SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
FRONTIER ADJUSTERS OF AMERICA, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[Frontier Letterhead]
November 22, 2000
Dear Shareholder:
You are cordially invited to attend the annual meeting of Shareholders (the
"Annual Meeting") of Frontier Adjusters of America, Inc. ("Frontier") to be held
at 10:00 a.m., on Thursday, December 14, 2000 at Frontier's executive offices,
located at 45 East Monterey Way, Phoenix, Arizona 85012.
At the Annual Meeting you will be asked to consider and vote upon the
following Proposals:
1. To elect nine directors.
2. To approve the amendment to Frontier's Articles of Incorporation to
conform the current limitations of liability of Frontier's directors
with the revised Arizona Business Corporation Act.
3. To approve the amendment to Frontier's Articles of Incorporation to
conform the current indemnification provisions with the revised
Arizona Business Corporation Act.
4. To approve the amendment to Frontier's Articles of Incorporation to
conform the provisions regarding directors' conflicts of interest to
the revised Arizona Business Corporation Act.
5. To approve the amendment to Frontier's Articles of Incorporation to
update the description of the purpose for which Frontier is organized
and the character of business that Frontier conducts.
6. To approve the amendment to Frontier's Articles of Incorporation to
update the provisions of Article 4 regarding serial preferred stock.
7. To approve the amendment to Frontier's Articles of Incorporation to
maintain certain corporate records at the known place of business of
Frontier.
8. To approve amending and restating the Articles of Incorporation in the
form of the Amended and First Restated Articles of Incorporation of
Frontier (the "Amended and Restated Articles"), to incorporate
proposals two through seven, and to reflect certain other technical
changes.
9. To ratify the appointment of McGladrey & Pullen, LLP as the auditors
of Frontier for the fiscal year ending June 30, 2001.
10. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
After careful consideration, your Board of Directors has unanimously
approved the election of the nominees for director, each amendment to the
Articles of Incorporation, the Amended and Restated Articles and the appointment
of McGladrey & Pullen, LLP as auditors, and has concluded that each is in the
best interests of Frontier and its shareholders. YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT FRONTIER'S SHAREHOLDERS VOTE TO ELECT THE NOMINEES
FOR DIRECTORS, APPROVE EACH OF THE AMENDMENTS TO THE ARTICLES OF INCORPORATION,
APPROVE THE AMENDED AND RESTATED ARTICLES AND RATIFY THE APPOINTMENT OF
MCGLADREY & PULLEN, LLP.
<PAGE>
Approval of each of the Proposals requires the affirmative vote of a
majority of the votes present in person or represented by proxy at the Annual
Meeting provided that there is a quorum present, however, Arizona law requires
cumulative voting in election for directors. This means that each shareholder
may cast that number of votes that is equal to the number of shares held of
record, multiplied by the number of directors to be elected. This amount of
shares may be cast for one candidate or distributed among the candidates. A
quorum consists of over 50% of the shares of Common Stock issued and outstanding
on the Record Date. United Financial Adjusting Company ("UFAC") holds
approximately 59% of the aggregate number of votes that may be cast by the
holders of Frontier Common Stock, which votes are sufficient to approve each of
the Proposals, except for the election of all of the director candidates, where
cumulative voting for directors is required. UFAC has informed Frontier that it
intends to vote its shares in favor of approving each of the Proposals and for
electing each of the nominees for director. Although UFAC has enough votes to
approve each of the Proposals, your vote is important to us and allows you to
communicate your opinion to management.
In the materials accompanying this letter, you will find a Notice of Annual
Meeting of Shareholders, a Proxy Statement relating to the actions to be taken
by Frontier's shareholders at the Annual Meeting, and a proxy (printed on blue
paper). To ensure your representation at the Annual Meeting, please complete,
sign, and date the enclosed proxy and return it in the envelope provided. If you
attend the Annual Meeting, you may vote in person if you wish, even though you
have previously turned in your proxy.
Thank you for your continued support.
Sincerely,
Peter I. Cavallaro
Secretary
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 14, 2000
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The Annual Meeting of Shareholders of Frontier Adjusters of America, Inc.,
an Arizona corporation ("Frontier"), will be held on Thursday, December 14,
2000, at 10:00 a.m. (Phoenix, Arizona time) at Frontier's executive offices
located at 45 East Monterey Way, Phoenix, Arizona 85012, for the following
purposes:
1. To elect nine directors.
2. To approve the amendment to Frontier's Articles of Incorporation to
conform the current limitations of liability of Frontier's directors
with the revised Arizona Business Corporation Act.
3. To approve the amendment to Frontier's Articles of Incorporation to
conform the current indemnification provisions with the revised
Arizona Business Corporation Act.
4. To approve the amendment to Frontier's Articles of Incorporation to
conform the provisions regarding directors' conflicts of interest to
the revised Arizona Business Corporation Act.
5. To approve the amendment to Frontier's Articles of Incorporation to
update the description of the purpose for which Frontier is organized
and the character of business that Frontier conducts.
6. To approve the amendment to Frontier's Articles of Incorporation to
update the provisions of Article 4 regarding serial preferred stock.
7. To approve the amendment to Frontier's Articles of Incorporation to
maintain certain corporate records at the known place of business of
Frontier.
8. To approve amending and restating the Articles of Incorporation in the
form of the Amended and First Restated Articles of Incorporation of
Frontier (the "Amended and Restated Articles"), to incorporate
proposals two through seven, and to reflect certain other technical
changes.
9. To ratify the appointment of McGladrey & Pullen, LLP as the auditors
of Frontier for the fiscal year ending June 30, 2001.
10. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on October 20, 2000 are entitled to notice of and to vote at the Annual
Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. To assure your representation at the Annual Meeting, however, you are
urged to mark, sign, date, and return the enclosed proxy as promptly as possible
in the postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the Annual Meeting may vote in person even if he or she previously has
returned a proxy.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IT IS
YOUR MEANS OF COMMUNICATING WITH MANAGEMENT. SHAREHOLDERS WHO DO NOT EXPECT TO
<PAGE>
BE PRESENT AT THE ANNUAL MEETING ARE REQUESTED TO MARK, SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
Phoenix, Arizona Peter I. Cavallaro
November 22, 2000 Secretary
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
45 EAST MONTEREY WAY
PHOENIX, ARIZONA 85012
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PROXY STATEMENT
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Shareholders are urged to read this Proxy Statement in its entirety. Certain
capitalized terms used in this Summary are defined elsewhere in this Proxy
Statement.
GENERAL
The enclosed proxy is solicited on behalf of Frontier by Frontier's board of
directors (the "Board" or "Board of Directors") for use at Frontier's Annual
Meeting of Shareholders to be held on Thursday, December 14, 2000 at 10:00 a.m.
(Phoenix, Arizona time) (the "Annual Meeting"), or at any adjournment thereof,
for the purposes set forth in this Proxy Statement and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at
Frontier's executive offices located at 45 East Monterey Way, Phoenix, Arizona
85012.
These proxy solicitation materials were first mailed on or about November 22,
2000 to all shareholders entitled to vote at the Annual Meeting.
The mailing address of Frontier's principal executive office is 45 East Monterey
Way, Phoenix, Arizona 85012. Frontier's telephone number is (602) 264-1061.
RECORD DATE
The Board of Directors has fixed the close of business on October 20, 2000 as
the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use by
delivering to Frontier written notice of revocation or a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
VOTING SECURITIES AND VOTING RIGHTS
On the Record Date, Frontier had outstanding 8,957,660 shares of Common Stock,
par value $.01 per share (the "Common Stock or "Frontier Common Stock"). Each
holder of Common Stock voting at the Annual Meeting, either in person or by
proxy, may cast one vote per share of Common Stock held on all matters to be
voted upon at the Annual Meeting.
The presence, in person or by proxy, at the Annual Meeting of shareholders
entitled to cast a majority of all votes entitled to be cast at such meeting,
shall constitute a quorum. Assuming that a quorum is present, the affirmative
vote of a majority of the shares of Frontier present in person or represented by
proxy at the Annual Meeting is required (i) for the election of directors, (ii)
to approve each amendment to the Articles of Incorporation, (iii) to approve the
Amended and Restated Articles of Incorporation, (iv) for the ratification of
McGladrey & Pullen, LLP, as the independent auditors of Frontier for the fiscal
year ending June 30, 2001 and (v) to transact such other business as may
properly come before the Annual Meeting or any adjournment thereof.
