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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] 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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
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):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
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 Statement No.:
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3) Filing Party:
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4) Date Filed:
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[LOGO OF FRONTIER ADJUSTERS OF AMERICA, INC. APPEARS HERE]
December 10, 1999
Dear Shareholder:
With this letter you are receiving the Proxy Statement, Annual Report, and
Interim Financial Statements for the Company's fiscal 2000 Annual Meeting of
Shareholders. In this same package, you are also receiving a proxy card for
recording your vote on whether to approve three proposals.
The Company's Board of Directors and management team recommend that you
vote for each of the proposals. I urge you to review the enclosed materials
carefully, mark your proxy card FOR the proposals, and return it as instructed.
Thank you for your continued support.
Sincerely,
/s/ Troy Huth
President and Chairman of the Board
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 26, 2000
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The Annual Meeting of Shareholders of Frontier Adjusters of America, Inc.,
an Arizona corporation (the "Company"), will be held on January 26, 2000 at
10:00 a.m. (Phoenix, Arizona time) at 45 E. Monterey Way, Phoenix, Arizona
85012, 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 and Pullen, LLP, Certified Public
Accountants, as the auditors of the Company for the Company's fiscal year ending
June 30, 2000; and
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 at the close of
business on December 8, 1999 are entitled to notice of and to vote at the
Meeting.
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 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
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
Phoenix, Arizona /s/ James S. Rocke
December 10, 1999 Secretary
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
45 EAST MONTEREY WAY
PHOENIX, ARIZONA 85011
PROXY STATEMENT
Shareholders are urged to read this Proxy Statement in its entirety. As
used herein, the "Company" means Frontier Adjusters of America, Inc., an Arizona
corporation, and/or its subsidiaries. Certain capitalized terms used in this
Summary are defined elsewhere in this Proxy Statement.
GENERAL
The enclosed proxy is solicited on behalf of the Company by the Company's
board of directors (the "Board" or "Board of Directors") for use at the
Company's Annual Meeting of Shareholders to be held on January 26, 2000 at 10:00
a.m. (Phoenix, Arizona time) (the "Meeting"), or at any adjournment thereof, for
the purposes set forth in this Proxy Statement and in the accompanying Notice of
Meeting of Shareholders. The Meeting will be held at 45 E. Monterey Way,
Phoenix, Arizona 85012.
These proxy solicitation materials were first mailed on or about December
10, 1999, to all shareholders entitled to vote at the Meeting.
The mailing address of the Company's principal executive office is 45 East
Monterey Way, Phoenix Arizona 85011.
RECORD DATE
The Board of Directors has fixed the close of business on December 8, 1999
as the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Meeting or any adjournment thereof.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to 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 SECURITIES AND VOTING RIGHTS
On the Record Date, the Company had outstanding 8,957,560 shares of common
stock, par value $0.01 per share (the "Common Stock"), with each share entitling
its owner of record to one vote on all matters submitted to shareholders at the
Meeting. Each holder of Common Stock voting at the Meeting, either in person or
by proxy, may cast one vote per share of Common Stock held on all matters to be
voted upon at the Meeting.
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The presence, in person or by proxy, at the Meeting of shareholders
entitled to cast a majority of all votes entitled to be cast at such meeting
shall constitute a quorum. Assuming that a quorum is present, the affirmative
vote of a majority of the shares of the Company present in person or represented
by proxy at the Meeting and entitled to vote is required (i) for the election of
directors, (ii) for the ratification of the appointment of McGladrey and Pullen,
LLP, as the independent auditors of the Company for the fiscal year ending June
30, 2000, and (iii) to transact such other business as may properly come before
the Meeting or any adjournment thereof.
Arizona law requires cumulative voting in elections for directors, which
means that each shareholder may cast the number of votes that is equal to the
number of shares held of record, multiplied by the number of directors to be
elected. Each shareholder may cast the whole number of votes for one candidate
or distribute such votes among two or more candidates. The enclosed proxy does
not seek discretionary authority to cumulate votes in election of directors.
