(HRH INSURANCE HILB, ROGAL AND HAMILTON COMPANY
LOGO) 4235 Innslake Drive
P.O. Box 1220
Glen Allen, Virginia 23060-1220
(804) 747-6500
FAX (804) 747-6046
MARCH 29, 1995
DEAR SHAREHOLDER:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, May 2, 1995, at 10:00 a.m. at Crestar Bank, 919 East Main Street,
Richmond, Virginia. At the meeting, you will be asked to elect two directors
for the class of directors whose term of office expires in 1995 and to approve
the selection of independent auditors for the Company for 1995. On the
following pages, you will find the formal notice of annual meeting and the
proxy statement.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Therefore, you are urged to
complete, sign, date and mail your proxy promptly in the enclosed postage-paid
envelope.
We hope you will participate in the annual meeting, either in person or
by proxy.
Sincerely,
(signature)
Robert H. Hilb
Chairman and Chief Executive
Officer
<PAGE>
4235 INNSLAKE DRIVE
P.O. BOX 1220
GLEN ALLEN, VIRGINIA 23060-1220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Hilb, Rogal and Hamilton
Company (the Company) will be held on Tuesday, May 2, 1995, at 10:00
a.m. at Crestar Bank, 919 East Main Street, Richmond, Virginia, for the
following purposes:
1. To elect two directors of the class of directors whose
term of office expires in 1995, to serve for a term of three
years;
2. To consider and act upon a proposal to appoint the firm of
Ernst & Young LLP as independent auditors for the Company for the
fiscal year ending December 31, 1995; and
3. To transact such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on March 7,
1995, the record date fixed by the Board of Directors of the Company,
are entitled to notice of, and to vote at, the meeting.
By Order of The Board of Directors
DIANNE F. FOX
Senior Vice President and Corporate
Secretary
March 29, 1995
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU
HAVE PREVIOUSLY SIGNED AND RETURNED YOUR PROXY.
<PAGE>
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of
Directors for the Annual Meeting of Shareholders to be held on May 2,
1995, and any duly reconvened meeting after adjournment thereof (the
Meeting). Any shareholder who executes a proxy has the power to revoke
it at any time by written notice to the Secretary of the Company, by
executing a proxy dated as of a later date or by voting in person at the
Meeting. It is expected that this proxy statement and the enclosed proxy
card will be mailed on or about March 29, 1995, to all shareholders
entitled to vote at the Meeting.
The cost of soliciting proxies for the Meeting will be borne by
the Company. The Company does not intend to solicit proxies other than
by use of the mails, but certain officers and regular employees of the
Company or its subsidiaries, without additional compensation, may use
their personal efforts, by telephone or otherwise, to obtain proxies.
The Company may also reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in forwarding proxy materials to the beneficial owners of the
shares.
On the record date of March 7, 1995, the date for determining
shareholders entitled to notice of and to vote at the Meeting, there
were outstanding 14,804,864 shares of Common Stock. Each share of Common
Stock is entitled to one vote on all matters to be acted upon at the
Meeting. A majority of the shares entitled to vote, represented in
person or by proxy, will constitute a quorum for the transaction of
business at the Meeting.
The management and directors are not aware of any matters to be
presented for action at the Meeting other than the matters stated in the
notice of the Meeting. If any such matter requiring a vote of the
shareholders should properly come before the Meeting, unless otherwise
instructed, it is the intention of the persons named in the proxy card
to vote such proxy in accordance with their best judgment.
1
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1995, certain information
with respect to the beneficial ownership of the Company's Common Stock by each
director and nominee; the Chief Executive Officer, Robert H. Hilb, and each of
the Company's four other most highly paid executive officers who own shares of
the Company's Common Stock, Andrew L. Rogal, John C. Adams, Jr., Ronald J.
Schexnaydre and Timothy J. Korman (collectively, the Named Executive Officers);
and all directors and officers as a group. Except as otherwise indicated, each
individual named has sole investment and voting power with respect to the shares
shown.
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES
NAME OF & NATURE OF PERCENT
BENEFICIAL OWNER/NUMBER BENEFICIAL OF
OF PERSONS IN GROUP OWNERSHIP CLASS
<S> <C> <C>
Robert H. Hilb 344,050(1) 2.3
John C. Adams, Jr. 119,150(1)(2) **
Andrew L. Rogal 83,540(1)(3) **
J.S.M. French 60,500(1) **
Timothy J. Korman 42,576(1) **
Ronald J. Schexnaydre 39,063(1) **
Theodore L. Chandler, Jr. 32,949(1) **
Robert S. Ukrop 28,648(1)(4) **
Thomas H. O'Brien 15,597(1) **
Norwood H. Davis, Jr. 12,105(1) **
Philip J. Faccenda 12,000(1) **
All directors and officers as a group (20
persons, including those named) 854,909(5) 5.8
</TABLE>
** Percentage of ownership is less than 1% of the outstanding shares of Common
Stock of the Company.
