H. D. Vest Investment Securities, Inc., a stock
brokerage and investment counseling firm located in Irving, Texas.
William W. Strawther, Jr. was the President and principal
shareholder of Continental American Securities, Inc., located in Phoenix,
Arizona from 1970 through 1982. He is a former member of the National Board of
Governors of the National Association of Securities Dealers, Inc. He has been an
independent business consultant since 1982.
R. Scott Younker has been a licensee of the Company in
Prescott, Arizona since 1979. He has been engaged in the claims adjusting
business for 32 years.
All directors are elected at each annual meeting of the
Company's shareholders for a term of one year and hold office until their
successors are elected and qualified. All officers serve at the discretion of
the Board of Directors.
Meetings, Committees and Compensation of the Board of Directors
The Company's Board of Directors met five times in fiscal year
1997. All members attended 75% or more of the meetings of the Board of Directors
and the meetings of each committee on which such director was a member. The
Board has two committees, an audit committee and a compensation committee.
Board members are reimbursed for expenses incurred while
attending Board meetings, and each director, including employees of the Company,
is paid $750 per Board meeting attended. During fiscal 1997, each director,
except for Messrs. Strawther and Mastos, received $3,750 for attendance at Board
meetings. Messrs. Strawther and Mastos received $3,000 for attendance at Board
meetings during fiscal 1997.
The Company has a standing audit committee of the Board of
Directors of which Messrs. Hill, Mastos, and Schumann are members. The audit
committee reviews the annual financial statements, the significant accounting
issues, and the scope of the audit with the Company's independent auditors and
is available to discuss with the auditors any other audit-related matters that
may arise during the year. The Committee held one meeting during the 1997 fiscal
year.
Compensation Committee Interlocks and Insider Participation
The Company's compensation committee of the Board of Directors
consists of Messrs. Mastos and Schumann. The compensation committee reviews and
acts on matters relating to compensation levels and benefit plans for key
employees of the Company. Messrs. Mastos and Schumann have not nor are they
presently serving as officers of the Company. The committee held one meeting
during the 1997 fiscal year.
<PAGE>
Executive Compensation
The following table sets forth certain information concerning
compensation during its year ended June 30, 1997 to each executive officer whose
aggregate compensation exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation (1)
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a b c d e i
- --------------------------------------------------------------------------------------------- ------------
Other Annual All Other
Compensation Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($) (2) ($) (3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William J. Rocke, CEO, 1997 231,300 51,559 -- 23,569
Chairman, Director 1996 225,000 71,981 -- 22,719
1995 206,636 50,000 -- 23,670
Jean E. Ryberg, 1997 164,480 51,559 -- 29,568
President, Director 1996 160,000 71,981 -- 29,266
1995 145,861 50,000 -- 29,168
Francis J. LaPallo, 1997 180,000 -- -- 29,568
Executive Vice President, 1996 692 -- -- --
Director
Patric R. Greer 1997 92,520 17,187 -- 21,876
Controller, Director 1996 90,000 11,224 -- 17,364
1995 68,116 12,703 -- 14,756
</TABLE>
(1) Columns f, g and h have been omitted as there has been no long term
compensation awarded to, earned by or paid to any of the named executives
in any fiscal year covered by these columns.
(2) No perquisites were received by any person named above greater than the
lesser of $50,000 or 10% of salary plus bonus.
(3) "All Other Compensation" includes (i) directors fees of $3,750, $2,250 and
$3,000 for Mr. Rocke in years ended June 30, 1997, 1996 and 1995
respectively; $3,750, $3,000 and $3,000 for Mrs. Ryberg in years ended June
30, 1997, 1996 and 1995 respectively; $3,750 for Mr. LaPallo for fiscal
1997 and $3,750, $3,000 and $2,250 for Mr. Greer in years ended June 30,
1997, 1996, and 1995 respectively; (ii) profit sharing contributions of
$19,819, $20,469 and $20,670 for Mr. Rocke in years ended June 30, 1997,
1996 and 1995 respectively; $25,818, $26,266 and $26,168 for Mrs. Ryberg in
years ended June 30, 1997, 1996 and 1995 respectively; $25,818 for Mr.