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 shareholders for a vote. Thus, an abstention will have the same
effect as a vote against the matter. 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.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it represents
will be voted at the Meeting as directed. Unless otherwise instructed, shares
represented by proxy will be voted (i) "for" the election of the nominees set
forth in this Proxy Statement, and (ii) "for" the ratification of the
appointment of McGladrey and Pullen, LLP, as the independent auditors of the
Company for the fiscal year ending June 30, 2000. If any other matters 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 best judgment on
such matter.
SOLICITATION
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
materials 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.
ANNUAL REPORT AND OTHER MATTERS
The 1999 Annual Report to Shareholders, and the Quarterly Report for the
period ended September 30, 1999 which were mailed to shareholders with or
preceding this Proxy Statement, contain financial and other information about
the Company, but, except for the Financial Statements contained therein, are not
incorporated into this Proxy Statement and are not to be considered a part of
these proxy soliciting materials 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 information contained in the "Report of Compensation
Committee" below and "Company Performance" below shall not be deemed "filed"
with the Securities and Exchange Commission (the "SEC") or subject to
Regulations 14A or 14C or to the liabilities of Section 18 of 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, 1999, 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 office set forth in this Proxy Statement.
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SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue $ 6,341,584 $5,825,348 $6,164,603 $5,641,984 $5,240,825
Net income 546,452 612,475 979,198 1,134,519 1,026,848
Comprehensive income 517,505 578,854 1,069,110 1,113,186 1,023,483
Basic earnings per share 0.12 0.13 0.21 0.25 0.22
Diluted earnings per share 0.12 0.13 0.21 0.25 0.22
Weighted average number of
shares used in per share data:
Basic 4,569,049 4,605,358 4,607,709 4,620,101 4,662,679
Diluted 4,570,113 4,612,674 4,631,898 4,627,606 4,664,258
Cash dividends per share $ 1.638 $ 0.15 $ 0.15 $ 0.14 $ 0.115
BALANCE SHEET DATA
Working capital $ 2,073,511 $3,214,490 $3,301,276 $3,196,562 $2,946,748
Total assets 12,118,984 7,800,700 7,912,139 6,875,752 6,597,050
Long-term debt -- 4,953 33,462 59,983 84,655
Property and equipment, net 1,608,936 1,724,329 1,736,226 1,554,401 1,484,545
Stockholders' equity 5,053,633 6,452,241 6,564,193 6,230,799 5,838,651
Book value per share 0.56 1.40 1.43 1.35 1.26
Retained earnings 3,022,731 4,735,935 4,814,266 4,526,419 4,042,588
Total shares outstanding 8,957,560 4,605,358 4,605,358 4,619,658 4,640,898
</TABLE>
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BENEFICIAL OWNERSHIP OF COMMON STOCK
As of the close of business on the Record Date, there were 8,957,560 shares
of Common Stock outstanding. The following table sets forth information
regarding the beneficial ownership of shares of the Common Stock outstanding as
of November 5, 1999 by (i) each person or group known to the Company who owns or
who will own more than 5% of the outstanding shares of Common Stock, (ii) each
of the directors and the executive officers of the Company and (iii) by all
directors and executive officers of the Company as a group. Unless otherwise
indicated in the footnotes, all of such interests are owned directly, and the
indicated person has sole voting and investment power. The number of shares
represents the number of shares of Common Stock the person holds, including
shares that may be issued upon the exercise of options that are exercisable as
of November 5, 1999. Information presented in the table and related notes has
been obtained from the beneficial owner and/or from reports filed by the
beneficial owner with the Securities and Exchange Commission pursuant to Section
13 of the Exchange Act.
Shares Beneficially
Owned on November 5, 1999
-------------------------
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership(1) of Class(2)
- ------------------------ ------------ -----------
OFFICERS AND DIRECTORS
John Davies 500 *
Jeffrey R. Harcourt -- *
Troy Huth -- *
Jeffrey C. Jordan -- *
Francis J. LaPallo and Wendy Harrison, his wife(3) 122,000 1.35%
Louis T. Mastos and Eva B. Mastos, his wife(4) 207,103 2.31%
William J. Rocke and Garnet Rocke, his wife(5) 415,332 4.64%
James S. Rocke and Kelly Rocke, his wife(6) 444,867 4.97%
Jean E. Ryberg(7) 110,960 1.24%
William A. White -- *
All officers and directors as a group (ten persons)(8) 1,010,762 11.16%
FIVE PERCENT SHAREHOLDERS
United Financial Adjusting Company (9) 5,258,513 58.06%
Netrex Corp. (9) 5,258,513 58.06%
Netrex Holdings L.L.C. (9) 5,258,513 58.06%
* Less than 1%
(1) 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 as of November 5, 1999 by the
exercise of stock options.