(1) The number of shares indicated includes 44,650 shares for Mr. Hilb; 30,150
shares for Mr. Adams; 28,900 shares for Mr. Rogal; 10,500 shares for Mr.
French; 17,300 shares for Mr. Korman; 23,000 shares for Mr. Schexnaydre;
10,500 shares for Mr. Chandler; 10,500 shares for Mr. Ukrop; 10,500 shares
for Mr. O'Brien; 2,000 shares for Mr. Davis; and 2,000 shares for Mr.
Faccenda; represented by options granted under the Company's 1989 Stock
Plan, which are exercisable within sixty days after March 1, 1995.
(2) The number of shares indicated includes 6,000 shares owned by a trust for
John C. Adams' wife. Mr. Adams disclaims beneficial ownership of such
shares.
(3) The number of shares indicated includes 17,300 shares held in a trust for
which Andrew L. Rogal is a trustee. Although Mr. Rogal, as trustee, has
voting and investment power for these shares, he disclaims beneficial
ownership thereof.
(4) The number of shares indicated includes 1,250 shares owned by an investment
club in which Robert S. Ukrop is an officer, for which voting and investment
power is shared.
2
<PAGE>
(5) The number of shares indicated includes 4,250 shares represented by options
granted under the Company's 1986 Incentive Stock Option Plan and 214,900
shares represented by options granted under the Company's 1989 Stock Plan,
which are exercisable within sixty days after March 1, 1995.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth, as of March 1, 1995, certain information
with respect to each person known by the Company to be the beneficial owner of
5% or more of the outstanding shares of Common Stock of the Company. In
preparing the table below, the Company has relied, without further
investigation, on information contained on the Schedule 13G filed by each
reporting person with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the Exchange Act).
<TABLE>
<CAPTION>
NUMBER OF COMMON
NAME & ADDRESS SHARES AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
Quest Advisory Corporation (1) 829,275(1) 5.7
Quest Management Company
Charles M. Royce
1414 Avenue of the Americas
New York, New York 10019
Lindner Fund, Inc. (2) 800,000(2) 5.5
Ryback Management Corporation
7711 Carondelet Avenue
Box 16900
St. Louis, Missouri 63105
</TABLE>
(1) Quest Advisory Corporation (Quest), Quest Management Company (QMC) and
Charles M. Royce (Royce) filed a joint Schedule 13G pursuant to Rule
13d-(1)(b)(ii)(H) of the Exchange Act to report with respect to beneficial
ownership as of December 31, 1994 by Quest and QMC, Investment Advisers
registered under Section 203 of the Investment Advisers Act of 1940. Quest
reported that it has sole voting power as to 776,075 shares and sole
dispositive power as to 776,075 shares. QMC reported that it has sole voting
power as to 53,200 shares and sole dispositive power as to 53,200 shares.
Royce may be deemed to be a controlling person of Quest and QMC, and as such
may be deemed to beneficially own the shares; however, Royce does not own
any shares outside of Quest and QMC, and disclaims beneficial ownership of
the shares held by Quest and QMC. The reporting group represented in the
Schedule 13G that the shares of Common Stock covered by the Schedule 13G
were acquired in the ordinary course of business and were not acquired for
the purpose of and do not have the effect of changing or influencing the
control of the Company and were not acquired in connection with or as a
participant in any transaction having such purpose or effect.
3
<PAGE>
(2) Ryback Management Corporation (Ryback), an investment company adviser, filed
a Schedule 13G pursuant to the Exchange Act to report with respect to
beneficial ownership as of December 31, 1994 by the Lindner Fund, Inc., an
Investment Company registered under Section 8 of the Investment Company Act.
Ryback reported that it has sole voting power as to 800,000 shares and sole
dispositive power as to 800,000 shares. Ryback represented in the Schedule
13G that the shares of Common Stock covered by the Schedule 13G were
acquired in the ordinary course of business and were not acquired for the
purpose of and do not have the effect of changing or influencing the control
of the Company and were not acquired in connection with or as a participant
in any transaction having such purpose or effect.
ELECTION OF DIRECTORS
Two directors are to be elected at the Meeting to serve for terms of three
(3) years expiring on the date of the Annual Meeting in 1998 and until their
successors are elected.