LaPallo in fiscal year 1997; $18,126, $14,364 and $12,506 for Mr. Greer for
years ended June 30, 1997, 1996 and 1995, respectively.
Excluded from all other compensation is the increase and the amortization
of the June 30, 1995 cash surrender value of life insurance policies that
will transfer to Mr. Rocke and Mrs. Ryberg upon termination of their
employment. The amount excluded is $18,119 and $18,203 for Mr. Rocke for
the years ended June 30, 1997 and 1996 and $13,678 and $13,511 for Mrs.
Ryberg for the years ended June 30, 1997 and 1996.
Option/SAR Exercises and Holdings
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------
% of Total Potential Realization
Number of Options/SARs Value at Assumed
Securities Granted to Exercise Annual Rates of Stock Price
Underlying All Employees or base Expiration Appreciation for Options Term
Name Options/SARs in fiscal 1997 Price ($/SH) Date 5% 10%
- -------------------- -------------- -------------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Francis J. LaPallo 100,000 100.00 $2.875 July 1, 2006 $ 180,807 $ 458,201
</TABLE>
<PAGE>
The following table shows Company stock options that were
exercised during fiscal 1997 and the number of shares and value of grants
outstanding as of June 30, 1997 for each Named Executive.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1997 AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised,
Underlying Unexercised In-The-Money Options/SARs
Shares Options/SARs at 6/30/97 (#) at 6/30/97 ($)(a)
Acquired Value --------------------------- -----------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ---------------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Rocke -- -- 48,654 -- -- --
Jean E. Ryberg -- -- 51,346 -- 2,715 --
Francis J. LaPallo -- -- -- 100,000 -- --
Patric R. Greer -- -- 51,346 -- 2,715 --
</TABLE>
(a) Value of unexercised, in-the-money Company options based on a fair market
value of the Company's common stock of $2.625 per share as of June 30,
1997.
Employment Agreements
The Company has entered into employment agreements with Mr. Rocke, Mrs.
Ryberg, Mr. Greer and Mr. LaPallo each for five-year terms. Mr. Rocke's, Mrs.
Ryberg's and Mr. Greer's agreements were effective July 1, 1995 and expire June
30, 2000. Mr. LaPallo's agreement is effective July 1, 1996 and expires June 30,
2001.
Mr. Rocke's agreement provides for an annual salary of $225,000 with
annual cost of living increases based upon the U.S. Department of Labor's cost
of living index, plus a bonus of three percent (3%) of the Company's income
before taxes and bonuses and 5% of the increase in the Company's income before
taxes and bonuses from the prior year.
Mrs. Ryberg's agreement provides for an annual salary of $160,000 with
annual cost of living increases based upon the U.S. Department of Labor's cost
of living index, plus a bonus of three percent (3%) of the Company's income
before taxes and bonuses and 5% of the increase in the Company's income before
taxes and bonuses from the prior year.
Mr. Greer's agreement provides for an annual salary of $90,000 with
annual cost of living increases based upon the U.S. Department of Labor's cost
of living index, plus a bonus of .5% of the Company's income before taxes and
bonuses in year 1 and 1% in year two and 1.5% in years 3, 4 and 5 and .5% of the
increase in the Company's income before taxes and bonuses from the prior year in
year one and increasing .5% annually to 2.5% in year five of the agreement.
Mr. LaPallo's agreement provides for an annual salary of $180,000 with
annual cost of living increases based upon the U.S. Department of Labor's cost
of living index for the first two years. For the remaining three years, the
agreement provides for an annual salary of $150,000 with annual cost of living
increases based upon the U.S. Department of Labor's cost of living index, plus a
bonus of three percent (3%) of the Company's income before taxes and bonuses and
3% of the increase in the Company's income before taxes and bonuses from the
prior year. In connection with the Company's employment of Mr. LaPallo, the
Company sold Mr. LaPallo 20,000 shares of common stock from the treasury for an
aggregate of $55,547.
