SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
FRONTIER ADJUSTERS OF AMERICA, INC.
(Name of Issuer)
FRONTIER ADJUSTERS OF AMERICA, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
359050-10-1
(CUSIP Number of Class of Securities)
WILLIAM J. ROCKE
CHIEF EXECUTIVE OFFICER
FRONTIER ADJUSTERS OF AMERICA, INC.
45 EAST MONTEREY WAY, PHOENIX, ARIZONA 85011
(602) 264-1061
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
KAREN L. LIEPMANN, ESQ.
SARA R. ZISKIN, ESQ.
O'CONNOR, CAVANAGH, ANDERSON, KILLINGSWORTH & BESHEARS,
A PROFESSIONAL ASSOCIATION
ONE EAST CAMELBACK ROAD, SUITE 1100
PHOENIX, ARIZONA 85012
(602) 263-2400
May 12, 1999
(Date Tender Offer First Published, Sent, or Given to Security Holders)
CALCULATION OF FILING FEE
================================================================================
TRANSACTION VALUATION(1) AMOUNT OF FILING FEE
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$2,900,000 $580.00
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(1) Calculated as the aggregate estimated maximum purchase price to be paid for
up to 1,000,000 shares to be purchased in the Tender Offer.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<PAGE>
This Tender Offer Statement on Schedule 13E-4 (this "Schedule 13E-4")
relates to the offer by Frontier Adjusters of America, Inc., an Arizona
corporation (the "Company"), to purchase up to 1,000,000 shares of its Common
Stock, par value $.01 per share, at a purchase price of $2.90 per share, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 12, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (collectively, as amended or
supplemented from time to time, the "Offer"), and is intended to satisfy the
reporting requirements of Section 13(e) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Offer to Purchase and the Letter of
Transmittal are incorporated herein by reference and filed as Exhibits 9(a)(1)
and 9(a)(2) hereto, respectively.
Item 1. SECURITY AND ISSUER.
(a) The name of the issuer is Frontier Adjusters of America, Inc., an Arizona
corporation, and the address of its principal executive office is 45 East
Monterey Way, Phoenix, Arizona 85011.
(b) The title of the securities that are the subject of the Offer is the
Company's Common Stock, par value $.01 per share (the "Shares"). As of May 4,
1999, 4,605,358 Shares were outstanding. The Company seeks to purchase up to
1,000,000 Shares that are properly tendered at a price of $2.90 per Share, as
described in the Offer to Purchase attached hereto as Exhibit 9(a)(1). The
Company may purchase less than 1,000,000 Shares if less than 1,000,000 Shares
are properly tendered. The Company has been informed that no directors,
executive officers, or affiliates of the Company intend to tender Shares
pursuant to the Offer.
(c) Information with respect to the principal market for the Shares, and the
price range of the Shares for each quarterly period during the past two years,
is set forth under Section 7 of the Offer to Purchase, which is incorporated by
reference herein.
(d) This statement is filed by the Company, the issuer of the securities.
Item 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Company expects to pay up to the maximum estimated $2,900,000 purchase
price for tendered Shares using cash received from United Financial Adjusting
Corporation, an Ohio corporation ("UFAC") and a wholly-owned subsidiary of The
Progressive Corporation, an Ohio corporation, pursuant to a Stock Purchase
Agreement, dated as of November 20, 1998 (the "Stock Purchase Agreement"),
between the Company and UFAC. Under the Stock Purchase Agreement, on April 30,
1999 UFAC purchased 5,258,513 shares of the Company's Series A Convertible
Preferred Stock, par value $.01 per share (the "Convertible Shares"), at a price
of $1.30 per Convertible Share, for an aggregate purchase price of $6,836,067.
The transactions contemplated by the Stock Purchase Agreement are sometimes
collectively referred to herein as the "Transaction."
(b) The Company does not expect to borrow any portion of the consideration to be
paid for the Shares.
<PAGE>
Item 3. PURPOSE OF TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The Shares purchased by the Company in the Offer will be held as treasury
stock. The Company agreed to make the Offer in connection with the Transaction
which is described in Item 2(a). As part of the Transaction, the Company also
plans to a make a special, one-time distribution to shareholders in the amount
of $1.60 per Share (the "Distribution") after completion of the Offer. Holders
of Shares whose Shares are purchased in the Offer will not be eligible to
receive the Distribution on such Shares. The Convertible Shares and Shares held
by UFAC are not eligible to participate in the Offer or the Distribution.
The background, purpose and terms of the Transaction are described in the
Offer to Purchase. The Company's shareholders approved the Transaction at the
Annual Meeting of Shareholders on April 29, 1999 and UFAC purchased the
Convertible Shares on April 30, 1999, on the terms described in Item 2(a).
Through the Offer, the Company is providing shareholders with liquidity
that is not currently available in the secondary market that exists for the
Shares. The average daily trading volume on the American Stock Exchange (the
"AMEX") during the past six months of the Company's Shares has been
approximately 174 Shares. The Offer provides shareholders with the opportunity
to sell Shares in quantities larger than the existing market has indicated it
has capacity to absorb without eroding per Share price levels. The Board of
Directors believes that it is in the best interests of shareholders for the
Company to provide liquidity to shareholders without many of the transaction
costs associated with a sale of Shares on the secondary market. The Board of
Directors also believes that the purchase of Shares at this time is consistent
with the Company's long term goal of increasing stockholder value.
Except as described herein or in Sections 8 and 9 of the Offer to Purchase,
the Company has no plans or proposals that relate to or which would result in
(a) the acquisition by any person of any of the Shares or any other securities
of the Company (other than awarding stock options to certain employees under the
Company's stock option plans) or the disposition of any Shares or other such
securities; (b) any extraordinary corporate transaction, such as a merger,
reorganization, or liquidation, involving the Company or any of its
subsidiaries; (c) a sale or transfer of a material amount of the assets of the
Company or any of its subsidiaries; (d) any change in the present Board of
Directors or management of the Company, including but not limited to any plans
or proposals to change the number or the term of directors, to fill any existing
vacancy on the board or to change any material term of the employment contract
of any executive officer; (e) any material change in the present dividend rate
or policy, or indebtedness or capitalization of the Company; (f) any other
material change in the Company's corporate structure or business; (g) any
changes in the Company's charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Company by any
person; (h) causing any class of equity security of the Company to be delisted
from the AMEX or from any national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity security of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
<PAGE>
of the Exchange Act; or (j) the suspension the Company's obligations to file
reports pursuant to Section 15(d) of the Exchange Act.
Item 4. INTEREST IN SECURITIES OF THE ISSUER.
Except for the purchase by UFAC of Convertible Shares pursuant to the Stock
Purchase Agreement, based upon the Company's records and upon information
provided to the Company by its directors, executive officers, and affiliates,
neither the Company nor any of its subsidiaries or affiliates or any person in
control of the Company nor, to the Company's knowledge, any of the directors,
executive officers or affiliates or any person in control of the Company, nor
any associates of the foregoing, has effected any transaction in the Shares
during the forty business days prior to the date hereof, except for a purchase
of 400 Shares in an open market brokerage transaction at a price of $2.625 per
Share by Louis T. Mastos, a member of the Company's Board of Directors.
Item 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The members of the Company's Board of Directors and the Executive Officers of
the Company have informed the Company that they do not intend to tender any
Shares held by such parties in the Offer. UFAC has agreed not to participate in
the Offer. Except as described herein or in Items 8 and 9 of the Offer to
Purchase, there are no contracts, arrangements, understandings, or relationships
relating, directly or indirectly, to the Offer under Rule 13e-4 (whether or not
legally enforceable) between the Company (including, to the knowledge of the
Company, any executive officer, director or controlling shareholder of the
Company or any subsidiary thereof) and any other person with respect to any
securities of the Company.
Item 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company will pay approximately $5,000.00 to U.S. Stock Transfer Corporation
for acting as information agent/depository in connection with the Offer. The
Company will also, on request, reimburse U.S. Stock Transfer Corporation for
customary handling and mailing expenses incurred in forwarding materials in
respect of the Offer to the beneficial owners for which they act as nominees.
The U.S. Stock Transfer Corporation has been authorized to act as the Company's
agent for purposes of the Offer. No person has been or is expected to be
employed, retained, or compensated by the Company or by any other person on
behalf of the Company to make solicitations or recommendations in connection
with the Offer.
Item 7. FINANCIAL INFORMATION.
(a) The following financial data of the Company is incorporated herein by
reference:
1. Audited financial statements for the two fiscal years ended June
30,1998 and June 30, 1997 are incorporated herein by reference to the
Form 10-K of the Company for the period ended June 30, 1998;
<PAGE>
2. Unaudited balance sheets and comparative year-to-date statements of
operations and statements of cash flows and related earnings per share
amounts are incorporated by reference to the Company's most recent
quarterly report filed on the Form 10-Q for the quarter ended December
31, 1998;
3. The book value per share as of December 31, 1998 and 1997, and June
30, 1998 and 1997 is shown on the Summary Historical Financial
Information on page 9 of the Offer to Purchase attached as Exhibit
9(a)(1).
(b) The Offer to Purchase includes pro forma financial data, which is
incorporated by reference herein, to demonstrate the effect of the Offer on
selected financial information provided under Item 7(a) above, commencing on
page 10 therein.
Item 8. ADDITIONAL INFORMATION.
(a) Pursuant to the Stock Purchase Agreement, described in Item 2, the Company
has entered into a Service Agreement with UFAC (the "Service Agreement")
pursuant to which UFAC will provide the Company with certain advisory and
support services related to franchise operations, strategic planning, sales and
marketing, technology, human resources support, accounting, and reporting, and
the Company will pay UFAC service fees of $25,000 per month plus expenses for
such services; an agreement with William J. Rocke, the Company's Chief Executive
Officer (the "Rocke Agreement") and an agreement with Jean E. Ryberg, the
Company's President (the "Ryberg Agreement"), respectively, pursuant to which
Mr. Rocke and Mrs. Ryberg will terminate their employment with the Company on
June 30, 1999 and will continue to act as consultants to the Company until June
30, 2000. Pursuant to the Stock Purchase Agreement. UFAC has the right to
nominate a majority of the Board as long as it continues to hold a majority of
the voting power of the Company. There are no other contracts, arrangements,
understandings, or relationships referred to in Items 5 or 8(a) of this
Schedule. There are no other contracts, agreements or understandings, except as
described herein or incorporated herein by reference.
(b) None.
(c) Not applicable.
(d) None.
(e) The Offer to Purchase attached hereto as Exhibit 9(a)(1) and the exhibits
thereto are incorporated herein by reference in their entirety.
Item 9. MATERIALS TO BE FILED AS EXHIBITS.
(a) The tender offer documents sent or given to security holders by the Company
are attached hereto as Exhibits 9(a)(1) through 9(a)(6).
<PAGE>
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Exhibit Number Description
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9(a)(1) Offer to Purchase, dated May 12, 1999
9(a)(2) Letter of Transmittal.
9(a)(3) Notice of Guaranteed Delivery.
9(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Company's and Other Nominees
9(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Company's and Other Nominees
9(a)(6) Letter to Shareholders from William J. Rocke, Chief
Executive Officer of the Company, dated May 12, 1999
9(a)(7) Press Release dated April 30, 1999
9(a)(8) Service Agreement*
9(a)(9) Rocke Agreement*
9(a) (10) Ryberg Agreement*
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*Incorporated herein by reference to the Company's Definitive Proxy Statement on
Schedule 14A filed with the Securities and Exchange Commission on March 26,
1999.
(b) Not applicable.
(c) Other than the Service Agreement, the Rocke Agreement, the Ryberg Agreement,
there are no other contracts, arrangements, understandings, or relationships
referred to in Items 5 or 8(a) of this Schedule.
(d) No written opinion has been prepared by legal counsel at the request of the
Company pertaining to the tax consequences of the tender offer.
(e) No securities of the Company have been or are to be registered under the
Securities Act of 1933, as amended, in connection with the Offer.
(f) No written instruction, form or other material has been furnished to
officers of the Company for their use, directly or indirectly, in connection
with the tender offer.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete, and correct.
FRONTIER ADJUSTERS OF AMERICA, INC.
/s/ William J. Rocke
-----------------------------------
William J. Rocke,
Chief Executive Officer
Dated: May 12, 1999
FRONTIER ADJUSTERS OF AMERICA, INC.
OFFER TO PURCHASE FOR CASH UP TO
1,000,000 SHARES OF ITS COMMON STOCK
AT A PRICE OF $2.90 PER SHARE
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD EXPIRE AT
9:00 P.M., PACIFIC TIME, ON JUNE 10, 1999 UNLESS THE OFFER
IS TERMINATED EARLIER OR EXTENDED
Frontier Adjusters of America, Inc., an Arizona corporation (the
"Company"), hereby invites its shareholders to tender its Common Stock, par
value $.01 per share (the "Shares"), to the Company at a price of $2.90 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer").