It is intended that the votes represented by the proxies, unless otherwise
specified, will be cast for the election as directors of the nominees listed
below, each of whom is now a director of the Company. The election of each
nominee for director requires the affirmative vote of the holders of a plurality
of the shares of Common Stock of the Company cast in the election of directors.
Votes that are withheld and shares held in street name (broker shares) that are
not voted in the election of directors will not be included in determining the
number of votes cast. Each nominee has consented to being named in the proxy
statement and has agreed to serve if elected. If, at the time of the Meeting,
any nominee should be unable to serve as a director, votes will be cast,
pursuant to the enclosed proxy, for such substitute nominee as may be nominated
by the Board of Directors.
As of the date of this proxy statement, the Board of Directors has no
reason to believe that any of the nominees will be unable or unwilling to serve.
The following information is furnished with respect to each nominee and
each director whose term of office will continue after the Meeting.
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN 1998
J.S.M. French, 54, has been President of Dunn Investment Company, a
construction and investment company in Birmingham, Alabama, since 1978 and has
been a director of the Company since 1984. He is a director of First Alabama
Bancshares, Inc. and Energen Corporation. Mr. French is a member of the
Nominating Committee and Chairman of the Compensation Committee.
Robert S. Ukrop, 48, has been President and Chief Operating Officer of
Ukrop's Super Markets, Inc., a chain of retail food stores in Richmond,
Virginia, since 1994 and has been a director of the Company since 1989. He was
Executive Vice President of Ukrop's Super Markets, Inc. from 1987 to 1994. He is
a first cousin of Timothy J. Korman, Senior Vice President - Finance and
Treasurer of the Company. Mr. Ukrop is a member of the Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THESE
NOMINEES.
4
<PAGE>
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT 1996 ANNUAL MEETING
Theodore L. Chandler, Jr., 42, has been a principal in the law firm of
Williams, Mullen, Christian & Dobbins in Richmond, Virginia, since 1982 and has
been a director of the Company since 1986. Williams, Mullen, Christian & Dobbins
has represented the Company as legal counsel since the Company's formation in
1982. He is a director of Lawyers Title Corporation. Mr. Chandler is a member of
the Executive Committee, the Compensation Committee, the Nominating Committee
and Chairman of the Audit Committee.
Norwood H. Davis, Jr., 55, has been Chairman of the Board and Chief
Executive Officer of Trigon Blue Cross Blue Shield, a company engaged in the
delivery of insurance and related employee benefits products in Virginia, since
1989 and has been a director of the Company since 1994. He was President and
Chief Executive Officer of Consolidated Healthcare, Inc. from 1985 to 1989.
Prior thereto, he was President and Chief Executive Officer of Blue Cross and
Blue Shield of Virginia from 1981 to 1985. He is a director of Signet Banking
Corporation. Mr. Davis is a member of the Audit Committee.
Thomas H. O'Brien, 58, has been Chairman and Chief Executive Officer of PNC
Bank Corp., a multi-bank holding company engaged in financial services
activities in Pittsburgh, Pennsylvania, since 1985 and has been a director of
the Company since 1982. He has been Chairman of PNC Bank, National Association,
a national banking institution in Pittsburgh, Pennsylvania, since February 1993.
He is a director of Bell Atlantic Corporation and PNC Bank Corp. Mr. O'Brien is
a member of the Audit Committee, the Compensation Committee and the Nominating
Committee.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT 1997 ANNUAL MEETING
Robert H. Hilb, 68, has been Chairman and Chief Executive Officer of the
Company since 1991 and a director of the Company since 1982. He was President of
the Company from 1982 to February 1995. He is a director of Lawyers Title
Corporation. Mr. Hilb is Chairman of the Executive Committee and Chairman of the
Nominating Committee.
Andrew L. Rogal, 46, has been President and Chief Operating Officer of the
Company since February 1995 and has been a director of the Company since 1989.
He was Executive Vice President of the Company from 1991 to February 1995 and
Senior Vice President of the Company from 1990 to 1991. He was Chief Executive
Officer of Hilb, Rogal and Hamilton Company of Pittsburgh, Inc., a subsidiary of
the Company, from 1990 to March 1995 and was President of this subsidiary from
1987 to 1993. Mr. Rogal is a member of the Executive Committee.
Philip J. Faccenda, 65, has been Vice President and General Counsel of the
University of Notre Dame, a higher education facility in Notre Dame, Indiana,
since 1992 and has been a director of the Company since 1993. Prior thereto, he
was a partner in the law firm of Barnes & Thornburg in South Bend, Indiana from
1982 to 1992. He is a director of First Source Corporation. Mr. Faccenda is a
member of the Audit Committee.