Arizona law requires cumulative voting in elections for directors, which means
that each shareholder may cast that number of votes that is equal to the number
of shares held of record, multiplied by the number of directors to be elected.
1
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Each shareholder may cast the whole number of votes for one candidate or
distribute such votes among two or more candidates. On the enclosed proxy, if no
direction is given, all votes for directors will be allocated evenly among the
nominees voted "for."
UNITED FINANCIAL ADJUSTING COMPANY ("UFAC") HOLDS APPROXIMATELY 59% OF
FRONTIER'S OUTSTANDING SHARES OF COMMON STOCK. THE FRONTIER SHARES OWNED BY UFAC
ARE SUFFICIENT TO ASSURE PASSAGE OF ALL OF THE PROPOSALS OTHER THAN THE ELECTION
OF DIRECTORS. UFAC HAS INFORMED FRONTIER THAT IT WILL VOTE ITS SHARES IN FAVOR
OF ALL OF THE PROPOSALS AND FOR ELECTING EACH OF THE NOMINEES FOR DIRECTOR. FOR
THIS REASON, YOUR VOTE WILL NOT AFFECT THE PASSAGE OF THE PROPOSALS OTHER THAN
THE ELECTION OF DIRECTORS. HOWEVER, WE ENCOURAGE YOU TO VOTE. WE BELIEVE THAT
YOUR VOTE IS IMPORTANT AS IT ALLOWS YOU THE OPPORTUNITY TO EXPRESS AGREEMENT OR
DISAGREEMENT WITH OUR ACTIONS.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
election inspectors appointed for the Annual Meeting and will determine whether
a quorum is present. The election inspectors will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but as unvoted for purposes of determining the approval of any
matter submitted to the shareholders for a vote. Thus, an abstention will have
the same effect as a vote against a Proposal or nominee. If a broker indicates
on the proxy that it does not have discretionary authority as to certain shares
to vote on a particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter.
VOTING OF PROXIES
A proxy form has been included with this proxy statement. In order to vote by
proxy, you should complete the proxy form, sign it and return it to us in the
self-addressed envelope we have provided. When a proxy is properly executed and
returned, the shares it represents will be voted at the Annual Meeting as
directed. Unless otherwise instructed, shares represented by proxy will be voted
"for" each of the Proposals. If any other matters should properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
proxy to vote each proxy in accordance with their best judgment on such matter.
SOLICITATION
The cost of this solicitation will be borne by Frontier. In addition, Frontier
may reimburse brokerage firms and other persons representing beneficial owners
of shares for expenses incurred in forwarding solicitation materials to such
beneficial owners. Proxies also may be solicited by certain of Frontier's
directors and officers, personally or by telephone or telegram, without
additional compensation.
ANNUAL REPORT AND OTHER MATTERS
Our 2000 Annual Report to Shareholders and our Quarterly Report on Form 10-Q for
the period ended September 30, 2000 were mailed to you with this Proxy
Statement, but are not incorporated into this Proxy Statement and are not to be
considered a part of these proxy soliciting materials or subject to Regulations
14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of
1934. The information contained under "Audit Committee," in the "Report of the
Compensation Committee" and under "Company Performance" below shall not be
deemed "filed" with the Securities and Exchange Commission or subject to
Regulations 14A or 14C or to the liabilities of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act").
WE WILL PROVIDE UPON WRITTEN REQUEST, WITHOUT CHARGE TO EACH SHAREHOLDER OF
RECORD AS OF THE RECORD DATE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED JUNE 30, 2000 AS FILED WITH THE SEC. ANY EXHIBITS LISTED IN
THE FORM 10-K REPORT ALSO WILL BE FURNISHED UPON REQUEST AT THE ACTUAL EXPENSE
INCURRED BY US IN FURNISHING SUCH EXHIBITS. ANY SUCH REQUESTS SHOULD BE DIRECTED
TO OUR COMPANY'S SECRETARY AT OUR EXECUTIVE OFFICES SET FORTH IN THIS PROXY
STATEMENT.
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PROPOSAL ONE
PROPOSAL TO ELECT DIRECTORS
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NOMINEES
A Board of nine directors is to be elected at the Annual Meeting. The nominees
for directors are Charles E. Becker, Eric J. Carlstrom, Peter I. Cavallaro, John
M. Davies, Mark A. Freeman, Jeffrey R. Harcourt, Jeffrey C. Jordan, Anthony J.
Puglisi and Kenneth A. Sexton. In the absence of direction by shareholders
executing proxies, the persons named in the enclosed proxy will vote FOR the
nominees named herein. In the event that any nominee of Frontier is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee designated by the current Board of Directors to
fill the vacancy. It is not presently expected that any nominee will be unable
or will decline to serve as director.
INFORMATION CONCERNING NOMINEES FOR DIRECTORS
The following table sets forth certain information regarding Frontier's
directors, nominees for director and executive officers:
<TABLE>
<CAPTION>
Name Age Position(s) with Frontier Director Since
---- --- ------------------------- --------------
<S> <C> <C> <C>
Charles E. Becker 32 Director Nominee
Eric J. Carlstrom 41 Director Nominee
Peter I. Cavallaro 39 Director, Secretary and General Counsel Nominee
John M. Davies 43 Director, Chairman of the Board, Chief 1999
Executive Officer and President
Mark A. Freeman 56 Director Nominee
Jeffrey R. Harcourt 39 Director, Chief Financial Officer and Treasurer 1999
Jeffrey C. Jordan 44 Director and Vice President 1999
Anthony J. Puglisi 51 Director Nominee
Kenneth A. Sexton 46 Director 2000
</TABLE>
CHARLES E. BECKER has served as Vice President of Duck Pond Corp. since December
1997 and as Secretary and Treasurer of WLNY-TV Inc. since January 2000. From
December 30, 1997 through January 2000, Mr. Becker served as Tax Director of
NationsBanc Auto Leasing, Inc. From March 1991 to June 1994, Mr. Becker was an
accountant with the firm of BDO Seidman. Mr. Becker holds an B.S. degree from
the State University of New York at Binghamton. Mr. Becker is a certified public
accountant.
ERIC J. CARLSTROM has served as Senior Vice President of AON Risk Services, Inc.
since 1997. Prior thereto, Mr. Carlstrom served as Senior Vice President at
Alexander & Alexander, an insurance brokerage firm, from 1994 to 1997. Mr.
Carlstrom holds a B.A. degree from Hofstra University.
PETER I. CAVALLARO joined UFAC as Secretary and General Counsel in November
1999. Mr. Cavallaro joined Netrex LLC, a newly-organized financial services and
technology company, in November 1999. Mr. Cavallaro was appointed Frontier's
Secretary in January 2000. From May 1990 to March 1999, Mr. Cavallaro was
employed by NationsBanc Auto Leasing, Inc. (formerly named Oxford Resources
Corp.), most recently serving as Senior Vice President and General Counsel. From
June 1999 to November 1999, Mr. Cavallaro was a Partner at the New York law firm
of Rivkin, Radler & Kremer LLP. Mr. Cavallaro continues as Of Counsel to that
law firm. Mr. Cavallaro holds a J.D. degree from St. John's University School of
Law, and a B.A. degree from St. John's University.
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JOHN M. DAVIES was appointed sole director of UFAC in November 1999. Mr. Davies
has been associated with Frontier as a director since April 1999, Chairman of
the Board since January 2000 and Chief Executive Officer and President since
November 22000. Since June 1999, Mr. Davies has also served as President of
Netrex LLC, a newly organized financial services and technology company. From
September 1989 through June 1999, Mr. Davies was employed by The Progressive
Corporation, most recently as Division President of Progressive's Diversified
Business Group. Mr. Davies has an M.B.A. from the University of Pittsburgh and
has earned numerous professional designations, including being a certified
public accountant, a Chartered Property and Casualty Underwriter and a Chartered
Life Underwriter.
MARK A. FREEMAN is a private investor. Mr. Freeman served as Senior Vice
President of NationsBanc Auto Leasing, Inc. and its predecessor, Oxford
Resources Corp., from 1974 to 1998. Mr. Freeman holds a B.B.A. degree from City
College of New York, Bernard M. Baruch School of Business Administration. Mr.
Freeman is a certified public accountant.
JEFFREY R. HARCOURT was appointed Treasurer of UFAC in November 1999. Mr.