<PAGE>
Report of Compensation Committee
The Compensation Committee of the Board of Directors is
comprised of Louis T. Mastos and Merlin J. Schumann, both outside directors of
the Company. The Committee establishes policies relating to the compensation of
employees. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board.
The following is a report submitted by the above-listed
committee members in their capacity as the Board's Compensation Committee,
addressing the Company's compensation policy as it relates to the named
executive officers for fiscal 1997.
Compensation Policy
The goal of the Company's executive compensation policy is to
ensure that an appropriate relationship exists between executive pay and the
creation of shareholder value, while at the same time motivating and retaining
key employees. To achieve this goal, the Company's executive compensation
policies integrate annual base compensation with bonuses based upon corporate
performance. Annual cash compensation, together with equity-based, incentive
compensation is designed to attract and retain qualified executives and to
ensure that such executives have a continuing stake in the long-term success of
the Company. All executive officers and management are eligible to participate
in the Company's Incentive Stock Option Plan.
Fiscal 1997 Compensation
The Company's fiscal 1997 executive compensation consisted of:
(i) a base salary, (ii) bonuses based upon the Company's income before income
taxes and bonuses, and (iii) fixed contributions to a defined contribution
Profit Sharing Plan. Stock options are granted from time to time by the Board of
Directors. Options were granted during fiscal 1997 to Mr. LaPallo.
The Company's 1997 compensation to named executives is best
exemplified by examining the salary paid to William J. Rocke, the Company's
Chairman and Chief Executive Officer which is based upon an employment agreement
entered into in 1995 after negotiations with the Board of Directors. The
agreement calls for a base salary with annual cost of living increases based
upon the U.S. Department of Labor's cost of living index. Additionally, the
agreement provides for a bonus of 3% of the Company's income before taxes and
bonuses and 5% of the increase in the Company's income before taxes and bonuses
from the prior year. The base salary is believed to be in the range of those of
other executives in comparable companies, both regionally and nationally. The
bonus based upon the Company's income caused compensation to decrease in fiscal
1997 as the Company's income decreased from 1996 levels.
The Committee believes that linking executive compensation to
corporate performance (i.e., income and stock performance) provides incentive to
the executives to enhance corporate performance and the shareholders' interests.
It was with this in mind that the bonus portion of executive compensation was
revised to the current bonus arrangement effective July 1, 1995. This bonus
arrangement is effective until June 30, 2000, except with regard to Mr. LaPallo
which is effective until June 30, 2001, and the Committee believes that
compensation levels in 1997 reflect the Company's compensation policy.
Louis T. Mastos
Merlin J. Schumann
COMPANY PERFORMANCE
The following graph reflects a five-year comparison of
cumulative total returns for the Company's Common Stock, the American Stock
Exchange Market Value Index, and the Company's Peer Group of Stocks based on the
four-digit SIC Code Index. The total cumulative return on investment (change in
the year-end stock price plus reinvested dividends) for each of the periods and
indexes is based on the stock price or composite index at the end of fiscal
1992. The graph compares the performance of the Company with AMEX and Peer Group
Indexes with the investment weighted based upon market capitalization.
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(GRAPH)
Measurement Period Frontier Adjusters of American Stock Peer Group
(Fiscal Year Covered) America, Inc. Exchange of Stocks
1992 100.00 100.00 100.00
1993 90.31 109.33 104.14
1994 91.41 105.54 101.94
1995 99.97 126.99 118.23
1996 117.13 145.40 138.81
1997 109.93 154.64 190.60
Certain Transactions
Old Frontier Investment, Inc. of Arizona, of which William J.
Rocke and Garnet Rocke, his wife, are owners of 51% of the issued and
outstanding stock of said corporation and James S. Rocke owns the remaining 49%,
has entered into a license agreement with the Company pursuant to which it
operates, under standard terms and conditions, an insurance adjusting and risk
management business located in Scottsdale, Arizona, and is paid a 5% royalty on
gross revenues derived from services provided by certain licensees in other
Arizona cities and towns. The Company paid that corporation $15,944 during
fiscal year 1997 in connection with such 5% royalty agreement.