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Compensation Committee and the Nominating
Committee. The Executive Committee, which is subject to the supervision and
control of the Board of Directors, has been delegated substantially all of the
powers of the Board of Directors in order for the Executive Committee to act
between meetings of the Board. The responsibilities of the Audit Committee
include the review of the scope and the results of the work of the independent
auditors and internal auditors, the review of internal accounting controls and
the recommendation of the independent auditors to be designated for the ensuing
year. As more fully discussed below under "Compensation Committee Report on
Executive Compensation," the Compensation Committee establishes the compensation
of all executive officers of the Company with the title of Senior Vice President
and above and administers the Company's stock option plans, the Outside
Directors Deferral Plan and the Supplemental Executive Retirement Plan. The
Nominating Committee is responsible for recommending to the Board of Directors
persons to be nominated for election as directors of the Company. In the
selection of nominees for the Board of Directors, the Committee will consider
any nominee recommended by a shareholder if the recommendation is made in
writing and includes (i) the qualifications of the proposed nominee to serve on
the Board of Directors, (ii) the principal occupations and employment of the
proposed nominee during the past five years, (iii) each directorship currently
held by the proposed nominee and (iv) a statement from the proposed nominee that
he or she has consented to the submission of the recommendation. Recommendations
should be addressed to the Corporate Secretary of the Company at its principal
business address.
In 1994, there were four meetings of the Board of Directors, one meeting of
the Executive Committee, two meetings of the Audit Committee and six meetings of
the Compensation Committee. The Nominating Committee did not meet during 1994.
Each member of the Board of Directors attended at least 75% of the aggregate
total number of meetings of the Board and the committees on which he served.
DIRECTORS' COMPENSATION
Each director who is not an officer of the Company receives an annual
retainer of $10,000, a fee of $2,500 for each Board meeting attended and a fee
of $500 for each committee meeting attended if such meeting occurs on a day
other than a scheduled meeting of the Board of Directors. Directors who are also
officers of the Company receive no compensation for their services as directors.
The Company has an Outside Directors Deferral Plan which permits a non-employee
director to defer all or a portion of his compensation. Interest will be paid on
the amounts deferred at a rate determined by the Compensation Committee. Subject
to certain restrictions, the director may elect at the time of deferral to take
cash distributions, in whole or in part, from his account either prior to or
following termination of service.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission (the
Commission), the Company is required to provide certain information with respect
to the compensation and benefits provided
6
<PAGE>
to the Company's Chief Executive Officer, Robert H. Hilb, and the other Named
Executive Officers. The following report of the Compensation Committee of the
Board of Directors addresses the Company's compensation policies in effect
during 1994.
ROLE OF COMPENSATION COMMITTEE
Decisions on compensation of certain executive officers of the Company are
made by the Compensation Committee of the Board. Each member of the Compensation
Committee is a non-employee director and qualifies as a disinterested person for
purposes of Rule 16b-3 adopted by the Commission under the Exchange Act. The
Compensation Committee has authority from the Board to review and determine the
salaries of all of the Company's executive officers with the title of Senior
Vice President and above.
In addition to determining salaries, the Compensation Committee reviews and
approves management incentive programs and other benefits for executive
officers. The Compensation Committee also administers the Company's stock option
plans. Finally, the Committee recommends to the Board of Directors such other
forms of remuneration as the Committee deems appropriate. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reported to the full Board.
The following is the text of the report adopted by the Compensation
Committee with respect to executive compensation for 1994.
EXECUTIVE COMPENSATION POLICIES
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals, recognize individual
initiative and achievement and assist the Company in attracting and retaining
highly qualified executives. They provide for competitive base salaries which
reflect individual performance and level of responsibility, annual bonuses
payable in cash on the basis of Company financial success, individual merit and
achievement in obtaining annual performance goals and long-term stock-based
incentive opportunities which strengthen the mutuality of interests between
senior management and the Company's shareholders.
In furtherance of its responsibility to determine executive compensation,
the Compensation Committee annually, or more frequently, reviews the Company's
executive compensation program. The Compensation Committee evaluates the
salaries and compensation structures of executive officers of peer companies in
the industry in order to establish general parameters within which it may fix
competitive compensation for its executive officers. The peer group used for
compensation analysis for 1994 is the same as the peer group reflected in the
performance graph included in this proxy statement.
The Compensation Committee then determines the appropriate salary and
management incentive opportunity for each executive officer using a number of
factors, including the executive officer's individual duties and
responsibilities in the Company, tenure, his or her relative importance to the
overall
7
<PAGE>
success of the Company's short and long-term goals and attainment of individual
performance goals, if appropriate.