Harcourt has served as Chief Financial Officer of Frontier since August 1999, as
a director of Frontier since April 1999 and as Treasurer of Frontier since
January 2000. From October 1990 through November 1999, Mr. Harcourt was employed
by The Progressive Corporation, most recently as Controller of the Diversified
Business Group. Mr. Harcourt currently also serves as the Chief Financial
Officer of Netrex Holdings, LLC, the parent company of UFAC. Mr. Harcourt holds
a B.S. degree from Miami University and has earned numerous designations,
including being a certified public accountant, a Chartered Property and Casualty
Underwriter, a Certified Internal Auditor and a Certified Information Systems
Auditor.
JEFFREY C. JORDAN has been Vice President and director of Frontier since April
1999. From September 1984 through November 1999 Mr. Jordan was employed by The
Progressive Corporation in numerous capacities, most recently as a division
claims manager. Mr. Jordan earned a B.A. degree from Rutgers University and a
J.D. degree from UCLA.
ANTHONY J. PUGLISI has been President of Zoomcar Wholesale, Inc. since October
2000. From April 1993 to March 2000, Mr. Puglisi served as Executive Vice
President of Olston Corporation. Mr. Puglisi holds a B.B.A. degree from City
College of New York, Bernard M. Baruch School of Business Administration. Mr.
Puglisi is a certified public accountant.
KENNETH A. SEXTON was appointed as a director of Frontier in January 2000. Mr.
Sexton currently serves as Senior Vice President of Finance and Administration
and Chief Financial Officer of Merant, a worldwide technology and software
company. Mr. Sexton has served in various positions with Merant and its related
companies since 1991. Mr. Sexton holds a B.S. degree in business from Ohio State
University and is a certified public accountant.
Frontier's Board of Directors met five times in fiscal year 2000, and all
members attended 75% or more of the meetings of the Board and committees he or
she serves on.
AUDIT COMMITTEE
The Audit Committee of the Board for the fiscal year ended June 30, 2000
consisted of Louis T. Mastos, Jean E. Ryberg, and Kenneth A. Sexton,
non-employee directors of Frontier. The Audit Committee reviews annual financial
statements, any significant accounting issues, and the scope and results of the
audit performed by Frontier's independent auditors, and discusses with the
auditors any other audit related matters that may arise during the year. In May
2000, the Board adopted a written charter for the Audit Committee. A copy is
attached as Annex B. Under AMEX rules, Messrs. Mastos and Sexton are independent
directors. Ms. Ryberg is not considered independent because she was employed by
Frontier within the last four years. The Board appointed Ms. Ryberg to the Audit
Committee to help represent a consistent approach to accounting and financial
control issues during the past fiscal year in which Frontier underwent a change
in management.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frontier's Board of Directors serves as Frontier's Compensation Committee. No
member of the current Board had any contractual or other relationships with
Frontier during the last completed fiscal year, other than their serving as
directors.
EXECUTIVE COMPENSATION
Frontier receives its management services under a service agreement with UFAC
(the "Agreement"). Under the Agreement, Frontier pays a monthly fee of $25,000
per month ($300,000 per year) for marketing, managerial, technological, human
resources support, financial and reporting support, the full-time services of
Jeffrey C. Jordan, and other services and resources. See "Proposal One - Certain
Transactions."
The following table sets forth certain information concerning compensation
during the years ended June 30, 2000, 1999 and 1998 to the chief executive
officer and each other executive officer whose aggregate compensation exceeded
$100,000 (the "Named Executives").
SUMMARY COMPENSATION TABLE (1)
ANNUAL COMPENSATION
----------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(2) BONUS($) COMPENSATION($)
--------------------------- ---- ------------ -------- ---------------
Troy M. Huth, Director, CEO 2000 (3) (3) (3)
and President 1999
1998
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(1) Columns representing other annual compensation and long-term compensation
were not included as no such compensation was granted.
(2) No perquisites were received by any person named above greater than the
lesser of $50,000 or 10% of salary plus bonus.
(3) Mr. Huth's services and the services of other executive officers of
Frontier are provided to Frontier by UFAC under the Agreement.
No additional sums are paid or payable to UFAC for bonuses, other annual
compensation, long-term compensation or any other form of compensation for
management services. Frontier has no employment agreements with any of its
management personnel and no other arrangements that would result in payment upon
resignation, retirement or any other termination of employment with Frontier or
from a change-in-control of Frontier, or any of its subsidiaries, or a change in
the executive's responsibilities following a change-in-control.
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
Frontier did not grant any stock options during fiscal 2000 nor were there any
options outstanding as of June 30, 2000 for any of the Named Executives.
DIRECTORS' COMPENSATION
Each director, including employees of Frontier, but excluding employees of UFAC
or Netrex Holdings L.L.C., is paid $1,000 per Board meeting attended ($750 per
meeting prior to March 1, 2000). During fiscal 2000, each such director, except
for Kenneth A. Sexton, received $2,750 for attendance at Board meetings. Mr.
Sexton received $2,000 for attendance at Board meetings.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
For the fiscal year ended June 30, 2000, the Compensation Committee was
comprised of the entire Board. The Board, acting as the Compensation Committee,
establishes policies relating to the compensation of employees. The following is
a report submitted by the Board members in their capacity as the Compensation
Committee, addressing Frontier's compensation policy as it relates to the named
executive officers for fiscal 2000.
COMPENSATION POLICY
The goal of Frontier's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, Frontier has implemented a gainsharing program
for all employees during fiscal 2000. The program is designed to reward
employees, including executive employees, for exceptional growth and return on
revenue. Disbursements under the program are made at the discretion of the
Board, if targets set by the Board are met. Annual cash compensation, together
with equity-based, incentive compensation is designed to attract and retain
qualified executives and to ensure that such executives have a continuing stake
in the long-term success of Frontier. All executive officers and management are
eligible to participate in Frontier's 1996 Stock Option Plan.
FISCAL 2000 COMPENSATION
Frontier's fiscal 2000 executive compensation plan consisted of (i) a base
salary and (ii) gainsharing based upon Frontier's revenue targets. No stock
options were granted by the Board during fiscal 2000.
The Board believes that linking executive compensation to corporate performance
(i.e., revenue targets and pre-tax profitability targets) provides incentive to
the executive to enhance corporate performance and the shareholders' interests.
It was with this in mind that the gainsharing portion of executive compensation
was revised to the current arrangement with Frontier's named executives.
COMPANY PERFORMANCE
The following graph reflects a five-year comparison of cumulative total returns
for the Common Stock, the American Stock Exchange ("AMEX") Market Value Index,
and Frontier's Peer Group of Stocks based on the four digit SIC Code Index. The
total cumulative return on investment (change in the year-end stock price plus
reinvested dividends) for each of the periods and indexes is based on the stock
price or composite index at the end of fiscal 1995. The graph compares the
performance of Frontier with AMEX and Peer Group Indexes with the investment
weighted based upon market capitalization.
6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 6/30/00
------- ------- ------- ------- ------- -------
Frontier Adjusters 100.00 117.17 109.97 134.92 191.41 225.86
Industry 100.00 117.41 161.21 211.28 223.60 271.41
AMEX Market Index 100.00 114.50 121.78 140.79 138.50 159.25
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CERTAIN TRANSACTIONS
Old Frontier Investment, Inc. of Arizona, of which William J. Rocke and Garnet
Rocke, his wife, own 51% of the issued and outstanding stock and James S. Rocke,
their son, owns the remaining 49%, has entered into a license agreement with
Frontier pursuant to which it operates, under standard terms and conditions, an
insurance adjusting and risk management business located in Scottsdale, Arizona,
and is paid a 5% royalty on gross revenue derived from services provided by
certain other licensees in other Arizona cities and towns. Frontier paid Old
Frontier Investment, Inc. $14,448 during fiscal year 2000 in connection with
such 5% royalty agreement.
George M. Hill, a shareholder and a former Vice President and Director of
Frontier, acts as outside counsel to Frontier. During the fiscal year ended June
30, 2000, Frontier paid Mr. Hill's law firm $42,774 for services rendered and
disbursements. Such fees will continue to accrue, pursuant to a retainer
agreement, at the rate of $3,000 per month effective June 1, 1999.
In April 1999, Frontier entered into the Agreement with UFAC whereby Frontier
pays a $25,000 monthly fee for marketing, managerial, technological, human
resource support, financial and reporting support, the full-time services of
Jeffrey C. Jordan, and other services and resources. As of June 30, 2000,
Frontier had incurred $300,000 in service fees related to this agreement, as
well as an additional $60,741 for services performed outside of the agreement,
for an aggregate of $360,741.