(2) The percentages shown include the shares of Common Stock that the person
had the right to acquire as of November 5, 1999 or that will vest upon
Closing. In calculating the percentage of ownership, all shares of Common
Stock which the identified person had the right to acquire as of November
5, 1999 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 shareholders.
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<PAGE>
(3) Includes 100,000 shares subject to a currently exercisable stock option at
$2.875 per share.
(4) 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 23,523 shares which are held by the Louis T. Mastos in an
Individual Retirement Account.
(5) Includes 290,000 shares held by Old Frontier Investment, Inc., of Arizona,
of which William J. Rocke and Garnet Rocke hold 51% of the outstanding
stock.
(6) Includes 290,000 shares held by Old Frontier Investment, Inc. of Arizona of
which James S. Rocke holds 49% of the outstanding stock.
(7) Excludes 15,000 held by Mrs. Ryberg's sons in which she disclaims any
beneficial interest.
(8) Excludes all duplicate reporting of holdings.
(9) Includes 5,258,513 shares of common stock owned by United Financial
Adjusting Company ("UFAC"). UFAC is a wholly owned subsidiary of Netrex
Holdings L.L.C., which is managed by Netrex Corp. Netrex Holdings L.L.C. is
owned 51.4% by The Progressive Corporation and 48.6% by Netrex L.L.C. The
Progressive Corporation and Netrex L.L.C. each disclaims that it is the
beneficial owner of the Company's shares owned by UFAC for purposes of
Section 13(d) or (g) of the Securities Exchange Act of 1934 as amended.
To the best of knowledge of the Company, no person or groups of persons, other
than officers, directors, and UFAC, beneficially own more than five percent of
the Common Stock (based upon present records of the transfer agent).
5
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of Directors is to be elected at the Meeting. The nominees for
directors are John M. Davies, Jeffrey R. Harcourt, Troy Huth, Jeffrey C. Jordan,
Francis J. LaPallo, Louis T. Mastos, William J. Rocke, Jean E. Ryberg, and
William A. White, all of whom are currently 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 director. The term
of office of each person elected as 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 under the heading "Information Concerning Directors and Executive Officers
of the Company."
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the Company's
directors and executive officers:
NAME Age Position(s) with the Company Director Since
- ---- --- ---------------------------- --------------
John M. Davies 43 Director 1999
Jeffrey R. Harcourt 39 Director, Chief Financial Officer 1999
Troy Huth 39 Director, President, Chairman of
the Board 1999
Jeffrey C. Jordan 43 Director, Executive Vice President 1999
Francis J. LaPallo 51 Director, Executive Vice President 1996
Louis T. Mastos 78 Director, Member Audit Committee 1978
(Fiscal 1999 & 2000)
James S. Rocke 31 Secretary, Treasurer -
William J. Rocke 75 Director 1975
Jean E. Ryberg 67 Director, Member Audit Committee 1975
(Fiscal 2000)
William A. White 45 Director 1999
JOHN M. DAVIES has been associated with the Company as a director since
1999. Effective June 1, 1999, Mr. Davies became President of Netrex, LLC, a
startup financial services and technology company. Mr. Davies was employed by
The Progressive Corporation from 1990 to 1999. His last position with
Progressive was managing Progressive's Diversified Business Group. Prior to
joining Progressive, he was employed at Coopers & Lybrand, an international
accounting and consulting firm. Mr. Davies has an MBA from the University of
Pittsburgh and has earned numerous professional designations, including being a
Certified Public Accountant, a Chartered Property and Casualty Underwriter and a
Chartered Life Underwriter.
JEFFREY R. HARCOURT has been associated with the Company as its chief
financial officer and as a director since 1999. Mr. Harcourt has been employed
by The Progressive Corporation since 1990 and currently is the Controller for
Progressive's Diversified Business Group. Prior to joining Progressive, he was
employed by KPMG Peat Marwick, an international accounting and consulting firm.