George M. Hill, Vice President and Director of the Company,
acts as General Counsel to the Company. During the fiscal year 1997, the Company
paid Mr. Hill $91,572 for services rendered and disbursements. Such fees will
continue to accrue, pursuant to a retainer agreement, at the rate of $6,650 per
month effective September 1, 1995.
The Company paid its Vice Chairman, William W. Strawther, Jr.,
$20,000 during fiscal year 1997 for business and financial consulting services.
The Company believes that the cost to the Company for all of
the foregoing were and are competitive with charges for similar services and
facilities available from third parties.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Based solely on a review of the copies of such forms received
by the Company during the fiscal year ended June 30, 1997, and written
representations that no other reports were required, the Company believes that
each person who, at any time during such fiscal year, was a director, officer or
beneficial owner of more than 10% of the Company's Common Stock complied with
all Section 16(a) filing requirements during such fiscal year except that R.
Scott Younker filed a late Form 4 covering five transactions for a total of
2,800 shares.
PROPOSAL TWO
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed McGladrey & Pullen, LLP,
independent public accountants, as the auditors of the Company, to serve as such
at the pleasure of the Board of Directors. Audit services provided by McGladrey
& Pullen, LLP during the year ended June 30, 1997 consisted of the examination
of consolidated financial statements of the Company and its subsidiaries,
reviews of information in certain filings with the Securities and Exchange
Commission and periodic consultation regarding accounting and financial matters.
The Company is
<PAGE>
informed that neither McGladrey & Pullen, LLP nor any of its partners of
associates has any relationship with the Company, other than as independent
auditors.
Certain financial statements of the Company appear in the
Company's 1997 Annual Report. A representative of McGladrey & Pullen, LLP will
be present at the Meeting and will be available to make a statement and to
respond to questions concerning the financial statements.
OTHER MATTERS
Management of the Company knows of no other matters which will
come before the Meeting. However, if any other matter should properly come
before the Meeting, it is the intention of the persons named in the enclosed
proxy to vote each proxy in accordance with their judgment on such matter.
SHAREHOLDER PROPOSALS
Proposals by shareholders which are intended to be presented
at the next annual meeting of shareholders of the Company must be received by
the Company on or before May 10, 1998 to be considered for inclusion in the
Company's proxy statement for the 1998 Annual Meeting of Shareholders.
By Order of the Board of Directors
/s/ James S Rocke
James S. Rocke
Secretary
Phoenix, Arizona
September 5, 1997
<PAGE>
<TABLE>
FRONTIER ADJUSTERS OF AMERICA, INC. THIS PROXY IS SOLICITED
P.O. Box 7680 ON BEHALF OF THE BOARD
Phoenix, Arizona 85011 P R O X Y OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
The undersigned hereby appoints WILLIAM J. ROCKE and JEAN E. RYBERG as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them, or either of them, to represent and to vote, as designated below, all the shares of common
stock of Frontier Adjusters of America, Inc. held of record by the undersigned as of the close of business on August 20, 1997, at
the annual meeting of shareholders to be held on October 10, 1997 at 9:00 A.M. (Phoenix, Arizona time) and at any adjournment
thereof.
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below)______ to vote for the ten nominees listed below ______
<S> <C> <C> <C> <C>
____ William J. Rocke ____ Jean E. Ryberg ____ William W. Strawther, Jr. ____ Louis T. Mastos ____ George M. Hill
____ James S. Rocke ____ R. Scott Younker ____ Merlin J. Schumann ____ Francis J. LaPallo ____ Patric R. Greer
2. To ratify the selection of McGladrey & Pullen, LLP, Certified Public Accountants, as the auditors of Frontier Adjusters of
America, Inc. for the Company's fiscal year ending June 30, 1998.
FOR___________________ AGAINST___________________ ABSTAIN___________________
3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is
made, this Proxy will be voted FOR Proposals 1 and 2, with respect to Proposal 3, as appropriate in the Board's judgment.
Please sign exactly as the name appears below. When shares are held by joint tenants or as community property, both shareholders
should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
<S> <C>
Dated:
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY, USING THE ENCLOSED ENVELOPE.
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Signature
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Signature if held jointly
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