Frontier believes that the cost to Frontier for all of the foregoing was and is
competitive with charges for similar services and facilities available from
third parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of copies of such forms received by Frontier during
fiscal year ended June 30, 2000, and written representations that no such
reports were required, Frontier believes that each person who, at any time
during such fiscal year, was a director, officer or beneficial owner of more
than 10% of the Common Stock complied with Section 16(a) filing requirements
during such fiscal year.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of the close of business on the Record Date, there were 8,957,660 shares of
Common Stock outstanding. The following table sets forth information regarding
the beneficial ownership of shares of the Common Stock outstanding as of
November 15, 2000 by (i) each person or group known to Frontier who owns or who
will own more than 5% of the outstanding shares of Common Stock, (ii) each of
the directors, nominees for director, and the executive officers of Frontier and
(iii) by all directors and executive officers of Frontier as a group. Unless
otherwise indicated in the footnotes, all of such interests are owned directly,
and the indicated person has sole voting and investment power. The number of
shares represents the number of shares of Common Stock the person holds,
including shares that may be issued upon the exercise of options that are
exercisable as of January 15, 2001. Information presented in the table and
related notes has been obtained from the beneficial owner and/or from reports
filed by the beneficial owner with the Securities and Exchange Commission
pursuant to Section 13 of the Exchange Act.
Shares Beneficially
Owned on November 15, 2000
-----------------------------------------
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership (1) of Class (2)
------------------------ ------------------------ ------------
OFFICERS AND DIRECTORS
Charles E. Becker (5) -- *
Eric J. Carlstrom (5) -- *
Peter I. Cavallaro (5) -- *
John M. Davies (5)(6) 500 *
Mark A. Freeman (5) -- *
Jeffrey R. Harcourt (4) -- *
Troy M. Huth (4) -- *
Jeffrey C. Jordan (3) -- *
Louis T. Mastos and Eva B.
Mastos, his wife (3)(7) 207,103 2.31%
Laurel A. Park (3) -- *
Anthony J. Puglisi (5) -- *
William J. Rocke and Garnet Rocke,
his wife (3)(8) 415,332 4.64%
Jean E. Ryberg (3)(9) 97,960 1.09%
Kenneth A. Sexton (3) -- *
William A. White (4) -- *
All officers and directors as a
group (eleven persons) (10) 720,895 8.05%
FIVE PERCENT SHAREHOLDERS
United Financial Adjusting Company
(4)(11) 5,258,513 58.70%
----------
* Less than 1%
(1) Includes, when applicable, shares owned of record by such person's minor
children and spouse and by other related individuals and entities over
whose shares of Common Stock such person has custody, voting control or
power of disposition. Also includes shares of Common Stock that the
identified person had the right to acquire within 60 days after November
15, 2000 by the exercise of stock options.
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(2) The percentages shown include the shares of Common Stock that the person
had the right to acquire within 60 days after November 15, 2000. In
calculating the percentage of ownership, all shares of Common Stock that
the identified person had the right to acquire within 60 days after
November 15, 2000 are deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by such person, but are
not deemed to be outstanding for the purpose of computing the percentage of
shares of Common Stock owned by any other shareholders.
(3) Each of such persons may be reached through Frontier at 45 East Monterey
Way, Phoenix, Arizona 85012.
(4) May be reached at 31500 Solon Road, Solon, Ohio 44139.
(5) May be reached at 270 South Service Road, Suite 45, Melville, New York
11747-2339.
(6) Does not include 5,258,513 shares owned by UFAC to which Mr. Davies
disclaims any beneficial interest for purposes of Section 13(d) or (g) of
the Securities Exchange Act of 1934, as amended.
(7) Includes 183,180 shares held in a trust under an agreement dated February
10, 1981, in which Mr. and Mrs. Mastos hold equal beneficial interests, and
23,523 shares which are held by Louis T. Mastos in an Individual Retirement
Account.
(8) Includes 290,000 shares held by Old Frontier Investment, Inc. of Arizona,
of which William J. Rocke and Garnet Rocke hold 51% of the outstanding
stock.
(9) Excludes 28,000 shares held by Mrs. Ryberg's sons and grandchildren, in
which she disclaims any beneficial interest.
(10) Excludes all duplication of shared holdings required to be reported by more
than one officer or director.
(11) Includes 5,258,513 shares owned by UFAC. These shares were purchased
directly from Frontier in April 1999. As a result there was a change in
control of Frontier. UFAC was a wholly-owned subsidiary of The Progressive
Corporation. Pursuant to a Contribution Agreement dated October 1, 1999,
The Progressive Corporation contributed all of its shares of UFAC to Netrex
Holdings L.L.C. in exchange for 51.3% of the outstanding units of Netrex
Holdings, L.L.C. As a result, there was a change in control of UFAC and,
therefore, an indirect change in control of Frontier. UFAC is now a wholly
owned subsidiary of Netrex Holdings, L.L.C. As of the date of this Proxy
Statement, Netrex Holdings, L.L.C., is owned 51.4% by The Progressive
Corporation and 48.6% by NCG which is wholly-owned by Netrex LLC. The
Progressive Corporation is a large publicly-traded corporation. According
to certain insurance regulatory filings dated March 30, 2000 of The
Progressive Corporation, Peter B. Lewis, President and Chief Executive
Officer of The Progressive Corporation, owns approximately 13.1% of the
outstanding common stock of that company. Netrex LLC is a limited liability
company, the manager of which is Duck Pond Corp., which is a privately-held
corporation having voting control and investment power of Netrex LLC. Each
of Michael C. Pascucci, Christopher S. Pascucci and Ralph P. Pascucci owns
one-third of the outstanding stock of and each is a director of (together
constituting all of the directors of) Duck Pond Corp. The Progressive
Corporation, NCG, Netrex LLC, Netrex Holdings, L.L.C., Duck Pond Corp.,
Peter B. Lewis, Michael C. Pascucci, Christopher S. Pascucci and Ralph P.
Pascucci each disclaims that it is the beneficial owner of Frontier's
shares owned by UFAC for purposes of Section 13(d) or (g) of the Securities
Exchange Act of 1934, as amended.
To the best knowledge of Frontier, no person or groups of persons, other than
officers, directors and UFAC beneficially own more than five percent of the
Common Stock (based upon present records of the transfer agent).
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--------------------------------------------------------------------------------
PROPOSALS TWO THROUGH EIGHT
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BACKGROUND
Frontier became an Arizona corporation in 1983, when its Articles of
Incorporation ("Articles") were filed with the Arizona Corporation Commission on
October 7, 1983. On October 20, 1986, Frontier amended its Articles of
Incorporation to change its corporate name to Frontier Adjusters of America,
Inc. On November 12, 1987, Frontier filed a second amendment to provide for a
limitation of the personal liability of directors for breaches of fiduciary duty
as a director, as permitted by Arizona law, and to provide for indemnification
of directors and officers to the fullest extent permitted by applicable law. On
October 24, 1991, Frontier filed a third amendment that added an exemption from
the Arizona Takeover Act. On April 26, 1999, Frontier filed a certificate
establishing and designating the class and fixing and determining their
respective preferences, privileges, voting powers, restrictions and
qualifications of 6,000,000 shares of Series A Convertible Voting Preferred
Stock.
On January 1, 1996, significant revisions to Arizona law governing corporations
went into effect (the "Business Corporation Act"). The Business Corporation Act
automatically applied to Frontier without any further action by Frontier.
However, certain provisions of the Articles are inconsistent with certain
provisions of the Business Corporation Act. As a result, the Board of Directors
determined that it is in the best interests of Frontier to amend and restate the
Articles to the extent necessary to make them more consistent with the Business
Corporation Act. In addition, because the Articles currently consist of
Frontier's original Articles of Incorporation and subsequent amendments as
described above, the Board of Directors deemed it advisable to amend and restate
the Articles in their entirety to provide one integrated document, which is
easier to read and which will avoid confusion. While the effectiveness of each
of the following proposals is not conditional on the approval of the other
proposals found in this Proxy Statement, they work together to conform
Frontier's Articles of Incorporation to the revised Business Corporation Act.