Mr. Harcourt holds a BS degree from Miami University and has earned numerous
designations, including being a Certified Public Accountant, a Chartered
Property and Casualty Underwriter, a Certified Internal Auditor and a Certified
Information Systems Auditor.
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TROY HUTH has been associated with the Company as its President and
Chairman of the Board and as a director since 1999. Mr. Huth has been employed
by The Progressive Corporation since 1986 and currently manages Progressive's
Diversified Technologies Group, the Progressive Vehicle Inspection Services
Group, and the Progressive Diversified Business Group Claims Organization. Prior
to joining Progressive, he held several information technology management
positions in manufacturing and service businesses and has been in the technology
field since 1979. Mr. Huth has a BA from Baldwin Wallace College.
JEFFREY C. JORDAN has been associated with the Company as its Executive
Vice President and as a director since 1999. Mr. Jordan has been employed by The
Progressive Corporation from 1978 to 1980 and from 1984 through the present. He
began his career with Progressive as an adjuster trainee and has held numerous
technical and managerial positions within the Progressive claims organization.
Mr. Jordan holds a BA degree from Rutgers University and a JD from UCLA. Prior
to his return to Progressive in 1984, Mr. Jordan was an attorney in private
practice in Los Angeles.
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 of 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.
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 in 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 founded the Company in 1957 and from 1957 to 1999 served
as Chief Executive Officer of the Company and its predecessor entities. Mr.
Rocke has been in the insurance adjusting business since 1952. He has a law
degree from the University of Denver and is a member of the Colorado Bar
Association. Mr. Rocke retired as Chairman of the Board and Chief Executive
Officer of the Company on June 30, 1999. Mr. Rocke is the father of James S.
Rocke.
JEAN E. RYBERG was employed by the Company and its predecessors from 1962
to 1999. Mrs. Ryberg held several positions with the Company. Mrs. Ryberg also
managed the Company's insurance adjusting operations in Phoenix and Tucson,
Arizona, and Las Vegas, Nevada. Mrs. Ryberg was elected President of the Company
in 1993 and served in that capacity until retiring on June 30, 1999.
WILLIAM A. WHITE has been associated with the Company as a director since
1999. Mr. White has been employed by The Progressive Corporation since 1985 and
currently manages Progressive's Diversified Claims Business Group. Prior to
joining Progressive, Mr. White served as a commissioned officer in the United
States Army. Mr. White holds a master's degree from the University of Southern
California and undergraduate degree in Business Administration from John Carroll
University in Cleveland, Ohio.
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 AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors met four times in fiscal year 1999, and
all members attended 75% or more of the meetings of the Board and committees he
or she serves on with the exception of Mr. Davies who was appointed to serve
prior to the to the Company's June meeting, but was unable to attend. The board
has an audit committee and a compensation committee.
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<PAGE>
The Audit Committee, which for fiscal 1999 consisted of George Hill, Louis
Mastos, and Merlin Schumann, non- employee directors of the Company, reviews the
annual financial statements, the significant accounting issues, and the scope of
the audit with the Company's independent auditors and discusses with the
auditors any other audit related matters that may arise during the year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee of the Board of Directors for fiscal 1999
consisted of Messrs. Mastos and Schumann. Neither Mr. Mastos nor Mr. Schumann
had any contractual or other relationships with the Company during such fiscal
years except as directors. The committee held one meeting during the fiscal 1999
year.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
during its year ended June 30, 1999 to the chief executive officer and each
other executive officer whose aggregate compensation exceeded $100,000 (the
"Named Executives").
SUMMARY COMPENSATION TABLE
Annual Compensation All Other
----------------------- Compensation
Name and Principal Position Year Salary($)(1) Bonus($) ($)(2)(3)
- --------------------------- ---- ------------ -------- ---------
William J. Rocke, CEO, 1999 241,105 32,914 412,830
Chairman, Director 1998 237,776 39,794 29,898
1997 231,300 51,559 23,569
Jean E. Ryberg, 1999 171,453 32,914 321,715
President, Director 1998 169,085 39,794 29,898
1997 164,480 51,559 29,568
Francis J. LaPallo, 1999 156,359 32,914 29,801
Executive Vice President, 1998 185,040 -- 29,898
Director 1997 180,000 -- 29,568
(1) No perquisites were received by any person named above greater than the
lesser of $50,000 or 10% of salary plus bonus.