The Company will purchase up to 1,000,000 Shares at a price of $2.90 per
Share pursuant to the Offer. The Company may purchase less than 1,000,000 Shares
if less than 1,000,000 Shares are properly tendered. Shareholders are not
obligated to tender or sell any Shares pursuant to the Offer. If more than
1,000,000 Shares are validly tendered, the Company will purchase the Shares on a
pro rata basis.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE
OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
The Shares are listed and principally traded on The American Stock Exchange
("AMEX") under the symbol "FAJ." On November 25, 1998, the last trading day
before the Company announced its intention to make the Offer, the closing sale
price as reported on AMEX was $2.44 per Share. On May 4, 1999, the closing sale
price as reported on AMEX was $2.75 per Share. THE COMPANY URGES SHAREHOLDERS TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS IS RECOMMENDING THAT ANY
SHAREHOLDER TENDER OR REFRAIN FROM TENDERING ANY SHARES. EACH SHAREHOLDER MUST
DECIDE WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE
COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS
INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
May 12, 1999
<PAGE>
IMPORTANT
To accept the Offer, shareholders must strictly comply with the
instructions contained in the Letter of Transmittal. Any shareholder tendering
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile copy thereof) and mail or deliver it, together with stock certificates
representing the tendered Shares and any other required documents, to the U.S.
Stock Transfer Corporation (the "Information Agent/Depositary") at the address
set forth below or (2) request the shareholder's broker, dealer, commercial
bank, trust company, or other nominee to effect the transaction for the
shareholder. A shareholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee must contact that
broker, dealer, commercial bank, trust company, or other nominee, if the
shareholder desires to tender those Shares. Shareholders who desire to tender
Shares and whose certificates for such Shares are not immediately available
should tender those Shares by following the procedures for guaranteed delivery
set forth in Section 3.
TO TENDER SHARES PROPERLY, SHAREHOLDERS MUST FULLY COMPLETE THE LETTER OF
TRANSMITTAL.
Questions and requests for assistance concerning this Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to the Information Agent/Depositary at the address and telephone number set
forth below.
U.S. Stock Transfer Corporation
1745 Gardenia Avenue
Suite 200
Glendale, CA 91204-2991
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION
OR ANY SUCH INFORMATION OR REPRESENTATION, IF GIVEN OR MADE, AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
FORWARD-LOOKING INFORMATION .......................................... 1
INTRODUCTION ......................................................... 1
THE OFFER............................................................. 2
1. Number Of Shares; Proration .......................................... 2
2. Tenders By Owners Of Fewer Than 100 Shares ........................... 3
3. Procedure For Tendering Shares ....................................... 3
4. Withdrawal Right ..................................................... 4
5. Purchase Of Shares and Payment ....................................... 5
6. Certain Conditions Of The Offer ...................................... 5
7. Price Range Of Shares ................................................ 7
8. Background And Purpose Of The Offer .................................. 7
9. Interest Of Directors And Executive Officers; Transactions And
Arrangements Concerning The Shares ................................. 8
10. Source And Amount Of Funds ........................................... 9
11. Certain Information About The Company ................................ 9
12. Effects Of The Offer On The Market For Shares; Registration Under
The Exchange Act ................................................... 11
13. Certain Legal Matters; Regulatory And Foreign Approvals .............. 11
14. Certain U.S. Federal Income Tax Consequences ......................... 12
15. Extension Of The Offer; Termination; Amendments ...................... 14
16. Fees And Expenses .................................................... 15
17. Miscellaneous..................................................... 15
i
<PAGE>
SUMMARY
This general summary is solely for the convenience of the Company's
shareholders and is qualified in its entirety by reference to the full text and
more specific details set forth in this Offer to Purchase.
PURCHASE PRICE
All Shares purchased by the Company pursuant to the Offer will be purchased at
the price of $2.90 per Share.
NUMBER OF SHARES TO BE PURCHASED
1,000,000 Shares (or such lesser number of Shares as are properly tendered).
MARKET PRICE OF SHARES
On May 4, 1999, the last reported sale price of the Shares on the AMEX was $2.75
per Share.
CONDITIONS TO THE OFFER
The Offer is subject to certain conditions. See Section 6.
HOW TO TENDER SHARES
See Section 3. Contact the Information Agent/Depositary or consult your broker
for assistance.
BROKERAGE COMMISSIONS
None for registered shareholders who tender their Shares directly to the
Information Agent/Depositary. Shareholders holding Shares through brokers or
banks are urged to consult the brokers or banks to determine whether transaction
costs are applicable if shareholders tender Shares through the brokers or banks
and not directly to the Information Agent/Depositary.
STOCK TRANSFER TAX
None, if payment is made to the registered holder of the Shares.
EXPIRATION AND PRORATION TIME
June 10, 1999 at 9:00 P.M., Pacific Time, unless the Offer is extended by the
Company.
PAYMENT DATE
As soon as practicable after the Expiration Time.
POSITION OF THE COMPANY AND ITS BOARD OF DIRECTORS
The Company's Board of Directors has approved the Offer. However, neither the
Company nor its Board of Directors makes any recommendation to shareholders as
to whether to tender or refrain from tendering their Shares. Each shareholder
must make the decision whether to tender Shares and, if so, how many Shares to
tender. The Company has been advised that none of its directors, executive
officers, or affiliates controlled by such persons intends to tender any Shares
pursuant to the Offer.
WITHDRAWAL RIGHTS
Tendered Shares may be withdrawn at any time prior to 9:00 P.M., Pacific Time,
on June 10, 1999, unless the Offer is extended by the Company, and, unless
previously purchased, after 9:00 P.M., Pacific Time, on July 9, 1999. See
Section 4.
ODD LOTS
There will be no proration of Shares tendered by any shareholder owning
beneficially or of record fewer than 100 Shares as of the close of business on
May 12, 1999, and as of the Expiration Time, provided the shareholder tenders
all Shares owned by the shareholder prior to the Expiration Time and completes
the section entitled "Odd Lots" in the Letter of Transmittal, in which case all
such Shares will be purchased. See Section 1.
FURTHER DEVELOPMENTS REGARDING THE OFFER
Call the Information Agent/Depositary or consult your broker.
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF FRONTIER ADJUSTERS OF AMERICA, INC.:
FORWARD-LOOKING INFORMATION
Certain statements and information contained in this Offer to Purchase,
including, but not limited to, Section 8 entitled "Background And Purpose of the
Offer" and Section 11 entitled "Certain Information about the Company"
concerning future, proposed, and anticipated activities of the Company and other
statements contained in this Offer to Purchase regarding matters that are not
historical facts are "forward-looking" statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those stated or implied in the forward-looking statements.
INTRODUCTION
Frontier Adjusters of America, Inc., an Arizona corporation (the
"Company"), hereby invites its shareholders to tender its Common Stock, par
value $.01 per share (the "Shares ") to the Company at a price of $2.90 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer").
The Company is making the Offer in accordance with the terms of a Stock
Purchase Agreement, dated as of November 20, 1998 (the "Stock Purchase
Agreement"), between the Company and United Financial Adjusting Company
("UFAC"), an Ohio corporation and a wholly-owned subsidiary of The Progressive
Corporation, an Ohio corporation, pursuant to which the Company sold to UFAC
5,258,513 shares of the Company's Series A Convertible Voting Preferred Stock,
par value $.01 per share (the "Convertible Shares"), at a purchase price of
$1.30 per share (the "Transaction"). The Convertible Shares are convertible into
Shares on a one-for-one basis on or before June 30, 1999. As part of the
Transaction, the Company plans to a make a special one-time distribution in the
amount of $1.60 per Share (the "Distribution") to shareholders whose Shares are
not purchased by the Company in the Offer. See Section 8. UFAC will not
participate in the Offer or receive the Distribution.
The Company believes that the Offer is an effective way of providing a cash
return on investment to shareholders who wish to liquidate all or part of their
Shares at this time, and that it is in the best interests of shareholders for
the Company to provide liquidity to shareholders without all of the transaction
costs associated with the sale of Shares on the open market. The Company also
believes that the purchase of Shares is consistent with the Company's long-term
goal of increasing shareholder value.
The Company will purchase up to 1,000,000 Shares that are properly tendered
and not withdrawn at a price of $2.90 net to the seller in cash, upon the terms
and subject to the conditions of the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
If, before the Expiration Time (as defined in Section 1), more than
1,000,000 Shares are properly tendered and not withdrawn, the Company will buy
Shares on a pro rata basis from all shareholders, other than odd lot holders,
who properly tender Shares. See "Section 1. Number of Shares" and "Section 2.
Tenders by Owners of Fewer than 100 Shares." The Company will return all Shares
not purchased under the Offer because of oversubscription. Tendering
shareholders will not be obligated to pay brokerage commissions, solicitation
fees, or, subject to Instruction 8 of the Letter of Transmittal, stock transfer
taxes on the Company's purchase of Shares. Shareholders should consult with
their brokerage firm or bank for additional fees or transaction costs, if any,
which will not be paid by the Company. The Company will pay all of its fees and
expenses in connection with the Offer. See "Section 16. Fees and Expenses."
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
SHAREHOLDER MUST DECIDE WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER. NONE OF THE COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER
SHARES PURSUANT TO THE OFFER.
The address of the principal executive offices of the Company is 45 East
Monterey Way, Phoenix, Arizona 85011.
1
<PAGE>
The 1,000,000 Shares that the Company is offering to purchase represent
approximately 10.1% of the Company's 9,863,871 Shares outstanding (assuming the
conversion of the Convertible Shares by UFAC) as of May 4, 1999 (9.6% on a fully
diluted basis).
The Shares are listed and traded principally on The American Stock Exchange
("AMEX") under the symbol "FAJ." The Company announced its intention to make the
Offer after the close of trading on November 25, 1998. The closing per Share
sales price as reported on AMEX on that day was $2.44. On May 4, 1999, the
closing per Share sales price as reported on AMEX on that day was $2.75. The
Company urges shareholders to obtain current market quotations for the Shares.
THIS OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
purchase up to 1,000,000 Shares that are properly tendered on or before the
Expiration Time (and not withdrawn in accordance with Section 4) at a price of
$2.90 per Share. The term "Expiration Time" means 9:00 P.M. Pacific Time, on
June 10, 1999, unless the Company extends the period of time during which the
Offer is open, in which event the term "Expiration Time" shall mean the latest
time and date at which the Company shall accept Shares. See Section 15 for a
description of the Company's right to extend the time during which the Offer is
open and to delay, terminate, or amend the Offer. See also Section 6.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Time more than 1,000,000 Shares are properly tendered and not
properly withdrawn, the Company will buy Shares first from any Odd Lot Holders
(as defined below) who properly tender all their Shares and then on a pro rata
basis from all other shareholders who properly tender Shares (and do not
properly withdraw such Shares prior to the Expiration Time). The proration
period also expires at the Expiration Time. In the event that proration of
tendered Shares is required, the Company will determine the proration factor as
soon as practicable following the Expiration Time. Proration for each
shareholder tendering Shares, other than Odd Lot Holders, will be based on the
ratio of the number of Shares properly tendered and not properly withdrawn by
such shareholder to the total number of Shares properly tendered and not
properly withdrawn by all Shareholders, other than Odd Lot Holders. Because of
the difficulty in determining the number of Shares properly tendered (including
Shares tendered by guaranteed delivery procedures, as described in Section 3)
and not properly withdrawn, and because of the Odd Lot procedure, the Company
does not expect that it will be able to announce the final proration factor or
commence payment for any Shares purchased pursuant to the Offer until
approximately seven AMEX trading days after the Expiration Time. The preliminary
results of any proration will be announced by press release as promptly as
practicable after the Expiration Time. Shareholders may obtain preliminary
proration information from the Information Agent/Depositary and may be able to
obtain such information from their brokers.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday, or federal holiday and consists of the time period from 12:01
a.m. through Midnight, Pacific Time.
In accordance with Instruction 2 of the Letter of Transmittal, each
shareholder desiring to tender Shares must specify the number of Shares he or
she desires to tender. All Shares purchased pursuant to the Offer will be
purchased at a price of $2.90 per Share, net to the seller in cash, without
interest thereon. All Shares not purchased pursuant to the Offer because of
proration, will be returned to the tendering shareholders at the Company's
expense as promptly as practicable following the Expiration Time.
If the number of Shares properly tendered prior to the Expiration Time is
less than or equal to 1,000,000 Shares, the Company will, upon the terms and
subject to the conditions of the Offer, purchase all Shares so tendered.
In the event that proration of tendered Shares is required, the Company
will determine the final proration factor as promptly as practicable after the
Expiration Time. Although the Company does not expect to be able to announce the
final results of such proration until approximately seven AMEX trading days
after the Expiration Time, it will announce preliminary results of proration by
press release as promptly as practicable after the Expiration Time. Shareholders
may obtain such preliminary information from the Information Agent/Depositary
and may be able to obtain such information from their brokers.
2
<PAGE>
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES.
The Company will accept for purchase, without proration, all Shares
properly tendered before the Expiration Time by or on behalf of shareholders who
beneficially held, as of the close of business on May 12, 1999, an aggregate of
fewer than 100 Shares ("Odd Lot Holders") and who continue to own beneficially
all of such Shares as of the Expiration Time. See Section 1. An Odd Lot Holder
must properly tender all Shares that such Odd Lot Holder beneficially owns;
partial tenders will not qualify for this preference. This preference is not
available to owners of 100 or more Shares, even if such owners have separate
stock certificates for fewer than 100 Shares. Any Odd Lot Holder wishing to
tender all Shares beneficially owned by that Odd Lot Holder pursuant to this
Offer must complete the box captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, on the Notice of Guaranteed Delivery. See Section 3.
3. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. For Shares to be properly tendered pursuant to the
Offer: (a) the certificates for the Shares, together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, must be received on or before the Expiration Time by the
Information Agent/Depositary at its address set forth on the back cover of this
Offer to Purchase; or (b) the tendering shareholder must comply with the
guaranteed delivery procedure set forth below.
It is a violation of Section 10(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 10b-4 promulgated thereunder, for a
person to tender Shares for such person's own account unless the person so
tendering:
(a) owns those Shares; or
(b) owns other securities convertible into or exchangeable for the
Shares or owns an option, warrant or right to purchase the Shares and
intends to acquire Shares for tender by conversion, exchange or exercise of
such option, warrant, or right.
Section 10(b) and Rule 10b-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
The Company's acceptance of Shares will constitute a binding agreement
between the tendering shareholder and the Company upon the terms and subject to
the conditions of the Offer. The tendering shareholder represents that (i) such
shareholder owns the Shares being tendered within the meaning of Rule 10b-4
promulgated under the Exchange Act and (ii) the tender of those Shares complies
with Rule 10b-4.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Signatures must be guaranteed
on all Letters of Transmittal and all other documents required for the transfer
of Shares, except as described in the next sentence. No signature guarantee is
required on the Letter of Transmittal if (a) the Letter of Transmittal is signed
by the registered holder of such Shares and payment, and delivery of the
certificates for any Shares not purchased, are to be made directly to such
holder or (b) the Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association, or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing constituting
an "Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or an Eligible Institution in accordance with applicable law and with the
Securities Transfer Agents Medallion Program ("STAMP") operated by Keymark
Financial Services, Inc. See Instruction 1 of the Letter of Transmittal. If a
certificate representing Shares is registered in the name of a person other than
the signer of the related Letter of Transmittal, or if payment is to be made or
Shares not purchased or tendered are to be issued to a person other than the
registered owner, then the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed by the registered owner exactly
as the name of the registered owner appears on the certificate, with the
signature on the certificate or stock power guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. or an Eligible Institution in accordance with
applicable law and with STAMP. In all cases, payment of Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Information Agent/Depositary of certificates for such Shares, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal. THE
METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE LETTER OF
TRANSMITTAL, AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF
THE TENDERING SHAREHOLDER. IF
3
<PAGE>
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who does not otherwise establish an exemption from such withholding
must notify the Company of such shareholder's correct taxpayer identification
number (or certify that such taxpayer is awaiting a taxpayer identification
number) and provide certain other information by completing the Substitute Form
W-9 included in the Letter of Transmittal. Foreign shareholders must submit Form
W-8 in order to avoid backup withholding. For this purpose, a foreign
shareholder is a shareholder that is not (i) a citizen or resident of the United
States; (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof; or
(iii) any estate or trust the income of which is subject to United States
federal income taxation regardless of the source of such income.
FOR A DISCUSSION OF CERTAIN OTHER FEDERAL INCOME TAX CONSEQUENCES TO
TENDERING SHAREHOLDERS, SEE SECTION 14.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates are not immediately available or
time will not permit all required documents to reach the Information
Agent/Depositary before the Expiration Time, such Shares may nevertheless be
tendered provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Information Agent/Depositary receives (by hand, mail,
telegram, or facsimile transmission), on or prior to the Expiration Time, a
properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form the Company has provided with this Offer to
Purchase; and
(c) the certificates for all tendered Shares in proper form for
transfer, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
and any other documents required by the Letter of Transmittal, are received
by the Depositary within three AMEX trading days after the date the
Information Agent/Depositary receives such Notice of Guaranteed Delivery.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. The Company reserves the absolute right to
reject any or all tenders it determines not to be valid, eligible or in proper
form or if acceptance of or payment for such Shares may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares. All defects and irregularities must be cured or
waived before any tender of Shares will be deemed to be proper. Neither the
Company nor any other person is or will be obligated to give notice of any
defects or irregularities in tenders, and none of them will incur any liability
for failure to give any such notice.
4. WITHDRAWAL RIGHT.
Except as otherwise provided in this Section 4, the tender of Shares
pursuant to the Offer are irrevocable. Any shareholder desiring to withdraw
Shares tendered pursuant to the Offer must notify the Information
Agent/Depositary as set forth below at any time before the Expiration Time and,
unless previously accepted for payment by the Company, at any time after 9:00
P.M., Pacific Time, on July 9, 1998, which is 20 business days after the
Expiration Time.
For a withdrawal to be effective, the Information Agent/Depositary must
timely receive (at its address set forth on the back cover of this Offer to
Purchase) a written, telegraphic, telex or facsimile transmission notice of
withdrawal that complies with the requirements set forth in this paragraph. Such
notice of withdrawal must specify the name of the person who deposited the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered owner, if different from that of the person who tendered such Shares.
If the certificates have been delivered or otherwise identified to the
Information Agent/Depositary, then prior to the release of such certificates,
the tendering shareholder must also submit the serial numbers shown on the
particular certificates evidencing the Shares and the signature on the notice of
withdrawal must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or an Eligible Institution in accordance with applicable law and with STAMP
(except in the case of Shares tendered by an Eligible Institution). The Company,
in its sole discretion, will determine the proper form and validity (including
time of receipt) of notices of withdrawal, and such decisions shall be final and
binding on all parties. Neither the Company nor any other person is or will be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and no such person will incur any liability for failure to give any
such notice. Any Shares properly withdrawn
4
<PAGE>
will thereafter be deemed not tendered for purposes of the Offer. Withdrawn
Shares may, however, be retendered before the Expiration Time by again following
any of the procedures described in Section 3.
5. PURCHASE OF SHARES AND PAYMENT.
The Company will purchase up to 1,000,000 Shares (subject to decrease as
provided in Section 1 and Section 15) properly tendered and not withdrawn as
permitted in Section 4, as soon as practicable after the Expiration Time.
The Company will pay for Shares purchased pursuant to the Offer by
transmitting payment of the aggregate of $2.90 per Share either to the tendering
shareholders or in accordance with their instructions. In the event of
proration, the Company will determine the proration factor and pay for those
tendered Shares accepted for payment as soon as practicable after the Expiration
Time. However, the Company does not expect to be able to announce the final
results of any such proration until approximately seven AMEX trading days after
the Expiration Time. Certificates for all Shares not purchased will be returned
as soon as practicable after the Expiration Time without expense to the
tendering shareholder. Under no circumstances will the Company pay interest on
the amount to be paid for tendered Shares.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however, if
payment for tendered Shares is to be made to any person other than the
registered owner, or (in the circumstances permitted by the Offer) if
unpurchased Shares are to be registered in the name of any person other than the
registered owner, or if tendered certificates are registered in the name of any
person other than the registered owner signing the Letter of Transmittal, the
amount of all stock transfer taxes, if any (whether imposed on the registered
owner or such other person), payable on account of the transfer to such person
will be deducted from the payment for tendered Shares unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted. See
Instruction 7 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM THE INFORMATION
AGENT/DEPOSITARY) MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF
31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO
THE OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment or to purchase or to pay for any Shares tendered
and may terminate or amend the Offer or may postpone the acceptance for payment
of, the purchase of and the payment for, Shares tendered, if at any time on or
after May 12, 1999 and at or before the time of purchase of such Shares, any of
the following events shall have occurred (or shall have been determined by the
Company to have occurred) which, in the Company's sole judgment in any such case
and regardless of the circumstances (including any action or omission to act by
the Company), makes it inadvisable to proceed with the Offer or with such
purchase or payment:
(a) there shall have been threatened, instituted, or pending any
action or proceeding by any government, or by any governmental, regulatory
or administrative agency, authority, or tribunal, or by any other person,
domestic, or foreign, which:
(1) challenges the making of the Offer, the acquisition of Shares
pursuant to the Offer, or otherwise relates in any manner to the
Offer; or
(2) in the Company's sole judgment, could materially affect the
business, condition (financial or other), income, operations, or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise could materially impair in any way the contemplated future
conduct of the business of the Company or any of its subsidiaries, or
materially impair the Offer's contemplated benefits to the Company; or
(b) there shall have been any statute, rule, regulation, judgment,
order, or injunction threatened, proposed, sought, promulgated, enacted,
entered, amended, enforced, or deemed to be applicable to the Offer or the
Company or any of its subsidiaries, which, in the Company's sole judgment,
would or might directly or indirectly:
5
<PAGE>
(1) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer;
(2) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the
Shares;
(3) materially impair the contemplated benefits of the Offer to
the Company or impose new or additional obligations or costs on the
Company; or
(4) materially affect the business, condition (financial or
other), income, operations, or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or
any of its subsidiaries; or
(c) there shall have occurred:
(1) the declaration of any banking moratorium or suspension of
payments in respect of banks in the United States;
(2) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or
in the over-the-counter market;
(3) the commencement of a war, armed hostilities, or any other
national or international crisis directly or indirectly involving the
United States;
(4) any limitation (whether or not mandatory) by any
governmental, regulatory, or administrative agency or authority on, or
any event which, in the Company's sole judgment, might affect, the
extension of credit by banks or other lending institutions in the
United States;
(5) any significant decrease in the market price of the Shares or
in the general level of market prices of equity securities in the
United States or abroad, or any change in the general political,
market, economic, or financial conditions in the United States or
abroad that could have a material adverse effect on the Company's
business, operations or prospects or on the trading in the Shares; or
(6) in the case of any of the foregoing existing at the time of
the commencement of the Offer, in the Company's sole judgment, a
material acceleration or worsening thereof; or
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations, Share ownership (other than
through the Offer), or prospects of the Company and its subsidiaries, taken
as a whole, which, in the Company's sole judgment, is or may be material to
the Company; or
(e) a tender or exchange offer for any or all of the Shares (other
than the Offer), or any merger, business combination, or other similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
The Company's determination concerning the events described in this Section
6 shall be final and conclusive, and shall be binding on all parties.
6
<PAGE>
7. PRICE RANGE OF SHARES.
The Shares are traded principally on AMEX under the symbol "FAJ." The
following table sets forth for the periods indicated the high and low closing
per Share sale prices on AMEX as reported in published financial sources and the
cash dividends paid, or to be paid, per Share in each such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Year HIGH LOW DIVIDENDS
-------- ------- ---------
<S> <C> <C> <C>
1997
First Quarter (ended September 30, 1996) ........ $ 3.2500 $2.5625 $.0375
Second Quarter (ended December 31, 1996) ........ $ 3.8750 $3.0000 $.0375
Third Quarter (ended March 31, 1997) ............ $ 3.6250 $2.9375 $.0375
Fourth Quarter (ended June 30, 1997) ............ $ 3.5625 $2.6250 $.0375
1998
First Quarter (ended September 30, 1997) ........ $ 2.8125 $2.1250 $.0375
Second Quarter (ended December 31, 1997) ........ $ 3.5000 $2.3750 $.0375
Third Quarter (ended March 31, 1998) ............ $ 3.3125 $2.5000 $.0375
Fourth Quarter (ended June 30, 199) ............. $ 3.2500 $2.3750 $.0375
1999
First Quarter (ended September 30, 1998) ........ $ 3.3750 $2.3750 $.0375
Second Quarter (ended December 31, 1998) ........ $ 2.5625 $2.0000 $.0000
Third Quarter (ended March 31, 1999) ............ $ 2.7500 $2.3750 $.0000
</TABLE>
The record date for the Distribution shall be declared during the
Fourth Quarter of the Company's 1999 fiscal year (prior to June 30, 1999). The
Company announced its intention to make the Offer after the close of trading on
November 25, 1998. The closing sales price per Share as reported on AMEX on that
day was $2.44. On May 4, 1999, the closing sales price per Share as reported on
AMEX on that day was $2.75. The Company urges shareholders to obtain current
quotations of the market price of the Shares.
8. BACKGROUND AND PURPOSE OF THE OFFER.
The Company is making the Offer in connection with the Transaction. See
"Introduction." The background, purpose, and terms of the Transaction are
described in the Proxy Statement for the Company's 1999 Annual Meeting of
Shareholders, which was mailed to the Company's shareholders on or about March
24, 1999. The Company's shareholders approved the Transaction at the Annual
Meeting of Shareholders on April 29, 1999.
Pursuant to the Stock Purchase Agreement, UFAC purchased the Convertible
Shares at a purchase price of $1.30 per share on April 30, 1999. The Convertible
Shares have full voting rights, vote with the Shares as a single class and are
convertible into Shares on a one-for-one basis after the record date for the
Distribution and automatically convert on June 30, 1999 if not converted prior
thereto. UFAC owns approximately to 53.3% of the Company's voting stock (52.2%
on a fully diluted basis), and upon conversion of the Convertible Shares will
own approximately 59.3% of the Shares on a fully diluted basis (if 1,000,000
Shares are purchased in the Offer).