--------------------------------------------------------------------------------
PROPOSAL TWO
PROPOSAL TO CONFORM CURRENT LIMITATION OF LIABILITY
PROVISIONS WITH BUSINESS CORPORATION ACT
--------------------------------------------------------------------------------
The Articles currently eliminate the personal liability of directors to Frontier
or its shareholders for monetary damages incurred as the result of the breach of
their fiduciary duty as a director except for: (i) any breach of the director's
duty of loyalty to the Corporation or its members; (ii) acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law; and (iii) any transaction from which the director derived an
improper personal benefit. The proposed Amended and Restated Articles eliminate
the personal liability of any director of Frontier to Frontier or its
shareholders for money damages for any action taken or failure to take any
action as a director of Frontier, to the fullest extent allowed by law. Under
the Business Corporation Act, Frontier may not indemnify a director for
liability for any of the following: (a) the amount of a financial benefit
received by the director to which the director is not entitled; (b) the
intentional infliction of harm on Frontier or its shareholders; (c) certain
unlawful distributions to shareholders; and (d) an intentional violation of
criminal law. The effect of these provisions in the proposed Amended and
Restated Articles is to eliminate the right of Frontier and its shareholders
(through shareholders' derivative suits on behalf of Frontier) to recover money
damages from a director for all actions or omissions as a director, including
breaches resulting from negligent or grossly negligent behavior (except in the
situations described in clauses (a) through (d) above). These provisions do not
limit or eliminate the right of Frontier or any shareholder to seek nonmonetary
relief such as an injunction or rescission to the extent of a breach of a
director's duty of care. The provisions in the proposed Amended and Restated
Articles described above are needed to eliminate potential inconsistencies
between the Articles and the Business Corporation Act. In addition, the proposed
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revisions will provide broader limitation of liability to Frontier's directors.
The Board of Directors believes that these revisions respecting the limitation
of directors' liabilities are necessary to enable Frontier to attract and retain
qualified persons to serve as directors of Frontier. The Board of Directors
recommends a vote FOR the proposal to conform current limitation of liability
provisions with the Business Corporation Act.
--------------------------------------------------------------------------------
PROPOSAL THREE
PROPOSAL TO CONFORM CURRENT INDEMNIFICATION PROVISIONS WITH
BUSINESS CORPORATION ACT
--------------------------------------------------------------------------------
The proposed Amended and Restated Articles include provisions that are intended
to conform the current indemnification provisions of the Articles with the
Business Corporation Act and that, in conjunction with the Business Corporation
Act, will enable Frontier to provide broader indemnification to its directors,
officers, employees and agents than the Articles currently permit. In
particular, certain provisions permitted by the Business Corporation Act and
included in the proposed Amended and Restated Articles will permit and, in
certain instances, require Frontier to pay for or reimburse expenses to its
directors, officers, employees and agents in advance of a final disposition of
legal proceedings to which such persons may be parties as a result of their
serving as directors, officers, employees or agents of Frontier. The Articles
currently do not permit Frontier to make such advances. The Board of Directors
believes that the ability to advance expenses to such persons will better enable
them to successfully defend legal proceedings to which they become parties as
the result of having served on behalf of Frontier. The Board of Directors
believes that the broader indemnification provisions permitted by the Business
Corporation Act and included in the proposed Amended and Restated Articles are
necessary to enable Frontier to attract and retain qualified persons to serve as
directors, officers, employees and agents. The Board of Directors recommends a
vote FOR the proposal to conform current indemnification provisions with the
Business Corporation Act.
REQUIRED INDEMNIFICATION
The proposed Amended and Restated Articles and the Business Corporation Act will
require Frontier to indemnify all directors and officers of Frontier who are not
directors against "liability" as defined below. The proposed Amended and
Restated Articles and the Business Corporation Act also will require Frontier to
indemnify against reasonable "expenses," as defined below, any director or
officer who is the prevailing party in a defense of any proceeding to which the
director or officer is a party because such person is or was a director or
officer of Frontier. In addition, the Business Corporation Act requires Frontier
to pay expenses to "Outside Directors," as defined below, in advance of a final
disposition of the proceeding if: (i) the Director furnishes to Frontier a
written affirmation ("Affirmation") of his or her good faith belief that: (a)
his or her conduct was in good faith, (b) he or she reasonably believes that the
conduct was in the best interests of Frontier, or at least not opposed to
Frontier's best interests, and (c) in the case of any criminal proceeding, he or
she had no reasonable cause to believe the conduct was unlawful (the "Standard
of Conduct"); and (ii) the director provided Frontier with a written undertaking
(the "Undertaking") to repay the advance if it ultimately is determined that the
director did not meet the Standard of Conduct. However, the Business Corporation
Act prohibits Frontier from advancing expenses to an Outside Director if a court
determines, before payment, that the director failed to meet the Standard of
Conduct, and the court does not otherwise authorize indemnification.
The proposed Amended and Restated Articles and the Business Corporation Act also
will require Frontier to indemnify a director who is not an Outside Director
against liability, but only if Frontier is advised in the specific case after a
determination has been made by either (i) a majority of the members of the Board
of Directors who are not at the time parties to the proceeding, (ii) special
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<PAGE>
legal counsel, or (iii) the shareholders of Frontier (excluding shares owned by
or voted under the control of directors who are at the time parties to the
proceeding) that the director has met the Standard of Conduct (a
"Determination"). In addition, the Business Corporation Act prohibits Frontier
from indemnifying a director who is not an Outside Director in connection with a
proceeding by or in the rights of Frontier in which the director is adjudged
liable to Frontier or in connection with a proceeding in which the director was
adjudged liable on the basis that the director improperly received a personal
benefit. As permitted by the Business Corporation Act, the proposed Amended and
Restated Articles also will require Frontier to pay for or reimburse the
reasonable expenses of a director who is not an Outside Director in advance of
the final disposition of a proceeding if a director furnishes Frontier with an
Affirmation, an Undertaking, and a Determination is made that the facts then
known to the persons making the Determination would not preclude indemnification
under the Business Corporation Act.
OPTIONAL INDEMNIFICATION
The proposed Amended and Restated Articles and the Business Corporation Act will
permit Frontier, in its sole discretion, to indemnify against liability and
advance expenses to, employees or agents who are not an officer or director to
the same extent as an officer or director. However, the Business Corporation Act
prohibits Frontier from indemnifying such persons against liability unless a
Determination is made that indemnification is permissible because the person has
met the Standard of Conduct. The Business Corporation Act permits Frontier to
pay for or reimburse expenses to an employee or agent who is not a director in
advance of a formal disposition of the proceeding, but only if the person
furnishes to Frontier an Affirmation and an Undertaking and a Determination is
made that the facts then known to the persons making the Determination would not
otherwise preclude indemnification.
COURT-ORDERED INDEMNIFICATION
The proposed Articles and the Business Corporation Act will permit a director or
officer of Frontier to apply to a court for indemnification, in which case the
court may, subject to certain conditions, order Frontier to indemnify such
person for all or part of the person's liability and expenses.
DEFINITIONS
The Business Corporation Act defines "Outside Director" to mean a director who,
when serving as a director, was not an officer, employee or holder of more than
five percent (5%) of the outstanding shares of any class of stock of Frontier.
"Liability" under the Business Corporation Act means the obligation to pay a
judgment, settlement, penalty or fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred with
respect to a proceeding, and includes obligations and expenses that have not yet
been paid by the indemnified person but that have been or may be incurred. The
Business Corporation Act defines "expenses" as attorneys' fees and all other
costs and expenses reasonably related to a proceeding.
--------------------------------------------------------------------------------
PROPOSAL FOUR
PROPOSAL TO CONFORM CURRENT CONFLICT OF INTEREST PROVISIONS WITH
BUSINESS CORPORATION ACT
--------------------------------------------------------------------------------
The proposed Amended and Restated Articles include substantive amendments that
delete provisions regarding directors' conflicts of interest because the
Business Corporation Act's provisions regarding this item are inconsistent with
the Articles. The Board of Directors recommends a vote FOR the proposal to
conform current conflict of interest provisions with the Business Corporation
Act.
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--------------------------------------------------------------------------------
PROPOSAL FIVE
PROPOSAL TO UPDATE DESCRIPTION OF PURPOSE AND
CHARACTER OF BUSINESS OF FRONTIER
--------------------------------------------------------------------------------
The proposed Amended and Restated Articles include substantive amendments that
update the description of the purpose for which Frontier is organized and the
character of business that Frontier conducts. The Board of Directors recommends
a vote FOR the proposal to update the description of purpose and character of
business of Frontier.