Combining subjective and objective policies and practices, this assessment
process is undertaken annually, or more frequently, by the Compensation
Committee in order to implement the Company's pay-for-performance policy, which
focuses on an executive officer's total compensation, including cash and
non-cash compensation, from all sources. Based upon the Committee's review of
executive compensation in the Company's industry, the Committee believes that
the Company's compensation of its executive officers is comparable to its peer
companies and provides proper incentives to the executive officer group.
1994 BASE SALARIES AND ANNUAL INCENTIVES
In 1994, the Compensation Committee did not approve increases in the base
salaries of Messrs. Hilb, Rogal, Adams and Korman. However, Mr. Schexnaydre
received a $25,000 step increase to reflect his increased operational
responsibilities. The reason for the base salaries remaining flat over 1993 was
the Company's experience of a decrease in earnings of 3.6% in 1993 from 1992 and
the Compensation Committee's belief that a greater percentage of each executive
officer's total compensation should be performance driven incentives. In
determining the amounts of salary and bonus paid to Mr. Hilb in 1994, the
Compensation Committee primarily took into account the Company's revenues and
earnings, Mr. Hilb's duties and responsibilities as Chief Executive Officer and
the performance of the Company compared to others in its industry group. Mr.
Hilb's base salary of $360,000 continued for 1994.
The Company's executive officers are also eligible for an annual management
incentive award in the form of a cash bonus. The Named Executive Officers
participate in a three year incentive bonus plan, which was implemented in 1994,
wherein a bonus pool is established based on improved earnings per share and
increased amounts of pre-tax profits over the preceding year. The purpose of the
program is to more closely align the interests of the senior executives with the
shareholders and further strengthen the Company's pay-for-performance policy.
The Committee awards bonuses from the bonus pool to the Named Executive Officers
based on the executive's individual performance and retains discretion not to
pay out the entire pool, if circumstances so warrant. In February 1995,
utilizing the aforementioned factors and in recognition of his leadership in the
improvement in pre-tax profits over the previous year, the Committee awarded Mr.
Hilb an incentive bonus of $175,000 out of the pool for his 1994 performance.
DECEMBER 1993 STOCK OPTION AWARD VESTING
In December 1993, the Compensation Committee developed a three year
performance-based program for granting stock options to the executive officers
of the Company. This program was begun to more clearly align the interests of
the program participants with the Company's shareholders and, for three years,
will take the place of other option grants to the participants. The December
1993 Options are subject to performance-based vesting criteria with the earliest
vesting in January of 1995. With respect to the allocation of available options
among the Named Executive Officers and other executive
8
<PAGE>
officers, the Committee was of the view that as a person's ability to impact
earnings per share and other direct elements of stock value increases, greater
portions of total compensation should be linked to the long-term performance of
the Company's Common Stock. Based upon this criteria, the Committee granted Mr.
Hilb a December 1993 Option to acquire 30,000 shares of Common Stock.
The exercise price of the December 1993 Options was based on the closing
sales price of the Common Stock as reported on the New York Stock Exchange on
the date of grant which was $13.25. The right to exercise the December 1993
Options vests at a rate of 33 1/3% of the aggregate number of shares covered by
such options on January 31, 1995, January 31, 1996 and January 31, 1997.
However, the right to exercise such options is contingent upon (i) the continued
employment of optionee from the date of grant, except in the event of his death,
permanent disability or retirement and (ii) an increase of at least 10% in the
annual earnings per share of the Common Stock of the Company over the
immediately prior year. The shares will not be available for vesting if either
of these criteria is not met for each vesting period. The December 1993 Options
expire ten years from date of grant. Based on the above criteria, 33 1/3% of the
December 1993 Options vested on January 31, 1995.
TAX CONSIDERATIONS
The Omnibus Budget Reconciliation Act of 1993 established certain criteria
for the tax deductibility of compensation in excess of $1.0 million paid to the
Company's executive officers. The Company is not in danger of losing deductions
under the new law. The Committee will carefully consider any plan or
compensation arrangement that would result in the disallowance of compensation
deductions. The Committee will use its best judgment in such cases, taking all
factors into account, including the materiality of any deductions that may be
lost. To date, the Committee has not adopted a policy that dictates its decision
in such a situation.