As part of the Transaction, the Company plans to a make a special, one time
Distribution in the amount of $1.60 per Share to shareholders whose Shares are
not purchased by the Company in the Offer and who continue to hold such Shares
on the record date for the Distribution. UFAC will not participate in the Offer
or receive the Distribution.
SHAREHOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER WILL NOT
RECEIVE THE DISTRIBUTION ON SUCH SHARES.
The size of the Company's Board of Directors was increased to fifteen
members on April 30, 1999. A majority of the Board of Directors are designees of
UFAC. Pursuant to the Stock Purchase Agreement, UFAC has the right to nominate a
majority of the Board as long as it continues to hold a majority of the voting
power of the Company. William J. Rocke, the Company's Chief Executive Officer,
and Jean E. Ryberg, the Company's President, have agreed to resign as officers
of the Company on June 30, 1999. At that time, the Board will name a new Chief
Executive Officer and President of the Company. Mr. Rocke and Ms. Ryberg will
remain on the Board until such time as their respective successors are duly
elected and qualified.
7
<PAGE>
Dividends may be declared from time to time in the discretion of the Board
of Directors. Since September 30, 1998, no quarterly cash dividends have been
declared pending payment of the Distribution. There can be no assurance that
dividends will thereafter be resumed. If the Company requires the capital to
fund operations or identifies alternative uses for capital (such as new business
or investment opportunities), earnings may be retained or applied for such
purposes rather than distributed as dividends.
The purpose of the Offer is to allow shareholders who want to liquidate
their investment in whole or in part in the Company to sell some or all of their
Shares. The Company is providing shareholders with liquidity that is not
currently present in the secondary market that exists for the Shares. The
average daily volume on the AMEX of the Company's Shares during the past six
months has been approximately 174 Shares. The Offer provides shareholders with
the opportunity to sell Shares in quantities larger than the existing market has
indicated it has capacity to absorb without eroding per Share price levels.
Furthermore, the Company believes that the purchase of Shares through the Offer
at this time is consistent with the Company's long-term goal of increasing
shareholder value. Shareholders whose Shares are not purchased in the Offer will
obtain a proportionate increase in their ownership interest in the Company if
the Offer is completed and thus in the Company's future earnings and assets. For
shareholders who sell at a gain, the repurchase may result in more favorable
capital gain tax treatment than would be the case with a special distribution of
the same aggregate amount. See Section 14.
Any shareholder owning less than 100 Shares whose Shares are purchased
pursuant to the Offer not only will avoid the payment of brokerage commissions
on such transaction, but also will avoid any applicable Odd Lot discounts
payable on sales of Odd Lots on AMEX.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
Although the Company has no current plans to acquire additional Shares, the
Company may from time to time in the future purchase additional Shares on the
open market, in private transactions, through tender offers or otherwise. Shares
that the Company acquires pursuant to the Offer will be deemed treasury stock.
No current plan exists to make any material change in the business or operations
of the Company.
9. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
As of May 4, 1999, UFAC owned approximately 53.3% of the Company's voting
stock. After the Offer, UFAC will own approximately 59.3% of the Company's
voting stock (if 1,000,000 Shares are purchased in the Offer), and the Company's
directors and executive officers as a group will beneficially own an aggregate
of 1,709,462 Shares (approximately 35.6%) of the outstanding Shares (including
194,782 Shares which may be acquired by exercise of options exercisable within
60 days). The Company has been advised that no directors and no executive
officers of the Company intend to tender any Shares pursuant to the Offer. If
the Company purchases 1,000,000 Shares (or 21.7% of the Shares outstanding as of
May 4, 1999) pursuant to the Offer, then after such purchase and assuming the
conversion of the Convertible Shares, the Company's executive officers and
directors as a group would beneficially own approximately 18.9% of the
outstanding Shares (including 194,782 Shares which may be acquired by exercise
of options exercisable within 60 days).
The Company and UFAC have entered into a Service Agreement (the "Service
Agreement") pursuant to which UFAC will provide the Company with certain
advisory and support services related to franchise operations, strategic
planning, sales and marketing, technology, human resources support, accounting,
and reporting, and the Company will pay UFAC service fees of $25,000 per month
plus expenses under such Services Agreement. Except for the purchase by UFAC of
the Convertible Shares pursuant to the Stock Purchase Agreement, based upon the
Company's records and upon information provided to the Company by its directors,
executive officers and affiliates, neither the Company nor any of its
subsidiaries nor, to the Company's knowledge, any of the directors, executive
officers or affiliates of the Company, nor any associates of any of the
foregoing, has effected any transactions in the Shares during the 40 business
days prior to the date hereof, except for a purchase of 400 Shares in an open
market brokerage transaction at a price of $2.625 per Share by Louis T. Mastos,
a member of the Company's Board of Directors.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any
8
<PAGE>
contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the Offer with respect to any securities of
the Company (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss, or the giving or withholding of
proxies, consents, or authorizations).
10. SOURCE AND AMOUNT OF FUNDS.
Assuming 1,000,000 Shares are tendered in the Offer, the Company's maximum
aggregate cost, including all fees and expenses applicable to the Offer, will be
approximately $2,950,000. All funds so required were obtained from the Company's
sale of the Convertible Shares pursuant to the Stock Purchase Agreement.
11. CERTAIN INFORMATION ABOUT THE COMPANY.
Readers are also encouraged to refer to the Company's most recent annual
report on Form 10-K and the most recent quarterly report on Form 10-Q for a
further discussion of the Company's business and the risks and opportunities
attendant thereto.
SUMMARY HISTORICAL FINANCIAL INFORMATION. The following table presents
certain summary consolidated historical financial information concerning the
Company and its subsidiaries. The historical financial information at and for
the years ended June 30, 1998 and 1997 has been summarized from the Company's
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1998. The historical financial
information at and for the six months ended December 31, 1998 and 1997 has been
summarized from the Company's audited consolidated financial statements included
in the Company's Quarterly Report on Form 10-Q for the six months ended June 30,
1998. The following summary historical financial information should be read in
conjunction with, and is qualified in its entirety by reference to, such audited
and unaudited consolidated financial statements and their related notes.
SUMMARY HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 SIX MONTHS ENDED DECEMBER 31
----------------------- ----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue $5,825,348 $6,164,603 $3,157,482 $2,894,950
Net income 612,475 979,198 435,415 493,033
Basic earnings per share 0.13 0.21 0.09 0.11
Diluted earnings per share 0.13 0.21 0.09 0.11
Weighted average number of
shares used in per share
data: Basic 4,605,358 4,607,709 4,605,358 4,605,358
Diluted 4,612,674 4,631,898 4,607,261 4,616,702
BALANCE SHEET DATA
Working capital $3,214,490 $3,261,953 $3,544,440 $3,482,664
Total assets 7,800,700 7,912,139 7,284,144 7,647,016
Current liabilities 1,343,506 1,314,484 569,029 969,417
Long-term debt 4,953 33,462 -- 19,465
Stockholders' equity 6,452,242 6,564,193 6,715,115 6,658,134
Book value per share 1.40 1.43 1.46 1.45
Total shares outstanding 4,605,358 4,605,358 4,605,358 4,605,358
</TABLE>
9
<PAGE>
PRO FORMA SUMMARY FINANCIAL INFORMATION. The following table presents
certain unaudited pro forma summary financial information based on historical
information which has been adjusted:
(a) for the repurchase of 1,000,000 Shares at a price of $2.90 per
Share and
(b) as if the transaction had taken place (i) at the beginning of the
periods presented for income statement items and (ii) at the end of the periods
presented for balance sheet items but, in each case, such information does not
purport to be indicative of the results which would actually have been achieved
if the Offer had been completed as of the periods indicated or which may be
achieved in the future.
The tables also assume:
(a) UFAC purchased 5,258,513 Convertible Shares for $6,836,067.
(b) The Company will issue 5,258,513 Shares upon conversion of the
Convertible Shares.
(c) UFAC's Convertible Shares will not be eligible for the
Distribution.
(d) The Distribution of $1.60 per Share on 3,605,358 Shares
outstanding after the Offer records a cash overdraft of (i) $1,188,083 for the
balance sheet data of December 31, 1998 and (ii) $903,142 for the balance sheet
data of June 30, 1998, to be funded by the sale of investments held as current
assets.
(e) Dilutive stock options remain equal to those on the historic date
of the financial information presented.
The pro forma summary financial information should be read in
conjunction with the audited and unaudited financial statements and related
notes set forth in the Company's Form 10-K for the year ended June 30, 1998 and
Form 10-Q for the six months ended December 31, 1998.
FRONTIER ADJUSTERS OF AMERICA, INC.
PRO FORMA SUMMARY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
June 30, 1998 December 31, 1998
------------------------- -------------------------
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue $5,825,348 $5,825,358 $3,157,482 $3,157,482
Net Income 612,475 612,475 435,415 435,415
BALANCE SHEET DATA
Working Capital 3,214,490 1,381,983 3,544,440 1,711,934
Total Assets 7,800,700 6,871,336 7,284,144 6,639,721
Current liabilities 1,343,506 2,246,648 569,029 1,757,112
Long-term debt 4,953 4,953 -- --
Stockholders Equity 6,452,242 4,619,735 6,715,115 4,882,609
PER SHARE DATA
Weighted average number of
shares used in per
share data
Basic 4,605,358 8,863,871 4,605,358 8,863,871
Diluted 4,612,674 8,871,187 4,607,261 8,865,774
Basic earnings per share $ 0.13 $ 0.07 $ 0.09 $ 0.05
Diluted earnings per share 0.13 0.07 0.09 0.05
Book value per share 1.40 0.52 1.46 0.55
</TABLE>
10
<PAGE>
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of shareholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded following
the Offer to ensure a continued trading market in the Shares. Based on the
published guidelines of AMEX, the Company believes that its purchase of Shares
pursuant to the Offer will not cause its remaining Shares to be delisted from
that exchange.
The Shares are registered under the Exchange Act. The Company is required,
among other things, to furnish certain information to its shareholders and the
Securities and Exchange Commission (the "Commission") and comply with the
Commission's proxy rules in connection with meetings of the Company's
shareholders. The Company has no present intention to apply to the Commission to
deregister the Shares under the Exchange Act and intends to continue to file
periodic reports thereunder.
13. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS.
The Company is not aware of any license or regulatory permit that is
material to its business that might be adversely affected by its acquisition of
Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares as contemplated by the Offer. Should any such approval or
other action be required, the Company currently contemplates that it will seek
such approval or other action. The Company cannot predict whether it may
determine that it is required to delay the acceptance for payment of, or payment
for, Shares tendered pursuant to the Offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions,
or that the failure to obtain any such approval or other action might not result
in adverse consequences to the Company's business. The Company's obligations
under the Offer to accept for payment and pay for Shares are subject to certain
conditions. See Section 6.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a discussion of material consequences for U.S.
federal income tax purposes of a redemption of Shares pursuant to the Offer.
This summary does not purport to cover all aspects of federal income
taxation that may be relevant to shareholders. In addition, certain shareholders
(including insurance companies, tax-exempt organizations, financial
institutions, foreign persons, broker dealers, and shareholders who have
acquired their Shares upon the exercise of options or otherwise as compensation)
may be subject to special rules not discussed below.
This summary is based on laws, regulations, rulings and decisions now in
effect, all of which are subject to change. For example, after the Offer,
Congress may change the tax rates that apply to gains realized in the Offer.
No rulings as to any of the matters discussed in this summary have been
requested or received from the Internal Revenue Service (the "Service"). The
consequences to any particular shareholder may differ depending on that
shareholder's own circumstances. Furthermore, this summary does not discuss any
aspects of state, local, foreign or other tax laws. Each shareholder is urged to
consult and rely on such shareholder's own tax adviser with respect to the tax
consequences to such shareholder of selling Shares pursuant to the Offer or
receiving the Distribution.
SALE OF SHARES PURSUANT TO OFFER. A shareholder's sale of Shares for cash
pursuant to the Offer will be a taxable transaction for federal income tax
purposes. The amount and characterization of income recognized by a shareholder
in connection with a sale of Shares pursuant to the Offer will depend on whether
the sale is treated as a "dividend" or as an "exchange" for tax purposes. All or
a portion of the amount received by a shareholder who sells Shares pursuant to
the Offer may be treated as a dividend. The amount received that is not treated
as a dividend will be treated as received in exchange for the Shares sold
pursuant to the Offer. The determination of how much of the amount received
represents a dividend and how much represents exchange proceeds depends on
whether (a) the shareholders have a legally enforceable right to receive a
dividend and instead receive an amount in redemption of their Shares (see "Legal
Right to Dividend"), and (b) the application of the stock redemption rules of
Section 302 of the Internal Revenue Code of 1986, as amended (the "Code") (see
"Application of Section 302").
11
<PAGE>
LEGAL RIGHT TO DIVIDEND. Judicial authorities have held and the Service has
ruled that if a shareholder has a legally enforceable right to a dividend and,
in effect, foregoes this dividend by selling shares to the corporation, the
portion of the sale proceeds that is equal to the foregone dividend will be
taxed as a dividend. In this case, the Stock Purchase Agreement provides that
the Company shall declare and pay a distribution in the amount of $1.60 per
Share on each Share not tendered in the Offer or not accepted by the Company if
tendered in the Offer, within 60 days after the final expiration of the Offer.