(2) "All Other Compensation" includes (i) directors' fees of $3,000, $2,250,
and $3,750 for Mr. Rocke in years ended June 30, 1999, 1998 and 1997
respectively; $3,000, $2,250, and $3,750 for Mrs. Ryberg in years ended
June 30, 1999, 1998 and 1997 respectively; $3,000, $2,250 and $3,750 for
Mr. LaPallo in years ended June 30, 1999, 1998 and 1997 respectively; (ii)
profit sharing contributions of $27,514, $27,648, and $19,819 for Mr. Rocke
in years ended June 30, 1999, 1998 and 1997 respectively; $27,514, $27,648,
and $25,818 for Mrs. Ryberg in years ended June 30, 1999, 1998, and 1997
respectively; $26,801, $27,648, and $25,818 for Mr. LaPallo in years ended
June 30, 1999 and 1998 and 1997 respectively; and (iii) a $382,316 and
$291,201 severance package, respectively for each of Mr. Rocke and Mrs.
Ryberg for the year ended June 30, 1999.
Excluded from all other compensation is the increase and the amortization
of the June 30, 1995 cash surrender value of these life insurance policies.
The amount excluded is $18,391, $18,166, and $18,119, for Mr. Rocke for the
years ended June 30, 1999, 1998, and 1997, respectively, and $14,173,
$14,070, and $13,678 for Mrs. Ryberg for the years ended June 30, 1999,
1998, and 1997, respectively.
(3) On June 30, 1999, William J. Rocke and Jean E. Ryberg terminated their
employment with the Company. Mr. Rocke received a severance package with a
total value of $382,316 and Mrs. Ryberg received a severance package with a
value of $291,201. Included in these amounts were their company cars and
the life insurance policies previously owned by the Company.
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OPTION/GRANTS, EXERCISES, AND HOLDINGS
The Company did not grant any stock options during fiscal 1999. The
following table shows the number and value of options outstanding as of June 30,
1999 for each Named Executive.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised,
Underlying Unexercised In-The-Money Options
Shares Options at 6/30/99 (#) at 6/30/99 ($)(1)
Acquired Value --------------------------- ---------------------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Rocke 21,718 2,715 -- -- -- --
Jean E. Ryberg 21,718 8,144 29,629 -- -- --
Francis J. LaPallo -- -- 100,000 -- 25,000 --
</TABLE>
Value of unexercised, in-the-money stock options based on a fair market
value of the Common Stock of $3.125 per share as of June 30, 1999.
DIRECTORS' COMPENSATION
During fiscal 1999, each director (other than those employed by
Progressive), but including employees of the Company, was paid $750 per Board
meeting attended. In total, each director received $3,000 for attendance at
Board meetings during fiscal 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into a five-year employment agreement with Mr.
LaPallo expiring on June 30, 2001. 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 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.
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board 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 1999.
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 1999 COMPENSATION
The Company's fiscal 1999 executive compensation plan 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 not granted during fiscal 1999.
The Company's 1999 compensation to named executives is best exemplified by
examining the salary paid to William J. Rocke, the Company's Chairman and Chief
Executive Officer. The Rocke Employment 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, and a bonus of 3% of the Company's income before taxes and
bonuses and 5% of the increase in the Company's income 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 Committee believes that linking executive compensation to corporate
performance (i.e., income and stock performance) provides incentive to the
executive to enhance corporate performance and the shareholders' interests. It
was with this in mind that the bonus portion of executive compensation was
revised under the Company's employment agreements to the current bonus
arrangement with the Company's named executives.
Louis T. Mastos
Merlin J. Schumann
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COMPANY PERFORMANCE
The following graph reflects a five-year comparison of cumulative total
returns for the Common Stock, the American Stock Exchange ("AMEX") 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 1994. The graph compares
the performance of the Company with AMEX and Peer Group Indexes with the
investment weighted based upon market capitalization.