The tables which follow this report, and accompanying narrative and
footnotes, reflect the decisions covered by the above discussion.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS:
J.S.M. FRENCH
ROBERT S. UKROP
THOMAS H. O'BRIEN
THEODORE L. CHANDLER, JR.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Robert S. Ukrop, a member of the Company's Compensation Committee, is the
first cousin of Timothy J. Korman, Senior Vice President - Finance and Treasurer
of the Company. Theodore L. Chandler, Jr., also a member of the Company's
Compensation Committee, is a principal in the law firm of Williams, Mullen,
Christian & Dobbins, Richmond, Virginia, which serves as outside counsel to the
Company.
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid
by the Company to each of the Named Executive Officers for the fiscal years
ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND COMPENSATION OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(4) (#) COMPENSATION ($)
<S> <C> <C> <C> <C> <C> <C>
Robert H. Hilb 1994 360,000 175,000 (1) -- -- 15,505(7)(8)
Chairman and 1993 360,000 120,000 (2) -- 30,000(5) 9,324(7)
Chief Executive Officer 15,000(6)
1992 330,000 42,500 (3) -- 10,000(6) 9,154(7)
Andrew L. Rogal 1994 250,000 75,000 (1) -- -- 9,306(7)(8)
President and 1993 250,000 56,000 (2) -- 30,000(5) 7,075(7)
Chief Operating Officer 10,000(6)
1992 220,000 25,000 (3) -- 10,000(6) 6,600(7)
John C. Adams, Jr. 1994 240,000 60,000 (1) -- -- 11,188(7)(8)
Executive Vice 1993 240,000 56,000 (2) -- 30,000(5) 9,324(7)
President 10,000(6)
1992 205,000 25,000 (3) -- 10,000(6) 8,200(7)
Ronald J. Schexnaydre 1994 172,500 60,000 (1) -- -- 9,926(7)(8)
Senior Vice President 1993 153,333 30,000 (2) -- 30,000(5) 6,133(7)
10,000(6)
1992 129,583 -- -- 5,000(6) 5,183(7)
Timothy J. Korman 1994 102,000 45,000 (1) -- -- 6,226(7)(8)
Senior Vice President - 1993 92,667 36,000 (2) -- 15,000(5) 3,707(7)
Finance and Treasurer 5,000(6)
1992 88,000 13,000 (3) -- 5,000(6) 3,520(7)
</TABLE>
(1) Bonuses included herein were paid in 1995 for services rendered in 1994 and
were awarded based on the Company realizing improved earnings per share and
increased amounts of pre-tax profits in 1994 as compared with 1993 and on
the Named Executive Officer's individual performance.
(2) Bonuses included herein were paid in 1993 and 1994 for services rendered in
1992 and 1993.
(3) Bonuses included herein are indicated for the year in which the bonuses were
earned.
(4) The dollar value of perquisites and other personal benefits received by each
of the Named Executive Officers did not exceed the lesser of either $50,000
or 10 percent of the total amount of annual salary and bonus reported for
any named individual.
(5) The stock options detailed above were granted under the Company's 1989 Stock
Plan in December 1993 and contain a provision whereby the right to exercise
such options vests at a rate of 33 1/3% of the aggregate number of shares
covered by such options on each January 31, 1995, January 31, 1996 and
January 31, 1997, so long as the Named Executive Officer is employed by the
Company on such date and the Company has at least a 10% increase in the
annual earnings per share of the
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<PAGE>
Common Stock over the immediately prior year. The shares will not be
available for vesting if either of these criteria is not met for each
vesting period. The options expire ten years from grant date. Based on the
above criteria, 33 1/3% of the options vested on January 31, 1995.
(6) The stock options detailed above, granted pursuant to the 1989 Stock Plan,
contain a provision whereby the right to exercise such options vests at a
rate of 20% of the aggregate number of shares covered by such options for
each one full year of continued employment from the grant date, with total
exercisability occurring upon five full years of continued employment by the
Company, and expire ten years from grant date.
(7) The amount shown for each Named Executive Officer for 1994 includes the
Company's profit sharing and 401(k) matching contributions as follows: Mr.
Hilb, $8,250; Mr. Rogal, $6,750; Mr. Adams, $8,250; Mr. Schexnaydre, $8,250;
and Mr. Korman, $5,610. The amount shown for 1993 and 1992 represents the
Company's profit sharing and 401(k) matching contributions to each Named
Executive Officer.
(8) The amount shown for each Named Executive Officer for 1994 includes the
Company's expense to the Supplemental Executive Retirement Plan, an unfunded
defined benefit plan not qualified under the Internal Revenue Code, as
follows: Mr. Hilb, $7,255; Mr. Rogal, $2,556; Mr. Adams, $2,938; Mr.