The obligation of the Company to declare and pay this distribution only arises
under the Stock Purchase Agreement, which is between the Company and UFAC.
Shareholders are not parties to the Stock Purchase Agreement, and therefore are
not likely to have any legally enforceable rights under the Stock Purchase
Agreement, including the right to force the Company to declare and pay this
distribution. If no such legal right exists, shareholders that accept the Offer
may not be required to recognize a portion of the amount received for their
Shares as a dividend.
Nevertheless, the Service may successfully contend that the Stock Purchase
Agreement effectively assures that a shareholder will receive a distribution of
$1.60 per Share and that $1.60 of the amount received by a shareholder in
exchange for each Share pursuant to the Offer must be treated as a dividend. Due
to the lack of authority directly on point, the Company can provide no assurance
with respect to this matter.
If the shareholders are regarded as having a legally enforceable right to
the distribution prior to the Offer, at least $1.60 per Share of the amount
received pursuant to the Offer would be treated as a dividend and the $1.30 per
Share balance of the amount received would be treated as a dividend or an amount
received in exchange for the Shares depending on the application of Code Section
302 to a shareholder's specific circumstances as discussed below. If a
shareholder who sells Shares pursuant to the Offer is not regarded as having a
legally enforceable right to the $1.60 per Share distribution, the entire $2.90
per Share amount received upon sale of the Shares pursuant to the Offer will be
treated as a dividend or an amount received in exchange for the Shares depending
on the application of Code Section 302 to a shareholder's specific circumstances
as discussed below.
APPLICATION OF SECTION 302.
EXCHANGE TREATMENT. If the redemption qualifies as an exchange under any of
the provisions of Code Section 302(b), except as described above, the cash
received pursuant to the Offer will be treated as a distribution from the
Company in exchange for the Shares sold. That treatment will result in a
shareholder recognizing gain or loss equal to the difference between (a) the
amount treated as received in exchange for the Shares pursuant to the Offer and
(b) the shareholder's adjusted tax basis in the Shares surrendered. Assuming the
Shares are held as a capital asset, such recognized gain or loss will be capital
gain or loss. If the Shares that are sold were held longer than one year, such
capital gain or loss will be long-term.
Notwithstanding the foregoing, the rules on "collapsible corporations"
might, if they applied, cause a shareholder's gain to be ordinary income (rather
than long-term capital gain). Because of its long operating history, the nature
of its assets and other factors, the Company believes it is not a "collapsible
corporation."
Net capital gain, the excess of net long-term capital gain over net
short-term capital loss, realized by individuals, estates and trusts is
currently taxed at a maximum federal income tax rate of 20%. Short-term capital
gains of individuals, estates and trusts are taxed at ordinary income rates,
currently up to a maximum federal income tax rate of 39.6% (although, income at
certain levels may be subject to a higher effective rate due to the phase-out of
personal exemptions and certain itemized deductions). Capital gains of
corporations are taxed at the federal income tax rates applicable to corporate
ordinary income, a maximum of 35% (although income at certain levels may be
subject to a higher effective rate due to phase-out of the 15%, 25% and 34%
brackets). Each of the foregoing rates is subject to change, and any such change
could apply retroactively to transactions effected pursuant to the Offer.
DIVIDEND TREATMENT. If none of the conditions of exchange treatment under
Code Section 302(b) are satisfied, a shareholder will be treated as having
received a dividend taxable as ordinary income in an amount equal to the entire
amount of cash received by the shareholder pursuant to the Offer, to the extent
the Company has accumulated or current "earnings and profits." The Company
believes that no shareholder's dividend income will be limited by a lack of
earnings and profits.
Each shareholder should consult with such shareholder's personal tax
adviser to determine whether that shareholder will qualify for exchange
treatment under Code Section 302(b). In the event that the sale of Shares
pursuant to the Offer is treated as a dividend distribution to a shareholder for
federal income tax purposes, such shareholder's tax basis in the Shares actually
redeemed will be added to the tax basis of such shareholder's remaining Shares
in the Company. In the event that a shareholder actually owns no Shares in the
Company after the Offer is completed but the transaction is nevertheless treated
as a dividend distribution because such shareholder constructively owns Shares
(see below), such shareholder's tax basis should
12
<PAGE>
be added to Shares in the Company owned by related persons that was considered
constructively owned by such shareholder. Ordinary income is generally taxable
to individuals up to a maximum federal income tax rate of 39.6% (although income
at certain levels may be subject to a higher effective rate due to the phase-out
of personal exemptions and certain itemized deductions) and to corporations at a
maximum federal income tax rate of 35% (although income at certain levels may be
subject to a higher effective rate due to phase-out of the 15%, 25% and 34%
brackets). Each of the foregoing tax rates is subject to change, and any such
change could apply retroactively to include the sale of Shares pursuant to the
Offer. As discussed below, a corporate shareholder that is treated as receiving
a dividend may be allowed a dividends-received deduction and may be subject to
the rules for "extraordinary dividends."
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether the provisions
under Code Section 302(b), as described below, are satisfied, a shareholder must
take into account not only Shares actually owned by such shareholder, but also
Shares that are constructively owned within the meaning of Code Section 318.
Under Code Section 318, a shareholder may constructively own Shares actually
owned, and in some cases constructively owned, by certain related individuals
and certain entities in which the shareholder or a related individual or entity
has an interest. Moreover, a shareholder may constructively own Shares that such
shareholder, or a related individual or entity, has the right to acquire by
exercise of an option or warrant. The rules of constructive ownership are
complex and must be applied to a particular shareholder's situation by such
shareholder's personal tax adviser.
ALTERNATIVE CONDITIONS FOR SECTION 302 EXCHANGE TREATMENT. Under Code
Section 302(b), a redemption will be taxed as an exchange, and not as a
dividend, if it (a) results in a "complete redemption" of all of the Shares
owned by a shareholder, (b) is "substantially disproportionate" with respect to
a shareholder, or (c) is "not essentially equivalent to a dividend" with respect
to a shareholder. Each shareholder should be aware that, under certain
circumstances, sales, purchases or transfers of Shares in the market or to or
from other parties contemporaneously with sales pursuant to the Offer may be
taken into account in determining whether the tests under clause (a), (b) or (c)
above are satisfied. Furthermore, the Company believes that in the event the
Offer is oversubscribed, resulting in a proration, it is likely that less than
all the Shares tendered by a shareholder will be purchased by the Company.
Proration may affect whether a sale by a shareholder will satisfy the provisions
described in clause (a), (b) or (c) above.
The following is a brief description of the three major provisions of Code
Section 302(b):
A COMPLETE REDEMPTION OF INTEREST. The receipt of cash by a
shareholder will result in a "complete redemption" of all the Shares owned by
the shareholder within the meaning of Code Section 302(b)(3) if either (i) all
the Shares actually and constructively owned by the shareholder are sold
pursuant to the Offer or (ii) all the Shares actually owned by the shareholder
are sold pursuant to the Offer, the only Shares the shareholder constructively
owns are actually owned by such shareholder's family members, and the
shareholder is eligible to waive and effectively waives, under procedures
described in Code Section 302(c), such constructive ownership.
A SUBSTANTIALLY DISPROPORTIONATE REDEMPTION. The receipt of cash
by a shareholder will be "substantially disproportionate" with respect to such
shareholder within the meaning of Code Section 302(b)(2) if the percentage of
the total outstanding voting stock of the Company actually and constructively
owned by the shareholder immediately following the sale of Shares pursuant to
the Offer is less than 80% of the percentage of the total outstanding voting
stock of the Company actually and constructively owned by such shareholder
immediately before such sale.
NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND. Even if a sale by a
shareholder fails to meet the "complete redemption" or "substantially
disproportionate" tests, a shareholder may nevertheless meet the "not
essentially equivalent to a dividend" test. Whether a specific redemption is
"not essentially equivalent to a dividend" depends on the individual
shareholder's facts and circumstances. In any event, the redemption must result
in a "meaningful reduction" of the shareholder's proportionate interest in the
Company. The Service has indicated in a published ruling that, in the case of a
minority shareholder in a publicly held corporation whose relative stock
investment in the corporation was minimal and who exercised no control over
corporate affairs, a small reduction in the percentage ownership interest of
such shareholder in such corporation (from .0001118% to .0001081%) was
sufficient to constitute a "meaningful reduction." Shareholders seeking to rely
on this test should consult their own tax advisers as to the application of this
particular standard to their own situations.
DISTRIBUTION. After acquisition of Shares pursuant to the Offer, the
Company plans to make the Distribution of cash to each remaining shareholder in
the amount of $1.60 per Share.
The DISTRIBUTION will be treated as a dividend, taxable as ordinary income,
to the extent of the Company's accumulated earnings and profits as of the
beginning of the current fiscal year and its "current" earnings and profits for
the
13
<PAGE>
entire current fiscal year. Assuming that the Company acquires one million
Shares in accordance with the terms of the Offer and the amount paid for the
tendered Shares is treated as paid in exchange for Shares (rather than as a
dividend in whole or in part), the Company expects that dividend income will not
be limited by lack of earnings and profits.
SPECIAL RULES FOR CORPORATE SHAREHOLDERS. Upon receipt of a dividend
from the Company, a corporate shareholder who owns less than 20% of the Company
generally is eligible for a dividends received deduction equal to 70% of the
amount of the distribution, subject to applicable limitations, including those
related to "debt-financed portfolio stock" under Code Section 246A and to the
holding period requirements of Code Section 246.
In addition, any amount received by a corporate shareholder that is
treated as a dividend may constitute an "extraordinary dividend" subject to the
provisions of Section 1059 of the Code. Generally, Section 1059 requires a
corporate shareholder to reduce the tax basis of its stock in a corporation by
the portion of the dividend eligible for the dividends received deduction and,
if such portion exceeds the shareholder's adjusted tax basis for the stock, to
treat any such excess as gain from the sale of the stock in the year in which
the extraordinary dividend is received. The term "extraordinary dividend"
includes any dividend if the amount thereof exceeds the greater of 10% of the
adjusted tax basis of the shareholder's shares or 10% of the fair market value
of the shares. For this purpose, other dividends received that have ex-dividend
dates within the same period of eighty-five consecutive days of a dividend are
aggregated. Further, if a taxpayer receives an aggregate amount of dividends in
excess of 20% of the adjusted basis of the taxpayer's stock, such dividends
having ex-dividend dates within the same period of 365 consecutive days, then
the dividends also constitute "extraordinary dividends" and the taxpayer must
reduce its basis under Code Section 1059. Section 1059 applies only to stock
that has not been held for more than two years before the dividend announcement
date unless, among other conditions, the redemption is not pro rata to all
shareholders. The Company believes that the Offer will likely not result in a
pro rata distribution to all shareholders. Additionally, if a corporate
shareholder is required under Section 1059 to reduce its stock basis, then the
non-taxed portion of all dividend distributions within an 85-day or 365-day
period referred to above reduces the corporate shareholder's basis in the stock
of the Company. Corporate shareholders should consult their tax advisers
concerning the application of Section 1059 to their particular situations.
BACKUP WITHHOLDING. A tendering shareholder or other payee who fails to
complete fully and sign the Substitute Form W-9 included in the letter of
transmittal may be subject to backup federal income tax withholding equal to 31%
of the gross payments made pursuant to the Offer.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN
TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER
(INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND
FOREIGN, STATE AND LOCAL TAX LAWS) OF THE SALE OF SHARES PURSUANT TO THE OFFER.
15. EXTENSION OF THE OFFER; TERMINATIONS; AMENDMENTS.
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Offer is open by making a
public announcement of such extension. The Company also expressly reserves the
right, in its sole discretion, to terminate the Offer and not accept for payment
or pay for any Shares not previously accepted for payment or paid for or,
subject to applicable law, to postpone payment for Shares upon the occurrence of
any of the conditions specified in Section 6, in each case by making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company either pay
the consideration offered or return the Shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, the Company further reserves the right, in its sole discretion,
to amend the Offer in any respect. Amendments to the Offer may be made at any
time and from time to time effected by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00 a.m.,
Pacific Time, on the next business day after the previously scheduled Expiration
Time. Any public announcement made pursuant to the Offer will be disseminated
promptly to shareholders in a manner reasonably designed to inform shareholders
of such change. Without limiting the manner in which the Company may choose to
make a public announcement, except as required by applicable law, the Company
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must
14
<PAGE>
remain open following material changes in the terms of the offer or information
concerning the offer (other than a change in price or a change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. If (i) the Company increases
or decreases the price to be paid for Shares, or the Company decreases the
number of Shares being sought and (ii) the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that notice of such increase or decrease is first
published, sent or given, then the Offer will be extended until the expiration
of such period of ten business days.
16. FEES AND EXPENSES.
The U.S. Stock Transfer Corporation will act as a depositary of Share
certificates and as information agent in connection with the Offer. The Company
will pay all expenses of the U.S. Stock Transfer Corporation in connection with
its acting as depositary, including reasonable attorneys' fees.