--------------------------------------------------------------------------------
PROPOSAL SIX
PROPOSAL TO UPDATE THE PROVISIONS OF FRONTIER'S ARTICLES
REGARDING SERIAL PREFERRED STOCK
--------------------------------------------------------------------------------
The proposed Amended and Restated Articles include substantive amendments that
update the provisions in Article 4 regarding serial preferred stock. The Board
of Directors recommends a vote FOR the proposal to update the provisions of
Frontier's Articles regarding serial preferred stock.
The Amended and Restated Articles do not include the rights and preferences of
the Series A Convertible Voting Preferred Stock of Frontier. The Series A
Convertible Voting Preferred Stock was established and designated by Frontier's
Board on April 26, 1999, by filing a Certificate with the Arizona Corporation
Commission, establishing and designating the class and fixing and determining
the relative preferences, rights, voting powers, restrictions and qualifications
of the Series A Convertible Voting Preferred Stock. There are no shares
presently outstanding, nor does Frontier anticipate issuing any Series A
Convertible Voting Preferred Stock. All formerly issued and outstanding shares
of Series A Convertible Voting Preferred Stock have been converted into Common
Stock of Frontier. Pursuant to the rights and preferences of the Series A
Convertible Voting Preferred Stock, all shares that were issued and reacquired
in any manner by Frontier were restored to the status of authorized, but
unissued preferred stock, without designation as to series. Furthermore, the
rights and preferences of the Series A Convertible Voting Preferred Stock allow
Frontier to retire any unissued shares of Series A Convertible Voting Preferred
Stock and require that such shares shall then be restored to the status of
authorized but unissued preferred stock, without designation as to series. The
Board of Directors of Frontier has adopted a resolution retiring all unissued
Series A Convertible Voting Preferred Stock. Accordingly, such unissued shares,
as well as all converted shares of Series A Convertible Voting Preferred Stock,
have been restored to the status of authorized but unissued preferred stock,
without designation as to series, and the establishment and designation of the
class and fixing and determining of the relative preferences, privileges, voting
powers, restrictions and qualifications of any Series A Convertible Voting
Preferred Stock, which was part of the Articles, has been removed from the
Amended and Restated Articles.
The Business Corporation Act provides that Frontier may acquire its own shares
or issue rights, options, or warrants to purchase shares of Frontier.
Accordingly, provisions in the current Articles that authorize Frontier to take
such actions have been deleted from the proposed Amended and Restated Articles.
The Business Corporation Act provides that companies may issue bonds, debentures
or debt securities. Accordingly, provisions in the current Articles that
authorize Frontier to issue such securities have been deleted from the proposed
Amended and Restated Articles.
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The Business Corporation Act prohibits Frontier from issuing shares of one class
or series of its capital stock as a dividend in respect of another class or
series of its capital stock unless either (i) the articles of incorporation
authorize such a dividend; (ii) a majority of the votes entitled to be cast by
the class or series to be issued as a dividend approves the issuance; or (iii)
no shares of the class or series to be issued are outstanding. The proposed
Amended and Restated Articles authorize Frontier to pay to holders of one class
or series of Frontier's capital stock dividends payable in shares of another
class or series of Frontier's capital stock, without approval or ratification by
Frontier's shareholders.
--------------------------------------------------------------------------------
PROPOSAL SEVEN
PROPOSAL TO MAINTAIN CERTAIN CORPORATE RECORDS AT
KNOWN PLACE OF BUSINESS OF FRONTIER
--------------------------------------------------------------------------------
The Business Corporation Act requires Frontier or its agent to maintain certain
corporate records. The proposed Amended and Restated Articles provide that,
unless the Bylaws of Frontier provide otherwise and Frontier's statutory agent
expressly consents thereto in writing, all records required pursuant to the
Business Corporation Act to be kept by Frontier or its agents shall be kept by
Frontier at the known place of business of Frontier. The Board of Directors
believes that this provision of the Amended and Restated Articles is necessary
to eliminate potential administrative burdens that might deter qualified persons
from serving as Frontier's statutory agent. The Board of Directors recommends a
vote FOR the proposal to maintain corporate records at the known place of
business of Frontier.
--------------------------------------------------------------------------------
PROPOSAL EIGHT
PROPOSAL TO AMEND AND RESTATE FRONTIER'S ARTICLES OF INCORPORATION
--------------------------------------------------------------------------------
On May 2, 2000, the Board of Directors unanimously approved a proposal to amend
and restate Frontier's Articles of Incorporation as amended (the "Articles"), to
conform the Articles to certain changes enacted under Arizona law and to reflect
other technical revisions. The Board of Directors recommends a vote FOR the
proposal to amend and restate the Articles. The full text of the proposed
Amended and Restated Articles is included as Annex A to this Proxy Statement. If
approved by Frontier's shareholders, the proposed Amended and Restated Articles
will become effective upon filing of the Amended and Restated Articles with the
Arizona Corporation Commission, which will occur as soon as practicable
following the Annual Meeting.
The approval of the proposed Amended and Restated Articles will also result in
the amendment and restatement of the Articles in their entirety to reflect the
foregoing substantive changes as well as several nonsubstantive ministerial
changes as contained in Annex A. These changes include the elimination of the
names and addresses of the original incorporators of Frontier, reflection of the
fact that the Articles of Incorporation have been restated, restatement and
renumbering of certain articles, and reflection of the names of the persons
currently serving as directors, as required by the Business Corporation Act.
--------------------------------------------------------------------------------
PROPOSAL NINE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
The Board of Directors has appointed McGladrey & Pullen, LLP, independent public
accountants, as the auditors of Frontier for the fiscal year ending June 30,
2001, to serve as such at the pleasure of the Board of Directors. The Board
requests that shareholders vote to ratify this appointment at the Annual
Meeting.
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Audit services for the fiscal year ended June 30, 2000 were provided by
McGladrey & Pullen, LLP, and consisted of the examination of consolidated
financial statements of Frontier and its subsidiaries, reviews of information in
certain filings with the Securities and Exchange Commission and periodic
consultation regarding accounting and financial matters. Frontier is informed
that neither McGladrey & Pullen, LLP, nor any of its partners or associates has
any relationship with Frontier, other than as independent auditors.
Certain financial statements of Frontier appear in Frontier's 2000 Annual
Report. A representative of McGladrey & Pullen, LLP will be present at the
Annual Meeting and will be available to make a statement and to respond to
questions concerning the financial statements.
REQUIRED VOTE, EFFECT OF SHAREHOLDER APPROVAL AND RELATED MATTERS
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting, provided that the total number of
shares present in person or represented by proxy at the Annual Meeting
represents over 50% of the shares of Common Stock issued and outstanding, is
required to vote to approve each of the amendments to the Articles of
Incorporation, approve the Amended and Restated Articles, and ratify the
appointment of McGladrey & Pullen, LLP. The nine persons who receive the highest
number of votes under cumulative voting, will be elected as directors. UFAC owns
58.7% of the issued and outstanding shares of Common Stock of Frontier, which
represents sufficient votes to approve each of the Proposals, however, because
of cumulative voting for directors, it may not have sufficient votes to fill all
of the Board positions.
OTHER MATTERS
Management of Frontier knows of no other matters that will come before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
to vote each proxy in accordance with his best judgment on such matter.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented by such shareholders at
Frontier's annual meeting of shareholders to be held during calendar 2001 must
be received by us no later than July 28, 2001, in order to be included in the
proxy statement and form of proxy relating to such meeting. Pursuant to Rule
14a-4 under the Exchange Act, we intend to retain discretionary authority to
vote proxies with respect to shareholder proposals which the proponent does not
seek to have included in the proxy statement for the annual meeting to be held
during calendar 2001, except in circumstances where (a) we receive notice of the
proposed matter no later than October 15, 2001 and (b) the proponent complies
with the other requirements set forth in Rule 14a-4.
By Order of the Board of Directors,
Peter I. Cavallaro
Secretary
Phoenix, Arizona
November 22, 2000
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ANNEX A
AMENDED AND FIRST RESTATED
ARTICLES OF INCORPORATION
OF
FRONTIER ADJUSTERS OF AMERICA, INC.
These Amended and Restated Articles of Incorporation correctly set forth,
without change, the Amended and Restated Articles adopted by the Board of
Directors and Shareholders as of ____________, 2000, and ____________, 2000,
respectively, and supersede the original Articles of Incorporation and all
amendments to the original Articles of Incorporation.