Schexnaydre, $1,676; and Mr. Korman, $616.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during fiscal
year 1994. No stock appreciation rights (SARs) were granted in fiscal year 1994.
There are no outstanding SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table provides information concerning the value of the
outstanding options for the Named Executive Officers on December 31, 1994. There
were no stock options exercised by any named individual during 1994. There are
no outstanding SARs.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT AT FISCAL YEAR END
FISCAL YEAR END (#)(1) ($)(2)
NAME EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
<S> <C> <C>
Robert H. Hilb 29,650 / 49,600 -- / --
Andrew L. Rogal 14,900 / 45,600 5,100 / 1,275
John C. Adams, Jr. 16,150 / 45,600 5,100 / 1,275
Ronald J. Schexnaydre 8,800 / 42,200 5,100 / 1,275
Timothy J. Korman 10,300 / 23,200 5,100 / 1,275
</TABLE>
(1) The aggregate number of exercisable and unexercisable options detailed above
are based on the provisions of the Company's stock option plans as of
December 31, 1994. Since that date, additional stock options for the Named
Executive Officers are exercisable within sixty days after
11
<PAGE>
March 1, 1995, and are reflected in the Security Ownership Table and
included in footnote (1) of that table.
(2) The value of in-the-money options was calculated by determining the
difference between the closing price of $12.125 per share of the Company's
Common Stock on the New York Stock Exchange on December 30, 1994, the last
trading day of the fiscal year, and the exercise price of the options.
PROFIT SHARING SAVINGS PLAN
The Company has adopted a broad-based Profit Sharing Savings Plan (the
Profit Sharing Plan) in which the Named Executive Officers are permitted to
participate on the same terms as other employees who meet applicable eligibility
criteria. The Profit Sharing Plan includes a salary reduction provision under
Section 401(k) of the Internal Revenue Code. Each year, the Board of Directors
determines the Company's level of contribution to the Profit Sharing Plan,
including any matching contributions in connection with the salary reduction
provision under Section 401(k). The minimum annual profit sharing contribution
percentage is 3% of eligible compensation, subject to certain earnings
restrictions, and the matching contribution will not be less than 25% of the
first 4% of a participant's salary reduction. For 1994, the Company profit
sharing contribution was 4.5% of participating employees' eligible compensation
and the Company matching contribution was $395,000 under the salary reduction
provision of the Profit Sharing Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Named Executive Officers participate in the Company's Supplemental
Executive Retirement Plan, which is an unfunded defined benefit plan not
qualified under the Internal Revenue Code. The retirement benefits are computed
without regard to the social security offset but are offset by benefits
attributable to Company contributions payable from the Company's Profit Sharing
Plan. Retirement benefits are payable in the form of a single life annuity.
The formula for calculating retirement benefits is based upon the product
of a participant's applicable percentage, years of service for purposes of
benefit accrual, final average compensation and vesting percentage. The
applicable percentage is 3.3% for an employee who becomes a vice president on or
after reaching age 50 and 4.0% for an employee who becomes a vice president
before reaching age 50. Years of service for purposes of benefit accrual means
service with the Company at the officer rank of vice president or higher but
limited to a maximum of fifteen years. Final average compensation is the
participant's average annual compensation for the sixty whole months prior to
separation from service. A participant is subject to a graduated vesting
schedule over a fifteen year period. Termination of employment prior to having
attained normal retirement age (age 65, except for a grandfathered participant
whose age is 70), or without having been credited with fifteen years of service
will result in a reduced benefit. Once determined, this benefit is offset by the
actuarial equivalent benefit produced by amounts attributable to Company
contributions to the Profit Sharing Plan.
Based upon current compensation and profit sharing account balances, with
service projected to normal retirement age, the estimated annual benefits
payable upon retirement at normal retirement age
12
<PAGE>
for each of the Named Executive Officers under the plan would be as follows: Mr.
Hilb, $175,051; Mr. Rogal, $286,027; Mr. Adams, $89,227; Mr. Schexnaydre,
$59,583; and Mr. Korman, $62,453.
EMPLOYMENT AGREEMENTS
Robert H. Hilb entered into an employment agreement with the Company on
June 1, 1982, for a term of 10 years. The agreement, as amended, provides for an
annual review of his salary by the Compensation Committee of the Board of
Directors of the Company, which may make any adjustments it deems appropriate,
provided that he will not be paid a salary less than $380,000 per annum for the
year beginning January 1, 1995, and any subsequent year. The agreement was
further amended to extend the initial term of employment to thirteen years and
seven months.