The Company will not pay the U.S. Stock Transfer Corporation for soliciting
Shares pursuant to the Offer. The Company will, on request, reimburse the U.S.
Stock Transfer Corporation for customary handling and mailing expenses incurred
in forwarding materials in respect of the Offer to the beneficial owners for
which they act as nominees. The U.S. Stock Transfer Corporation has been
authorized to act as the Company's agent for purposes of the Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Shares, except as otherwise provided in Instruction 8 of the Letter
of Transmittal.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction.
ADDITIONAL INFORMATION
Additional information about the Company is set out in its Annual Report on
Form 10-K for the fiscal year ended June 30, 1998; its Proxy Statement dated
March 24, 1999; and its Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998. The Company has also filed an Issuer Tender Offer Statement
on Schedule 13E-4 with the Commission which includes certain additional
information relating to the Offer. The Company regularly files with the
Commission reports on Form 10-K and Form 10-Q as well as other periodic reports,
proxy statements, and other information (including information about its
officers and directors, their holdings of Shares, its principal shareholders,
and any material interest of such persons in transactions with the Company).
Such material can be inspected and copied at the Commission, Room 1024, 450
Fifth Street N.W., Washington, D.C. 20549, and at its regional offices at 7
World Trade Center, New York, New York 10048; and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies may also be obtained by mail from the
Commission's Public Reference Branch, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Company's Schedule 13E-4 will not be available at
the Commission's regional offices. The Commission also maintains a web site at
http://www.sec.gov which contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
15
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for the Shares and any other required documents
should be sent or delivered by each shareholder or the shareholder's broker,
dealer, commercial bank, trust company or other nominee to the Information
Agent/Depositary at its address set forth below:
By Mail, Overnight Courier or By Hand:
U.S. Stock Transfer Corporation
1745 Gardenia Avenue
Suite 200
Glendale, CA 91204-2991
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
Any questions or requests for assistance concerning this Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to the Information Agent/Depositary at the above address and phone number. You
may also contact your broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
16
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
FRONTIER ADJUSTERS OF AMERICA, INC.
Pursuant to the Offer to Purchase dated May 12, 1999
- --------------------------------------------------------------------------------
THE OFFER WILL EXPIRE AT 9:00 P.M., PACIFIC TIME, ON JUNE 10, 1999 UNLESS
TERMINATED EARLIER OR EXTENDED AS PROVIDED IN THE OFFER TO PURCHASE.
- --------------------------------------------------------------------------------
Delivery by Mail, Overnight Courier, Facsimile, or by Hand
to the Information Agent/Depositary:
U.S. Stock Transfer Corporation
1745 Gardenia Avenue
Suite 200
Glendale, CA 91204-2991
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
Confirm receipt of facsimile
by telephone (818) 502-1404
PLEASE READ CAREFULLY THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
Please fill in, if blank, exactly as name(s) appear(s) on Share certificates
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(Attach additional signed list if necessary)
- --------------------------------------------------------------------------------
Share Certificate Total Number of Shares Number of
Number(s) Evidenced by Certificate(s) Shares Tendered*
- --------------------------------------------------------------------------------
Total Shares..........................................
- --------------------------------------------------------------------------------
* Please indicate in this column the number of Shares you wish to tender. If
nothing is indicated in this column, the total number of Shares evidenced by
each certificate delivered with this Letter of Transmittal will be deemed to
have been tendered.
- --------------------------------------------------------------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
1
<PAGE>
EACH TENDERING SHAREHOLDER MUST COMPLETE PAGES 1, 2 AND 4 OF THIS LETTER OF
TRANSMITTAL AND SIGN IT AT PAGE 4. SEE INSTRUCTIONS BEGINNING AT PAGE 7.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING TENDERED PURSUANT TO NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE INFORMATION AGENT/DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution that Guaranteed Delivery: __________________________________
Window Ticket Number (if any): _________________________________________________
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 4.)
To be completed ONLY if Shares are being tendered by or on behalf of a
person who owned beneficially, as of the close of business on May 12, 1999, an
aggregate of fewer than 100 Shares, and who will continue to own all of such
Shares beneficially as of the Expiration Time.
The undersigned either (check one box):
[ ] was the beneficial or record holder as of the close of business on May 12,
1999, of an aggregate of fewer than 100 Shares, and will continue to be the
beneficial or record holder of such Shares at the Expiration Time, all of which
are being tendered; or
[ ] is a broker, dealer, commercial bank, trust company or other nominee that:
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record holder, and (b) believes, based upon representations made
to it by such beneficial owner or record holder, that each such person will
continue as the beneficial owner as of the close of business on May 12, 1999,
and continues to own beneficially or of record as of the Expiration Time, an
aggregate of fewer than 100 Shares and is tendering all such Shares.
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
The undersigned holder(s) of the share certificates referred to on page 1
and transmitted herewith, hereby tender(s) to Frontier Adjusters of America,
Inc., an Arizona corporation (the "Company"), the number of shares of Common
Stock, par value $0.01 per share (the "Shares") of the Company specified on page
1 and represented by such certificates, pursuant to the Company's offer to
purchase the Shares at a price of $2.90 per Share (the "Purchase Price"), net to
the seller in cash, set forth in the Offer to Purchase dated May 12, 1999 (the
"Offer to Purchase") and in this Letter of Transmittal (collectively, the
"Offer"). The undersigned hereby acknowledges
2
<PAGE>
receipt of the Offer. Capitalized terms used in this Letter of Transmittal but
not defined herein have the meanings provided in the Offer to Purchase.
Each of the undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Shares
tendered hereby, without restriction, and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, claims, security
interests, restrictions, charges and encumbrances, when the same are purchased
by the Company in accordance with the Offer. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the sale, assignment and transfer to the
Company of the Shares tendered hereby.
The undersigned hereby deposits with U.S. Stock Transfer Corporation (the
"Information Agent/Depositary") the above certificates representing Shares being
tendered. If certificate numbers are not indicated on page 1, the undersigned is
nonetheless depositing all certificates that accompany this Letter of
Transmittal. The undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company the Shares tendered hereby that are accepted pursuant to
the Offer and hereby irrevocably constitutes and appoints the Secretary of the
Company the true and lawful attorney-in-fact of the undersigned with respect to
such Shares, with full power of substitution and resubstitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to:
(a) deliver certificates for such Shares together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
against payment of the Purchase Price pursuant to the Offer, (b) present such
Shares for transfer on the books of the Company, (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer, and (d) make delivery of certificates
for Shares or make payment as provided under "Special Delivery Instructions"
below or "Special Payment Instructions" below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that Shares validly tendered will be purchased
at the price of $2.90 per Share, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including provisions applicable to Odd
Lot Owners and prorations, and that the Company will return all Shares not
purchased because of proration. The undersigned recognizes that the Company will
accept only up to 1,000,000 Shares properly tendered in accordance with the
terms of the Offer. This Letter of Transmittal is subject to the terms and
conditions set forth in the Offer to Purchase.
Unless otherwise indicated under Special Delivery Instructions below,
please issue and mail the check for the Purchase Price for the Shares tendered
hereby and send any certificate(s) for unpurchased Shares (and accompanying
documents, as appropriate), to the shareholder(s) named at the address(es) shown
on page 1. Similarly, unless otherwise indicated below under "Special Payment
Instructions," please issue the check for the Purchase Price and any
certificate(s) for unpurchased Shares in the name(s) of the shareholder(s) on
page 1 and mail such check and any such certificate(s) to the address(es) of
such shareholder(s) shown on page 1. The undersigned recognizes that the Company
has no obligation to transfer any certificate for Shares delivered herewith from
the name of the registered holder(s) thereof if the Company does not purchase
any of the Shares represented by such certificate.
3
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
SHAREHOLDER(S) SIGN HERE
(PLEASE COMPLETE AND RETURN THE ATTACHED SUBSTITUTE FORM W-9.)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
certificate(s) for the Shares or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates, stock powers and
other documents transmitted herewith. If signing is by trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or any
other person acting in a fiduciary or representative capacity, please set forth
full title and see Instruction 5.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated:
----------------------------------------
Print or type name(s):
---------------------------------------------------------
- --------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Daytime Area Code and Telephone Number:
----------------------------------------
Tax Identification or Social Security Nos.:
------------------------------------
GUARANTEE OF SIGNATURE(S)
(REQUIRED IN CERTAIN INSTANCES - SEE INSTRUCTIONS 1 AND 5.)
Authorized Signature(s) Guaranteed:
---------------------------------------------
Print or type name(s):
----------------------------------------------------------
Title:
-------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Daytime Area Code and Telephone Number:
----------------------------------------
Dated:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4
<PAGE>
- ------------------------------------------------------------ -------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE
INSTRUCTIONS 1, 3, 5, AND 6.) (SEE INSTRUCTIONS 1, 3, 5, AND 6.)
To be completed ONLY if certificate(s) To be completed ONLY if certificate(s)
for Shares not tendered or not purchased Shares not tendered or not purchased
and any check for the Purchase Price are and any check for the Purchase Price
to be issued in the name of someone are to be mailed or sent to someone
other than the undersigned. other than the undersigned, or to the
undersigned at am address other than
that designated above.
Issue Check and Share Certificate to: Mail Check and Share Certificate to:
Name:________________________________ Name:________________________________
Address: ____________________________ Address: ____________________________
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
(Taxpayer Identification or Social (Taxpayer Identification or Social
Security Number) Security Number)
(See Substitute From W-9 on (See Substitute From W-9 on
reverse side.) reverse side.)
- --------------------------------------------------------------------------------
5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PAYER'S NAME: DEPOSITARY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART I--Taxpayer Identification Number--For TIN:_____________
FORM W-9 all accounts, enter your Social Security Social Security Number or
Number (TIN) in the box at right and certify Employer Identification
by signing and dating below. Number (If awaiting TIN,
write "Applied For")
Department of the Treasury, Note: If the account is in more than one name,
Internal Revenue Service see the chart in the enclosed GUIDELINES to
determine which number to give to the payer.
PAYER'S REQUEST FOR TAXPAYER PART 2--For payees exempt from backup withholding, please write "EXEMPT"
IDENTIFICATION NUMBER ("TIN") here (see the enclosed GUIDELINES):___________________
- -----------------------------------------------------------------------------------------------------------
PART 3--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my
correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not
subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you
are subject to backup withholding because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup withholding, do not cross out
item (2). (Also see instructions in the enclosed GUIDELINES.)
- -----------------------------------------------------------------------------------------------------------
SIGNATURE:____________________________________________ DATE:_________________
- -----------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE
TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
- -----------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
- -----------------------------------------------------------------------------------------------------------
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and
that I mailed or delivered an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center of Social Security Administration Office (or I intend to mail or deliver an
application in the near future). I understand that, notwithstanding the information I provided in Part III
of the Substitute Form W-9 above (and the fact that I have completed this Certificate of Awaiting Taxpayer
Identification Number), if I do not provide a taxpayer identification number to the Information
Agent/Depositary within sixty (60) days, the Information Agent/Depositary is required to withhold 31% of
all cash payments made to me thereafter until I provide a number.
SIGNATURE _____________________________________________ DATE: _____________________
- -----------------------------------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY EXECUTED MUST BE RECEIVED BY THE
INFORMATION AGENT/DEPOSITARY ON OR PRIOR TO THE EXPIRATION TIME.
</TABLE>
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if
either:
(a) This Letter of Transmittal is signed by the registered holder of
the Shares tendered hereby exactly as the name of such registered holder appears
on the certificate(s) for such Shares tendered with this Letter of Transmittal
and payment and delivery are to be made directly to such owner; or
(b) Such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association, or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing constituting
an "Eligible Institution").
In all other cases, all signatures on this Letter of Transmittal must
be guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or an Eligible
Institution in accordance with applicable law and with the Securities Transfer
Agents Medallion Program ("STAMP") operated by Keymark Financial Services, Inc.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES. This
Letter of Transmittal or a facsimile hereof, properly completed and duly
executed (with signatures guaranteed, if required), must be used in connection
with a tender of Shares and must be actually received by the Information
Agent/Depositary at the address set forth on page 1 on or before the Expiration
Time. If tendered Shares are registered in different ways on different
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such
certificates.
You may make copies of this Letter of Transmittal or obtain additional
copies from the Information Agent/Depositary at the address and telephone listed
on page 1.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES AND OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE TENDERING HOLDER. THE COMPANY RECOMMENDS THAT, IF STOCK
CERTIFICATES ARE SENT BY MAIL, DELIVERY BE BY REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED AND PROPER INSURANCE OBTAINED.
3. PARTIAL TENDERS. If you want to tender fewer than all of the Shares
evidenced by any certificate enclosed herewith, the number of Shares that you
want to tender represented by such certificate must be entered on the
appropriate line on page 1 under "Number of Shares Tendered" opposite the
appropriate certificate number. A new certificate for the remainder of the
Shares which were evidenced by such certificate(s) delivered herewith will be
sent to the registered holder, unless otherwise provided in the Special Delivery
Instructions on page 5, no later than 30 days after the Expiration Time. Unless
otherwise indicated, all Shares represented by certificates listed on page 1 are
deemed to have been tendered as described in this Instruction 3.