ARTICLE 1. The name of the corporation is FRONTIER ADJUSTERS OF AMERICA,
INC., (the "Corporation").
ARTICLE 2. The purpose for which the Corporation is organized is the
transaction of any and all lawful business for which corporations may be
incorporated under the Arizona Business Corporation Law, as it may be amended
from time to time (the "Business Corporation Act").
ARTICLE 3. The present character of business that the Corporation conducts
in the State of Arizona is insurance adjusting, risk management, and other
businesses through wholly-owned subsidiaries, and all manner of activity related
thereto.
ARTICLE 4. The authorized capital stock of the corporation shall be divided
into 100,000,000 shares of preferred stock with a par value to be determined by
the Board of Directors prior to the issuance of the stock, and 100,000,000
shares of common stock, par value $0.01 per share. Stock shall be issued when
paid for in cash, past services, real property or personal property, and shall,
when issued, be fully paid for and forever non-assessable. The judgment of the
Board of Directors as to the value of any property or service rendered in
exchange for stock shall be conclusive in the absence of actual fraud in the
transaction.
Each issued and outstanding share of common stock will entitle the holder
thereof to one (1) vote on any matter submitted to a vote of or for consent of
shareholders.
The Board of Directors is authorized to provide from time to time for the
issuance of shares of serial preferred stock in series and to fix from time to
time before issuance the designation, preferences, privileges and voting powers
of the shares of each series of serial preferred stock and the restrictions or
qualifications thereof, including, without limiting the generality of the
foregoing, the following:
i. The serial designation and authorized number of shares;
ii. The dividend rate, the date or dates on which such dividends will be
payable, and the extent to which such dividends may be cumulative;
iii. The amount or amounts to be received by the holders in the event of
voluntary or involuntary dissolution or liquidation of the Corporation;
iv. The price or prices at which shares may be redeemed and any terms,
conditions and limitations upon such redemption;
v. Any sinking fund provisions for redemption or purchase of shares of such
series; and
vi. The terms and conditions, if any, on which shares may be converted into
shares of other capital stock, or of other series of serial preferred stock of
the Corporation.
<PAGE>
Each series of serial preferred stock, in preference to the common stock,
may be entitled to dividends, from funds or other assets legally available
therefor, at such rates, payable at such times and cumulative to such extent as
may be fixed by the Board of Directors pursuant to the authority herein
conferred upon it. In the event of dissolution or liquidation of the
Corporation, voluntary or involuntary, the holders of the serial preferred
stock, in preference to the common stock, may be entitled to receive such amount
or amounts as may be fixed by the Board of Directors pursuant to the authority
herein conferred upon it. Each issued and outstanding share of serial preferred
stock will entitle the holder thereof only to those votes, if any, which may
expressly be fixed as hereinafter provided for the respective series thereof and
to voting rights on certain matters, and in certain circumstances, as set forth
in this Article.
Preference stock of any series redeemed, converted, exchanged, purchased or
otherwise acquired by the Corporation shall be cancelled by the Corporation and
returned to the status of authorized but unissued preference stock unless
otherwise provided herein or in resolutions of the board of directors duly filed
with the Arizona Corporation Commission authorizing the issuance of the series.
All shares of any series of serial preferred stock, as between themselves,
shall rank equally and be identical; and all series of serial preferred stock,
as between themselves shall rank equally and be identical except as set forth in
resolutions of the board of directors duly filed with the Arizona Corporation
Commission authorizing the issuance of the series.
ARTICLE 5. The name and street address of the statutory agent of the
Corporation are Corporation Service Company, 3636 North Central Avenue, Phoenix,
Arizona 85012.
ARTICLE 6. The board of directors consists of 9 members. The number of
directors may be increased or decreased from time to time as set forth in the
bylaws of the Corporation. The names and addresses of each of the persons who
currently serve as the members of the board of directors are:
Name Address
---- -------
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
_____________________________ 45 East Monterey Way, Phoenix, Arizona 85012
ARTICLE 7. The personal liability of any director of the Corporation to the
Corporation or its shareholders for money damages for any action or failure to
take any action as a director is hereby eliminated to the fullest extent allowed
by law.
ARTICLE 8. The Corporation shall indemnify, and advance expenses to, to the
fullest extent allowed by law, any person who incurs liability or expense by
reason of such person acting as a director or officer of the Corporation. This
indemnification with respect to directors and officers shall be mandatory,
subject to the requirements of the Business Corporation Act, in all
circumstances in which indemnification is permitted by the Business Corporation
Act. In addition, the Corporation may, in its sole discretion, indemnify, and
advance expenses to, to the fullest extent allowed by law, any person who incurs
liability or expense by reason of such person acting as an employee or agent of
the Corporation, except where indemnification is mandatory pursuant to the
Business Corporation Act, in which case the Corporation shall indemnify to the
fullest extent required by the Business Corporation Act.
2
<PAGE>
ARTICLE 9. Pursuant to Arizona Revised Statutes Sections 10-2721(A)(2) and
10-2743(A)(2) and pursuant to the approval of the shareholders of this
Corporation, this Corporation shall be exempt from the provisions of A.R.S.
Section 10-2721 through 10-2743, concerning control share acquisitions (as
defined in A.R.S. Section 10-2701(9) and business combinations (as defined in
A.R.S. Section 10-2701(6)). This Article 9 shall not apply to any control share
acquisition made on or before the effective date of the Articles of Amendment to
this Corporation's Articles of Incorporation to incorporate this Article 9
herein, or to any business combination with an interested shareholder (as
defined in A.R.S. Section 10-2701(10)) whose share acquisition date (as defined
in A.R.S. Section 10-2701(14)) was on or before the effective date of the
Articles of Amendment to this Corporation's Articles of Incorporation to
incorporate this Article 9 herein.
ARTICLE 10. Unless the bylaws of the Corporation provide otherwise and the
statutory agent expressly consents thereto in writing, all records required
pursuant to the Business Corporation Act to be kept by the Corporation or its
agent shall be kept by the Corporation at the known place of business of the
Corporation.
ARTICLE 11. The Corporation shall have the right to pay dividends payable
in shares of one class of stock to holders of shares of another class or series
of stock of the Corporation, and no shareholder approval or ratification of any
such dividend shall be required.
ARTICLE 12. The street address of the known place of business for the
Corporation is 45 East Monterey Way, Phoenix, Arizona 85012.
3
<PAGE>
ANNEX B
FRONTIER ADJUSTERS OF AMERICA, INC.
AUDIT COMMITTEE CHARTER
MISSION STATEMENT
The audit committee will assist the board of directors in fulfilling its
oversight responsibilities. The audit committee will review the financial
reporting process, the system of internal control, the audit process, and the
company's process for monitoring compliance with laws and regulations and with
the code of conduct. In performing its duties, the committee will maintain
effective working relationships with the board of directors, management, and the
internal and external auditors. To effectively perform his or her role, each
committee member will obtain an understanding of the detailed responsibilities
of committee membership as well as the company's business, operations and risks.
ORGANIZATION
SIZE OF COMMITTEE
The committee will be comprised of a minimum of three independent directors,
each of whom is financially literate or becomes financially literate within a
reasonable period of time after his or her appointment to the audit committee.
At least one member of the audit committee will have accounting or related
financial management expertise.
MEMBER QUALIFICATIONS
Committee members will possess the following qualifications:
* Integrity
* Recognition of audit committee's significant role
* Dedication of time and energy
* Understanding of the business
* Knowledge of the company's risks and controls and the ability to offer
insights
* Inquisitiveness and independent judgement
* Ability to offer new and different perspectives and constructive
suggestions
FREQUENCY OF MEETINGS
The committee will meet regularly and carefully plan its timetable, agenda and
participants. Meeting dates will correspond with dates of board of directors'
meetings.
A written agenda will be prepared and distributed to the committee members in
advance. The committee will refer to its charter regularly to ensure that
meeting agendas are designed to meet the committee's objectives.
In addition to general meetings, the committee will meet privately with
management and with the internal auditors and external auditors at least once
during the year.
The board of directors will select a committee chairperson. This person will
possess strong leadership skills, objectivity and the ability to promote
effective working relationships (among committee members and with others such as
management and internal and external auditors).
INTERNAL AUDIT FUNCTION
Due to the size of the company's operation, the internal audit function is an
integral role in the company's finance/control organization. As such, the
company's Controller acts in the capacity of Director of Internal Audit.