Measurement Period Frontier Adjusters of American Stock Peer Group of
(Fiscal Year Covered) America, Inc. Exchange Stocks
- --------------------- --------------------- -------------- -------------
1995 109.37 120.33 115.98
1996 128.14 137.78 136.17
1997 120.27 146.53 186.97
1998 145.55 169.41 245.03
1999 209.33 166.65 259.33
CERTAIN TRANSACTIONS
Old Frontier Investment, Inc. of Arizona, of which William J. Rocke and
Garnet Rocke, his wife, own 51% of the issued and outstanding stock 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 revenue derived from services provided by
certain other licensees in other Arizona cities and towns. The Company paid Old
Frontier Investment, Inc. $13,382 during fiscal year 1999 in connection with
such 5% royalty agreement.
George M. Hill, former Vice President, former Assistant Secretary and
former Director of the Company, provides legal services to the Company. During
the fiscal year 1999, the Company paid Mr. Hill $92,187 for services rendered
and disbursements. Such fees will continue to accrue at the rate of $3,000 per
month pursuant to a retainer agreement effective June 1, 1999.
The Company paid its former Vice Chairman, William W. Strawther, Jr.,
$20,000 during fiscal year 1999 for business and financial consulting services.
Mr. Strawther resigned his position as a director and Vice President of the
Company's Board of Directors on April 29, 1999.
In April 1999, the Company entered into an agreement with UFAC whereby the
Company will pay a $25,000 monthly fee for marketing, managerial, technological,
financial, the full time services of Jeffrey Jordan, and other services and
resources. As of June 30, 1999, the Company has incurred $50,000 in service fees
related to this agreement.
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 upon a review of copies of such forms received by the Company
during fiscal year ended June 30, 1999, and written representations that no such
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 Common Stock complied with Section 16(a) filing requirements
during such fiscal year.
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PROPOSAL TWO
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. The Board requests that shareholders vote to
ratify this appointment at the Meeting.
Audit services provided by McGladrey & Pullen, LLP, during the year ended
June 30, 1999 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 informed that neither McGladrey
& Pullen, LLP, nor any of its partners or associates has any relationship with
the Company, other than as independent auditors.
Certain financial statements of the Company appear in the Company's 1999
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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Financial Statements filed with the Commission pursuant to
the Exchange Act in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 are incorporated herein by reference.
OTHER MATTERS
Management of the Company knows of no other matters that will come before
the Meeting. However, if any other matters 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 best judgment on such matter.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-4 under the Exchange Act, the Company intends to
retain discretionary authority to vote proxies with respect to shareholder
proposals for which the proponent does not seek inclusion of the proposed matter
in the Company's proxy statement for the 2001 Annual Meeting, except in
circumstances where (i) the Company receives notice of the proposed matter no
later than August 12, 2000, and (ii) the proponent complies with the other
requirements set forth in Rule 14a-4.
By Order of the Board of Directors,
/s/ James S. Rocke, Secretary
Phoenix, Arizona
December 10, 1999
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FRONTIER ADJUSTERS OF AMERICA, INC.
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Troy Huth, Francis J. LaPallo, and Jeffrey C.
Jordan, as Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them, or any of them, or such substitute, to represent and to
vote, as designated below, all of the shares of common stock of Frontier
Adjusters of America, Inc. (the "Company") held of record by the undersigned as
of the close of business on December 8, 1999, at the annual meeting of
shareholders to be held on January 26, 2000, at 10:00 A.M. (Phoenix, Arizona
time), and at any adjournment thereof.
1. ELECTION OF DIRECTORS.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as indicated) to vote for each nominee listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below:
John M. Davies Jeffrey R. Harcourt Troy Huth Jeffrey C. Jordan
Louis T. Mastos William J. Rocke Jean E. Ryberg William A. White
Francis J. LaPallo
2. RATIFICATION OF ACCOUNTANTS. To ratify the selection of McGladrey and Pullen,
LLP, Certified Public Accountants, as the auditors of the Company for the
Company's fiscal year ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR Proposals 2 ; FOR all of the nominees listed in Proposal 1 above; and,
with respect to Proposal 3, as appropriate in the judgment of the Proxies named
herein.
Receipt of Notice of Annual Meeting of Shareholders and related Proxy Statement
dated December 10, 1999, is hereby acknowledged.
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, or as executor, administer,
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.
Dated:
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PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE
Signature
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Signature if held jointly