4. ODD LOTS. As described in Sections 1 and 2 of the Offer to Purchase,
if the Company purchases less than all Shares tendered before the Expiration
Time because more than 1,000,000 Shares (or such larger number as the Company
may elect pursuant to the Offer) are tendered, the Shares purchased first will
consist of all Shares tendered by any shareholder who owned beneficially, as of
the close of business on May 12, 1999 and continues to own beneficially as of
the Expiration Time, an aggregate of fewer than 100 Shares. This preference will
not be available unless the box captioned "Odd Lots" on page 2 is completed.
5. SIGNATURES, STOCK POWERS AND ENDORSEMENTS. If this Letter of
Transmittal is signed by the registered holder(s) of the certificate(s)
transmitted hereby, such signatures must correspond exactly with the name(s) of
7
<PAGE>
such registered holder(s) as they appear on the face of each such certificate,
without any alteration or change whatsoever. If any certificate transmitted
hereby is registered in the names of two or more holders, all such holders must
sign this Letter of Transmittal.
If this Letter of Transmittal is properly signed by the registered
holder(s) of the certificate(s) transmitted hereby, no endorsements of such
certificate(s) or separate stock power(s) are required, except as follows:
(a) If the check for the Purchase Price for Shares purchased is to be
made payable and sent to a person other than the registered holder(s), then
endorsement of the transmitted certificates or a separate stock power signed by
the registered holder(s) of such certificate is required. In such event,
signatures on such certificates or stock powers and on this Letter of
Transmittal must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or an Eligible Institution in accordance with applicable law and with STAMP
(see Instruction 1). or
(b) If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificates transmitted hereby, each such
certificate must be endorsed or accompanied by an appropriate stock power, in
either case signed by the registered holder(s) exactly as the name(s) of the
registered holder(s) appear(s) on the face of such certificates, without any
alteration or change whatsoever. In such event, signatures on such certificates
or stock powers and on this Letter of Transmittal must be guaranteed by a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or an Eligible Institution in accordance
with applicable law and with STAMP (see Instruction 1).
If this Letter of Transmittal is signed by any trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, partner of
a partnership, or any other person acting in a fiduciary or representative
capacity, each such person should so indicate when signing, and must deliver to
the Depositary proper evidence satisfactory to the Company of such person's
authority so to act.
6. SPECIAL DELIVERY OR PAYMENT INSTRUCTIONS. If the check for the
Purchase Price of the Shares purchased or the certificate for Shares not
accepted because of proration is to be sent to an address, or is to be issued to
a person and sent to an address, different from the registered holder and the
address as shown at page 1 of this Letter of Transmittal in the section marked
"Name(s) and Address(es) of Registered Holder(s)," then please complete the
"Special Delivery Instructions" or the "Special Payment Instructions," as
applicable, on page 5.
7. STOCK TRANSFER TAXES. The Company will pay all stock transfer taxes,
if any, payable as a result of the transfer of purchased Shares to the Company
pursuant to the Offer. However, the Company will not pay stock transfer taxes
payable as a result of a transfer of Shares to any other person or entity prior
to or in connection with a tender of the Shares to the Company. If payment is to
be made to a person other than the registered holder, or new share certificates
are to be registered in the name of any person other than the registered holder,
all stock transfer tax stamps required (except as a result of the transfer of
purchased Shares to the Company), if any, must be affixed to the certificates or
evidence satisfactory to the Company of the payment of or exemption from such
tax must be submitted herewith. If such stamps are not affixed, or such other
evidence is not submitted to the Company with this Letter of Transmittal, the
amount of such stock transfer tax may be deducted from the Purchase Price
payable by the Company.
8. INADEQUATE SPACE. If the space provided on page 1 is inadequate,
additional share certificate number(s) and related number of Shares tendered
with this Letter of Transmittal should be listed on a separate, signed schedule
affixed hereto.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of any tender of Shares will be
determined solely by the Company, which determinations shall be final and
binding. The Company reserves the absolute right to reject any or all tenders
determined by it not to be in appropriate form or the acceptance of or payment
for which would, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Shares or any
particular shareholder, and the Company's
8
<PAGE>
interpretations of the terms and conditions of the Offer (including these
Instructions) shall be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Company shall determine. The Company shall not be obligated to give notice of
defects or irregularities in tenders, nor shall it incur any liability for
failure to give any such notice. Tenders will not be deemed to have been made
until all defects and irregularities have been cured or waived.
10. ADDITIONAL COPIES. Additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from the Information Agent/Depositary
at the address and telephone number set forth below.
U.S. Stock Transfer Corporation
1745 Gardenia Avenue
Suite 200
Glendale, CA 91204-2991
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
11. QUESTIONS. Any questions concerning the tender of Shares under this
Letter of Transmittal may be directed to the Information Agent/Depositary at the
address and telephone number set forth above.
IMPORTANT TAX INFORMATION
12. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
(a) BACKUP WITHHOLDING. In order to prevent the application of Federal
income tax backup withholding on payments that are made to a shareholder with
respect to Shares purchased pursuant to the Offer, each shareholder of record
(or each beneficial owner of Shares, if other than the shareholder of record)
(all record and beneficial holders of Shares are referred to herein as
"Shareholders") must, unless an exemption applies, provide the Company with such
Shareholder's taxpayer identification number on the Substitute Form W-9 set
forth on this Letter of Transmittal and certify under penalties of perjury that
such number is correct. If the Shareholder is an individual, the taxpayer
identification number is such Shareholder's Social Security Number. If the
Company is not provided with the correct taxpayer identification number, the
Shareholder may be subject to penalties imposed by the Internal Revenue Service.
If backup withholding applies, the Company is required to withhold 31%
of any payments made to the Shareholder. Backup withholding is not an additional
tax. Rather, the amount withheld is applied to the taxpayer's Federal income tax
liability. If backup withholding results in an overpayment of taxes, a refund
may be obtained from the Internal Revenue Service.
Certain Shareholders (including, among others, corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. To qualify as an exempt recipient on the basis of foreign status,
a foreign Shareholder must submit to the Company a statement, signed under
penalty of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Company. A Shareholder should consult such
Shareholder's tax advisor as to such Shareholder's qualification for exemption
from the backup withholding and reporting requirements and the procedure for
obtaining an exemption.
(b) WITHHOLDING OF TAX ON CERTAIN FOREIGN PERSONS. Under Federal income
tax law, the Company is required to withhold a tax on certain types of payments
made to a nonresident alien individual, foreign partnership or foreign
corporation. In certain situations, a Shareholder may be exempt from
withholding. A Shareholder should consult such Shareholder's tax advisor as to
such Shareholder's qualification for exemption from these withholding
requirements and the procedure for obtaining an exemption.
9
FRONTIER ADJUSTERS OF AMERICA, INC.
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if certificates
evidencing shares of common stock, par value $.01 per share (the "Shares"), of
Frontier Adjusters of America, Inc., an Arizona corporation (the "Company"), are
not immediately available or time will not permit all required documents,
including a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof), to reach the Information Agent/Depositary
prior to the Expiration Time (as defined in the Offer to Purchase).
This Notice of Guaranteed Delivery form or a facsimile of it, signed
and properly completed may be delivered by hand, mail or facsimile transmission
to the Depositary by the Expiration Time (as defined in the Offer to Purchase).
See Section 3 of the Offer to Purchase.
THE INFORMATION AGENT AND DEPOSITARY FOR THE OFFER IS:
U.S. Stock Transfer Corporation
1745 Gardenia Avenue
Suite 200
Glendale, CA 91204-2991
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
Confirm receipt of facsimile by
telephone: (818) 502-1404
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN THE ONE
SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THE ONE LISTED ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
This Notice of Guaranteed Delivery form is not to be used to guarantee
signatures. If a signature guarantee on the Letter of Transmittal is required
(as described in the Letter of Transmittal) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company at a price of $2.90 per
Share, net to the seller in cash, upon the terms and subject to conditions set
forth in the Company's Offer to Purchase, dated May 12, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase.
- --------------------------------------------------------------------------------
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person who owned beneficially, as of the close of business on May 12, 1999, an
aggregate of fewer than 100 Shares, and who will continue to own all of such
Shares beneficially as of the Expiration Time.
The undersigned either (check one box):
[_] was the beneficial or record holder as of the close of business on May 12,
1999 of an aggregate of fewer than 100 Shares, and will continue to be the
beneficial or record holder of such Shares at the Expiration Time, all of which
are being tendered; or
[_] is a broker, dealer, commercial bank, trust company or other nominee that:
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record holder, and (b) believes, based upon representations made
to it by such beneficial owner, that each such person was the beneficial or
record owner as of the close of business on May 12, 1999, and will continue to
own beneficially or of record as of the Expiration Time, an aggregate of fewer
than 100 Shares and is tendering all such Shares.
- --------------------------------------------------------------------------------
<PAGE>
TENDERED SHARES
Number of Shares: ______________________________________________________________
Signature(s):
_______________________________________________________
_______________________________________________________
Certificate Nos. (if available): ______________________
_______________________________________________________
Address: ______________________________________________
_______________________________________________________
(Zip Code)
Daytime Telephone
Area Code and No.: ____________________________________
_______________________________________________________
<PAGE>
DELIVERY GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
THE UNDERSIGNED, A FIRM WHICH IS A BANK, BROKER, DEALER, CREDIT UNION,
SAVINGS ASSOCIATION, OR OTHER ENTITY WHICH IS AN "ELIGIBLE GUARANTOR
INSTITUTION," AS SUCH TERM IS DEFINED IN RULE 17AD-15 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (EACH OF THE FOREGOING CONSTITUTING AN
"ELIGIBLE INSTITUTION"), GUARANTEES (I) THAT THE ABOVE-NAMED PERSONS(S) OWN(S)
THE SHARES TENDERED HEREBY WITHIN THE MEANING OF RULE 13E-4 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, (II) THAT SUCH TENDER OF SHARES COMPLIES WITH
RULE 13E-4, AND (III) TO DELIVER TO THE DEPOSITARY, AT ITS ADDRESS SET FORTH
ABOVE, SHARE CERTIFICATES EVIDENCING THE SHARES TENDERED HEREBY, IN PROPER FORM
FOR TRANSFER, IN EACH CASE WITH DELIVERY OF A LETTER OF TRANSMITTAL (OR
FACSIMILE THEREOF), PROPERLY COMPLETED AND DULY EXECUTED AND ANY OTHER REQUIRED
DOCUMENTS, ALL WITHIN THREE TRADING DAYS ON THE AMEX NATIONAL MARKET OF THE DATE
HEREOF.
The firm that completes this form must communicate the guarantee to the
Depositary and must deliver the Letter of Transmittal and certificates
representing Shares to the Depositary within the time period set forth herein,
Failure to do so could result in a financial loss to such firm.
- ---------------------------------------- -----------------------------------
Name of Firm: _______________________ _________________________________
Authorized Signature
Address: ____________________________
_____________________________________ Name: ___________________________
(Zip Code)
Title: __________________________
Area Code and
Telephone No.: ______________________ Date: ___________________________
- ---------------------------------------- -----------------------------------
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. CERTIFICATES FOR
SHARES SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL.
FRONTIER ADJUSTERS OF
AMERICA, INC.
OFFER TO PURCHASE FOR CASH UP TO
1,000,000 SHARES OF ITS COMMON STOCK
AT A PRICE OF $2.90 PER SHARE
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 9:00 P.M., PACIFIC
TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS TERMINATED EARLIER OR EXTENDED.
- --------------------------------------------------------------------------------
May 12, 1999
To Brokers, Dealers, Commercial, Banks,
Trust Companies, and Other Nominees:
Frontier Adjusters of America, Inc., an Arizona corporation (the
"Company"), has engaged U.S. Stock Transfer Corporation to act as Depositary and
Information Agent in connection with the Company's offer to purchase up to
1,000,000 shares (or such lesser number of shares as are properly tendered) of
its Common Stock, par value $0.01 per share (the "Shares"), at a price of $2.90
per Share, net to the seller in cash, without interest thereon, to shareholders
tendering their Shares, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated May 12, 1999 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which, as amended or supplemented from time
to time, together constitute the "Offer").
All Shares properly tendered prior to the Expiration Time (as defined
in the Offer to Purchase) and not properly withdrawn, will be purchased at a
price of $2.90 per Share, upon the terms and subject to the conditions of the
Offer, including the proration provisions. Shares not purchased because of
proration, will be returned at the Company's expense to the shareholders who
tendered such Shares.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Time more than 1,000,000 Shares are properly tendered and not
properly withdrawn, the Company will buy Shares first from any person (an "Odd
Lot Holder") who owned beneficially or of record as of the Expiration Time, an
aggregate of fewer than 100 Shares and so certified in the appropriate place in
the Letter of Transmittal (and, if applicable, on a notice of guaranteed
delivery), who properly tender all their Shares and then on a pro rata basis
from all other shareholders who properly tender Shares (and do not properly
withdraw such Shares) prior to the Expiration Time.
For your information and for forwarding to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee, we
are enclosing the following documents.