Frontier Adjusters Of America, Inc. Audit Committee Charter - 1
<PAGE>
ROLES AND RESPONSIBILITIES
INTERNAL CONTROL
* Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of internal control and ensuring that all
individuals possess an understanding of their roles and responsibilities;
* Focus on the extent to which internal and external auditors review computer
systems and applications, the security of such systems and applications,
and the contingency plan for processing financial information in the event
of a systems breakdown;
* Gain an understanding of whether internal control recommendations made by
internal and external auditors have been implemented by management; and
* Ensure that the external auditors keep the audit committee informed about
fraud, illegal acts, deficiencies in internal control, and certain other
matters.
FINANCIAL REPORTING
GENERAL
* Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact on
the financial statements; and
* Ask management and the internal and external auditors about significant
risks and exposures and the plans to minimize such risks.
ANNUAL FINANCIAL STATEMENTS
* Review the annual financial statements and determine whether they are
complete and consistent with the information known to committee members,
and assess whether the financial statements reflect appropriate accounting
principles;
* Pay particular attention to complex and/or unusual transactions such as
restructuring changes and derivative disclosures;
* Focus on judgmental areas such as those involving valuation of assets and
liabilities;
* Meet with management and the external auditors to review the financial
statements and the results of the audit;
* Consider management's handling of proposed audit adjustments identified by
the external auditors;
* Review the MD&A and other sections of the annual report before its release
and consider whether the information is adequate and consistent with
members' knowledge about the company and its operations; and
* Ensure that the external auditors communicate certain required matters to
the committee.
Frontier Adjusters Of America, Inc. Audit Committee Charter - 2
<PAGE>
INTERIM FINANCIAL STATEMENTS
* Be briefed on how management develops and summarizes quarterly financial
information, the extent of internal audit/control involvement, the extent
to which the external auditors review quarterly financial information, and
whether that review is performed on a pre- or post-issuance basis;
* Meet with management and, if a pre-issuance review was completed, with the
external auditors, either telephonically or in person, to review the
interim financial statements and the results of the review. (This may be
done by the committee chairperson or the entire committee);
* To gain insight into the fairness of the interim statements and
disclosures, obtain explanations from management and from the internal and
external auditors on whether:
* Actual financial results for the quarter or interim period varied
significantly from budgeted or projected results;
* Changes in financial ratios and relationships in the interim financial
statements are consistent with changes in the company's operations and
financing practices;
* Generally accepted accounting principles have been consistently
applied;
* There are any actual or proposed changes in accounting or financial
reporting practices;
* There are any significant or unusual events or transactions;
* The company's financial and operating controls are functioning
effectively;
* The company has complied with the terms of loan agreements or security
indentures; and
* The interim financial statements contain adequate and appropriate
disclosures.
* Ensure that the external auditors communicate certain required matters to
the committee.
COMPLIANCE WITH LAWS AND REGULATIONS
* Review the effectiveness of the system for monitoring compliance with laws
and regulations and the results of management's investigation and follow-up
(including disciplinary action) on any fraudulent acts or accounting
irregularities;
* Periodically obtain updates from management, general counsel and outside
tax accountants regarding compliance;
* Be satisfied that all regulatory compliance matters have been considered in
the preparation of the financial statements; and
* Review the findings of any examinations by regulatory agencies such as the
Securities and Exchange Commission.
COMPLIANCE WITH CODE OF CONDUCT
* Ensure that a code of conduct is formalized in writing and that all
employees are aware of it;
* Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of the code of conduct and the guidelines for
acceptable business practices;
* Review the program for monitoring compliance with the code of conduct; and
* Periodically obtain updates from management and general counsel regarding
compliance.
Frontier Adjusters Of America, Inc. Audit Committee Charter - 3
<PAGE>
INTERNAL AUDIT
* Review the activities and organizational structure of the internal
audit/control function;
* Review the qualifications of the internal audit/control function and concur
in the appointment, replacement, reassignment, or dismissal of the director
of internal audit/controller; and
* Review the effectiveness of the internal audit/control function.
EXTERNAL AUDIT
* Review the external auditors' proposed audit scope and approach;
* Review the performance of the external auditors and recommend to the board
of directors the appointment or discharge of the external auditors; and
* Review and confirm the independence of the external auditors by reviewing
the nonaudit services provided and the auditors' assertion of their
independence in accordance with professional standards.
OTHER RESPONSIBILITIES
* Meet with the external auditors, director of internal audit/controller, and
management in separate executive sessions to discuss any matters that the
committee or these groups believe should be discussed privately;
* Ensure that significant findings and recommendations made by the internal
and external auditors are received and discussed on a timely basis;
* Review, with the company's counsel, any legal matters that could have a
significant impact on the company's financial statements;
* Review the policies and procedures in effect for considering officers'
expenses and perquisites;
* If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist;
* Perform other oversight functions as requested by the full board; and
* Review and update the charter; receive approval of changes from the board.
REPORTING RESPONSIBILITIES
* Regularly update the board of directors about committee activities and make
appropriate recommendations.
Adapted: May 31, 2000
Frontier Adjusters Of America, Inc. Audit Committee Charter - 4
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FRONTIER ADJUSTERS OF AMERICA, INC.
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints John M. Davies, Jeffrey R. Harcourt and Jeffrey
C. Jordan as Proxies, each with the power to appoint his substitute, and hereby
authorizes them, or any of them, or such substitute, to represent and to vote,
as designated below, all of the shares of Common Stock of Frontier Adjusters of
America, Inc. ("Frontier") held of record by the undersigned as of the close of
business on October 20, 2000, at the annual meeting of shareholders to be held
on December 14, 2000, at 10:00 A.M. (Phoenix, Arizona time), and at any
adjournment thereof.
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS. [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated) to vote for each nominee
listed below
</TABLE>
If you wish to withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
Charles E. Becker Eric J. Carlstrom Peter I. Cavallaro
John M. Davies Mark A. Freeman Jeffrey R. Harcourt
Jeffrey C. Jordan Anthony J. Puglisi Kenneth A. Sexton
If no direction is given, all votes for directors will be allocated evenly
among the nominees voted "for."
2. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION REGARDING THE
LIMITATIONS OF LIABILITY. To approve the proposed changes to the Articles
of Incorporation regarding the limitations of liability as described in the
Proxy Statement dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION REGARDING THE
INDEMNIFICATION PROVISIONS. To approve the proposed changes to Articles of
Incorporation regarding the indemnification provisions as described in the
Proxy Statement dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION REGARDING THE CONFLICT
OF INTEREST PROVISIONS. To approve the proposed changes to the Articles of
Incorporation regarding the conflict of interest provisions as described in
the Proxy Statement dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION TO UPDATE THE
DESCRIPTION OF THE PURPOSE AND THE CHARACTER OF THE BUSINESS OF FRONTIER.
To approve the proposed changes to Articles of Incorporation to update the
description of the purpose and the character of the business of Frontier as
described in the Proxy Statement dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
6. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION REGARDING THE SERIAL
PREFERRED STOCK. To approve the proposed changes to Articles of
Incorporation regarding the Serial Preferred Stock as described in the
Proxy Statement dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. TO APPROVE CHANGE TO THE ARTICLES OF INCORPORATION REGARDING THE
MAINTENANCE OF CERTAIN CORPORATE RECORDS AT THE KNOWN PLACE OF BUSINESS OF
FRONTIER. To approve the proposed changes to Articles of Incorporation
regarding the maintenance of certain corporate records at the known place
of business of Frontier as described in the Proxy Statement dated November
22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. TO APPROVE CHANGE TO THE AMENDED AND FIRST RESTATED ARTICLES OF
INCORPORATION. To approve the proposed changes to Amended and First
Restated Articles of Incorporation as described in the Proxy Statement
dated November 22, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
9. TO RATIFY THE APPOINTMENT OF MCGLADREY & PULLEN, LLP AS AUDITORS. To ratify
the appointment of McGladrey & Pullen, LLP as the auditors of Frontier for
the fiscal year ended June 30, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR all of the nominees listed in Proposal 1, FOR Proposal 2, FOR Proposal
3, FOR Proposal 4, FOR Proposal 5, FOR Proposal 6, FOR Proposal 7, FOR Proposal
8, and FOR Proposal 9.
Receipt of Notice of Annual Meeting of Shareholders and related Proxy Statement
dated November 22, 2000, is hereby acknowledged.
Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated:
--------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE
Signature:
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Signature if held jointly:
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