Messrs. Rogal, Adams and Schexnaydre are all employed under standard
employment agreements. All such agreements may be terminated for cause and may
be terminated without cause on notice of 90 days or less. In no case would any
of the foregoing individuals be entitled to compensation greater than 90 days of
base salary.
Mr. Korman entered into an employment agreement with the Company on January
1, 1991, for an initial term of three years, which initial term has expired.
Thereafter, the agreement remains in force and may be terminated for cause, or
terminated without cause on notice of 90 days. The agreement, as amended,
provides for an annual review of his salary by the Compensation Committee of the
Board of Directors of the Company, which may make any adjustments it deems
appropriate, provided that he will not be paid a base salary less than $120,000
per annum for the year beginning January 1, 1995, and any subsequent year.
13
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change in
the cumulative total shareholder return, assuming reinvestment of dividends, on
the Company's Common Stock with the cumulative total return, assuming
reinvestment of dividends, of (1) the S&P 500 Index and (2) the Company's Peer
Group Index during the five year period ended December 31, 1994. The Peer Group
Index includes the Company, Arthur J. Gallagher & Co., Poe & Brown, Inc., Marsh
& McLennan Cos., Inc. and Alexander & Alexander Services Inc. The Company
selected this group in its good faith belief that these other public companies
are most similar to the Company's American insurance agency business.
PERFORMANCE GRAPH
[PERFORMANCE GRAPH HERE]
<TABLE>
Base
Period Return Return Return Return Return
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
HILB ROGAL & HAMILTON CO 100 81.90 75.52 91.83 76.65 76.72
S&P 500 INDEX 100 96.89 126.42 136.05 149.76 151.74
PEER GROUP 100 98.47 103.96 123.89 113.61 113.80
</TABLE>
14
<PAGE>
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has recommended, subject to shareholder approval,
the appointment of Ernst & Young LLP as independent auditors to audit the
consolidated financial statements of the Company for the fiscal year ending
December 31, 1995.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE YEAR 1995.
PROPOSALS FOR 1996 ANNUAL MEETING
In order for a shareholder proposal to be considered for possible inclusion
in the 1996 proxy statement, it must conform to the requirements of Regulation
14A of the Commission and must be received by the Corporate Secretary of the
Company no later than December 1, 1995.
ANNUAL REPORTS
THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS, IS BEING MAILED
TO SHAREHOLDERS WITH THIS PROXY STATEMENT. A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING EXHIBITS, FOR 1994 FILED WITH THE COMMISSION CAN BE
OBTAINED WITHOUT CHARGE BY WRITING TO DIANNE F. FOX, SENIOR VICE PRESIDENT AND
CORPORATE SECRETARY, 4235 INNSLAKE DRIVE, P.O. BOX 1220, GLEN ALLEN, VIRGINIA
23060-1220.
15
**************************APPENDIX*****************************************
PROXY
HILB, ROGAL AND HAMILTON COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert H. Hilb, Timothy J. Korman and Walter
L. Smith and each or any of them, proxy for the undersigned, with power of
substitution to vote all the shares of Common Stock of Hilb, Rogal and Hamilton
Company held of record by the undersigned on March 7, 1995, at the Annual
Meeting of Shareholders to be held at 10:00 a.m., May 2, 1995, and at any
adjournments thereof, upon the matters designated on the other side and as more
fully set forth in the Proxy Statement and for the transaction of such business
as may properly come before the meeting.
(Continued on reverse side)
FOLD AND DETACH HERE
1. ELECTION OF DIRECTORS FOR THREE YEAR TERMS EXPIRING AT THE 1998 ANNUAL
MEETING:
<TABLE>
<C> <C>
[ ] FOR nominees [ ] WITHHOLD AUTHORITY
(except as marked to the contrary at right) to vote for all such nominees
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee, write
each such nominee's name in the following space:
2. Proposal to approve the appointment of Ernst & Young LLP as Independent
Auditors for the Company:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears below. When shares are held
by joint tenants, both should sign. When signing in a representative
capacity, please give full title as such. If a corporation, please
sign in corporation's name by President or other authorized officer.
If a partnership, please sign in partnership's name by authorized
person.
Dated: ,1995
Signature
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMTLY USING THE
ENCLOSED ENVELOPE.
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES
FOLD AND DETACH HERE
ANNUAL MEETING
of
HILB, ROGAL AND HAMILTON COMPANY
Tuesday, May 2, 1995
10:00 a.m.
Crestar Bank
919 East Main Street
Richmond, Virginia
Agenda
(solid box) Election of Directors
(solid box) Proposal to Approve the Appointment of
Independent Auditors
(solid box) Report on the Progress of the Company