1. The Offer to Purchase dated May 12, 1999.
2. The Letter of Transmittal for your use and for the
information of your clients (together with the accompanying Substitute
Form W-9). Facsimile copies of the Letter of Transmittal (with manual
signatures) may be used to tender Shares;
3. A letter to the shareholders of the Company dated May 12,
1999 from William J. Rocke, Chief Executive Officer of the Company;
4. The Notice of Guaranteed Delivery to be used to accept the
Offer and tender Shares pursuant to the Offer if none of the procedures
for tendering Shares set forth in the Offer to Purchase can be
completed on a timely basis;
5. A printed form of letter which may be sent to your clients
for whose accounts you hold Shares registered in your name or in the
name of your nominee, with an instruction form provided for obtaining
such clients' instructions with regard to the Offer;
<PAGE>
6. Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9;
and
7. A return envelope addressed to U.S. Stock Transfer
Corporation, as Depositary for the Offer (the "Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD, AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 P.M. PACIFIC TIME, ON June 10, 1999,
UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof)
including any required signature guarantees and any other required documents
should be sent to the Depositary together with certificate(s) representing
tendered Shares in accordance with the instructions set forth in the Offer to
Purchase and the related Letter of Transmittal.
Holders of Shares whose certificate(s) for such Shares are not
immediately available or who cannot deliver such certificate(s) and all other
required documents to the Depositary prior to the Expiration Time must tender
their Shares according to the procedure for guaranteed delivery set forth in
Section 3 of the Offer to Purchase.
No fees or commissions will be payable by the Company or any officer,
director, shareholder, agent, or other representative of the Company to any
broker, dealer, or other person for soliciting tenders of Shares pursuant to the
Offer (other than fees paid to the Depositary and Information Agent, as
described in the Offer to Purchase). The Company will, however, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients whose Shares are held
by you as a nominee or in a fiduciary capacity. The Company will pay any stock
transfer taxes applicable to its purchase of Shares, except as otherwise
provided in the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be
addressed to U.S. Stock Transfer Corporation, 1745 Gardenia Avenue, Suite 200,
Glendale, California 91204-2991, (818) 502-1404 (call collect), as Information
Agent. Requests for additional copies of the enclosed materials may be directed
to the same address and telephone numbers.
Very truly yours,
William J. Rocke
Chief Executive Officer
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE INFORMATION AGENT, OR
THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
FRONTIER ADJUSTERS OF AMERICA, INC.
OFFER TO PURCHASE FOR CASH UP TO
1,000,000 SHARES OF ITS COMMON STOCK
AT A PRICE OF $2.90 PER SHARE
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 9:00 P.M., PACIFIC
TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS TERMINATED EARLIER OR EXTENDED.
- --------------------------------------------------------------------------------
May 12, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated May 12,
1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer") in
connection with the offer by Frontier Adjusters of America, Inc., an Arizona
corporation (the "Company"), to purchase up to 1,000,000 shares (or such lesser
number of shares as are properly tendered) of its Common Stock, par value $0.01
per share (the "Shares"), at a price of $2.90 per Share, net to the seller in
cash, without interest thereon, to shareholders tendering their Shares, upon the
terms and subject to the conditions set forth in the Offer.
The Company, upon the terms and conditions of the Offer, will purchase
all Shares properly tendered and not properly withdrawn prior to the Expiration
Time (as defined in the Offer to Purchase), at a price of $2.90 per Share. Upon
the terms and subject to the conditions of the Offer, if at the Expiration Time
more than 1,000,000 Shares are properly tendered and not properly withdrawn, the
Company will buy Shares first from any person (an "Odd Lot Holder") who owned
beneficially or of record as of the Expiration Time, an aggregate of fewer than
100 Shares and so certified in the appropriate place in the attached Instruction
Form (and, if applicable, on the Notice of Guaranteed Delivery), who properly
tender all their Shares and then on a pro rata basis from all other shareholders
who properly tender Shares (and do not properly withdraw such Shares prior to
the Expiration Time). Shares not purchased because of proration, will be
returned at the Company's expense to the shareholders who tendered such Shares.
A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
YOUR SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender
any or all of the Shares held by us for your account upon the terms and
conditions of the Offer.
Please note the following:
1. Shares will be purchased in the Offer at a price of $2.90
per Share, net to the Seller in cash, without interest thereon.
2. The Offer is not conditioned on any minimum number of
Shares being tendered. The Offer is, however, subject to certain other
conditions set forth in the Offer to Purchase.
3. The Offer, proration period and withdrawal rights will
expire at 9 p.m. Pacific Time, on June 10, 1999, unless the Offer is
terminated earlier or extended.
<PAGE>
4. The Offer is for 1,000,000 Shares, constituting
approximately 22% of the Shares outstanding as of May 4, 1999.
5. The Board of Directors of the Company has approved the
Offer. However, none of the Company, the Board of Directors or the
Information Agent/Depositary makes any recommendation to shareholders
as to whether to tender or refrain from tendering their Shares. Each
shareholder must make the decision whether to tender such shareholder's
Shares, and, if so, how many Shares to tender.
6. Tendering shareholders will not be obligated to pay any
brokerage fees, commissions or solicitation fees to the Information
Agent/Depositary or the Company or, except as set forth in the Letter
of Transmittal, stock transfer taxes on the transfer of Shares pursuant
to the Offer.
If (i) you owned beneficially or of record as of the close of business
on May 12, 1999, and continue to own beneficially or of record as of the
Expiration Time, an aggregate of fewer than 100 Shares; (ii) you instruct us to
tender on your behalf all such Shares prior to the Expiration Time; and (iii)
you complete the section entitled "Odd Lots" in the attached Instruction Form,
the Company, upon the terms and subject to the conditions of the Offer, will
accept all such Shares for purchase before proration, if any, of the purchase of
other Shares properly tendered.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, all such Shares will be tendered
unless otherwise indicated on the attached Instruction Form.
PLEASE FORWARD YOUR INSTRUCTION FORM TO US AS SOON AS POSSIBLE TO ALLOW
US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF
THE OFFER.
As described in the Offer to Purchase, if more than 1,000,000 Shares
have been properly tendered and not properly withdrawn prior to the Expiration
Date, the Company will purchase tendered Shares on the basis set forth below:
1. FIRST, all Shares tendered and not withdrawn prior to the Expiration
Time by any Odd Lot Holder who:
(a) tenders all Shares owned beneficially or of record by such
Odd Lot Holder (tenders of less than all Shares owned by such Odd Lot
Holder will not qualify for this preference); and
(b) completes the box captioned "Odd Lots" in the attached
Instruction Form and, if applicable, on the Notice of Guaranteed
Delivery; and
2. SECOND, after purchase of all of the foregoing Shares, all other
Shares properly tendered and not properly withdrawn prior to the Expiration
Time, on a pro rata basis (with appropriate adjustments to avoid purchases of
fractional Shares) as described in the Offer to Purchase.
The Offer is being made solely pursuant to the Offer to Purchase and
the related Letter of Transmittal and is being made to all holders of Shares who
were record holders as of May 12, 1999. The Offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of Shares residing in any
jurisdiction in which the making of the Offer or acceptance thereof would not be
in compliance with the securities laws of such jurisdiction.
2
<PAGE>
INSTRUCTION FORM
INSTRUCTION FOR TENDER OF SHARES OF FRONTIER ADJUSTERS OF AMERICA, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated May 12, 1999 (the "Offer to Purchase") and related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer") in connection with the offer by Frontier
Adjusters of America, Inc., an Arizona corporation (the "Company"), to purchase
up to 1,000,000 shares (or such lesser number of shares as are properly
tendered) of its Common Stock, par value $0.01 per share (the "Shares"), at a
price of $2.90 per Share, net to the seller in cash, without interest thereon,
to shareholders tendering their Shares, upon the terms and subject to the
conditions set forth in the Offer.
This will instruct you to tender to the Company on (our) (my) behalf,
the number of Shares indicated below (or if no number is indicated below, all
Shares) which are beneficially owned by (us) (me) and registered in your name,
upon terms and subject to the conditions of the Offer.
- --------------------------------------------------------------------------------
NUMBER OF SHARES BEING TENDERED: __________________________________ SHARES*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
[_] By checking this box the undersigned represents that the undersigned was
the beneficial or record holder as of the close of business on May 12, 1999 of
an aggregate of fewer than 100 Shares, and will continue to be the beneficial or
record holder of such Shares at the Expiration Time, all of which are being
tendered.
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE>
SIGN HERE:
________________________________________________________________________________
________________________________________________________________________________
Signature(s)
________________________________________________________________________________
________________________________________________________________________________
Print Name(s)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address(es)
________________________________________________________________________________
Daytime Area Code and Telephone Number
________________________________________________________________________________
Taxpayer Identification or Social Security Number
THIS FORM MUST BE RETURNED TO THE
BROKERAGE FIRM MAINTAINING YOUR ACCOUNT
[Frontier Letterhead]
May 12, 1999
Dear Fellow Shareholder:
Frontier Adjusters of America, Inc. (the "Company") is offering to
purchase up to 1,000,000 shares of its Common Stock, par value $0.01 per share
(the "Shares"), from existing shareholders. The purchase price will be $2.90 per
Share. The offer to purchase 1,000,000 Shares represents approximately 22% of
the currently outstanding Shares of the Company. United Financial Adjusting
Company ("UFAC") recently purchased preferred shares that are convertible into
Shares on a one-for-one basis. Assuming the conversion of such preferred shares
into Shares, the offer represents approximately 10% of the currently outstanding
Shares on a fully-diluted basis.
Any shareholder whose Shares are properly tendered directly to U.S.
Stock Transfer Corporation, the Information Agent/Depositary for the offer, and
purchased pursuant to the offer will receive the $2.90 per Share net purchase
price in cash, without interest, and will not incur the usual brokerage
commissions associated with open market sales. Shareholders who own fewer than
100 Shares should note that the offer represents an opportunity for them to sell
their shares without having to pay brokerage commissions or odd lot discounts.
The terms and conditions of the offer are explained in detail in the
enclosed Offer to Purchase and the related Letter of Transmittal. I encourage
you to read these materials carefully before making any decision with respect to
the offer. The instructions on how to tender Shares are also explained in detail
in the accompanying materials.
Neither the Company nor the Board of Directors of the Company makes any
recommendation to shareholders as to whether to tender or refrain from tendering
their Shares. Each shareholder must make the decision whether to tender such
shareholder's Shares and, if so, how many Shares to tender. The Company plans to
make a special one-time distribution in the amount of $1.60 per Share to
shareholders whose Shares are not purchased by the Company in the offer. The
Company has been advised that none of its directors or executive officers
intends to tender any Shares pursuant to the offer. UFAC will not participate in
the offer to purchase Shares or receive the special distribution.
The offer will expire at 9:00 p.m., Pacific Time, on Thursday, June 10,
1999 unless extended or terminated earlier by the Company. If you have any
questions regarding the offer or need assistance in tendering your Shares,
please contact US Stock Transfer Corporation, the Information Agent/Depositary
for the offer, at (818) 502-1404.
Sincerely,
/s/ William J. Rocke
William J. Rocke
Chief Executive Officer
[FRONTIER ADJUSTERS OF AMERICA, INC. LETTERHEAD]
Released by Strategic IR, Inc.
530 Fifth Avenue, 20th Floor
New York, NY 10036
FOR IMMEDIATE RELEASE
SHAREHOLDERS OF FRONTIER ADJUSTERS OF AMERICA, INC.
APPROVED THE SALE OF A MAJORITY INTEREST
IN THE COMPANY TO UNITED FINANCIAL ADJUSTING COMPANY
PHOENIX, ARIZONA - April 30, 1999 - On April 30, 1999, Frontier Adjusters of
America, Inc. (ASE: FAJ) (the "Company") sold a majority interest in the Company
to United Financial Adjusting Company ("UFAC"), a wholly-owned subsidiary of The
Progressive Corporation (NYSE: PGR), and the Company appointed to its Board a
majority of directors nominated by UFAC. At its annual meeting of shareholders
held on April 29, 1999, the Company's shareholders approved the sale. The
Company announced that its Board has approved the making of a tender offer to
its shareholders as of a date to be announced, to purchase up to 1,000,000
shares of its common stock at a price of $2.90 per share. In addition, the
Company announced that it will declare a special distribution of $1.60 per share
to its shareholders of record at a date subsequent to completion of the tender
offer. UFAC will not participate in this distribution or the tender offer.
Frontier Adjusters of America, Inc. licenses and franchises independent claims
adjusters throughout North America, with more than 670 advertised locations in
50 states, the District of Columbia and Canada. The Company also owns and
operates independent insurance adjusting businesses in Arizona and Nevada.
From time to time, Frontier makes forward-looking statements in its public
disclosures. This press release includes statements with respect to the tender
offer and payment of a cash distribution that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Important risks and uncertainties that could
cause the Company's results to differ materially from those contained in such
forward-looking statements are contained in the Company's filings with the
Securities and Exchange Commission, including Frontier's Annual Report on Form
10-K for the year ended June 30, 1998.
For information at Frontier, please contact:
Laurel Park, Assistant Controller
(602) 264-1061
