1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission file number 0-15981
HILB, ROGAL AND HAMILTON COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1194795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 1220, Glen, Allen, VA 23060-1220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 747-6500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1997
Common stock, no par value 13,005,439
(This document contains 12 pages)
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Consolidated Income
for the three months and six months
ended June 30,1997 and 1996 3
Consolidated Balance Sheet,
June 30, 1997 and December
31, 1996 4
Statement of Consolidated Shareholders'
Equity for the six months ended
June 30, 1997 and 1996 5
Statement of Consolidated Cash Flows
for the six months ended June
30, 1997 and 1996 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-9
Exhibits to Part I
Exhibit 11 - Computation of Earnings
Per Share 10
Part II. OTHER INFORMATION
Item 4.Submission of Matters to a Vote
of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30,1997 JUNE 30, 1996
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues
Commissions $41,687,098 $36,839,284 $88,952,127 $78,768,286
and fees
Investment and
other income 2,636,021 1,096,973 3,283,828 2,243,540
----------- ----------- ----------- -----------
44,323,119 37,936,257 92,235,955 81,011,826
Operating expenses
Compensation
and employee
benefits 23,898,152 21,494,224 48,867,525 44,115,134
Other operating
expenses 11,708,930 9,912,252 22,920,710 19,603,610
Amortization
of intangibles 2,095,691 1,874,264 4,225,709 3,666,605
Interest expense 514,452 229,565 1,032,170 461,460
----------- ----------- ----------- -----------
38,217,225 33,510,305 77,046,114 67,846,809
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 6,105,894 4,425,952 15,189,841 13,165,017
Income taxes 2,568,823 1,751,746 6,246,054 5,328,496
NET INCOME $ 3,537,071 $ 2,674,206 $ 8,943,787 $ 7,836,521
============ ============ ============ ============
NET INCOME PER
COMMON SHARE $0.27 $0.20 $0.68 $0.58
===== ===== ===== =====
Dividends per
Common Share $0.155 $0.15 $0.31 $0.30
====== ===== ===== =====
Weighted Average
Number of Shares
Outstanding 13,166,333 13,524,232 13,239,878 13,626,914
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 27,262,327 $ 19,774,374
Investments 6,620,567 5,088,020
Receivables:
Premiums, less allowance for
doubtful accounts of
$2,577,000 and $2,445,000,
respectively 40,136,567 41,453,677
Other 5,169,293 6,122,612
------------ -----------
45,305,860 47,576,289
Prepaid expenses and other current
assets 2,355,140 3,816,819
------------ -----------
TOTAL CURRENT ASSETS
81,543,894 76,255,502
INVESTMENTS 4,758,339 6,185,686
PROPERTY AND EQUIPMENT (NET) 15,534,952 16,092,075
INTANGIBLE ASSETS
Expiration rights 78,368,079 76,402,292
Goodwill 32,696,352 32,718,982
Noncompetition agreements 11,864,313 11,421,278
------------ -----------
122,928,744 120,542,552
Less accumulated amortization 42,479,454 40,536,482
------------ -----------
80,449,290 80,006,070
OTHER ASSETS 5,737,393 2,936,014
------------ -----------
$188,023,868 $181,475,347
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance $ 69,418,567 $ 66,527,381
companies
Accounts payable and accrued
expenses 11,260,362 11,401,805
Premium deposits and credits due
customers 10,554,806 8,837,483
Current portion of long-term debt 2,710,117 2,345,059
------------ -----------
TOTAL CURRENT LIABILITIES 93,943,852 89,111,728
LONG-TERM DEBT 29,029,634 27,195,571
OTHER LONG-TERM LIABILITIES 9,750,147 9,869,777
SHAREHOLDERS' EQUITY
Common Stock, no par value; authorized
50,000,000 shares; outstanding
13,000,139 and 13,320,577
shares, respectively 20,356,793 25,266,279
Retained earnings 34,943,442 30,031,992
------------ -----------
55,300,235 55,298,271
------------ -----------
$188,023,868 $181,475,347
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
Common Stock Retained Earnings
Balance at January 1, 1997 $25,266,279 $30,031,992
Issuance of 29,796 shares of
Common Stock 354,941
Purchase of 349,564 shares of
Common Stock (5,217,649) (4,032,337)
Payment of dividends
Other (46,778)
Net income 8,943,787
------------ ------------
Balance at June 30, 1997 $20,356,793 $34,943,442
============ ============
Balance at January 1, 1996 $29,903,900 $26,741,990
Issuance of 145,448 shares of
Common Stock 1,987,725
Purchase of 479,000 shares of
Common Stock (6,544,680) (4,052,544)
Payment of dividends
Other 3,275
Net income 7,836,521
------------ ------------
Balance at June 30, 1996 $25,350,220 $30,525,967
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
OPERATING ACTIVITIES
Net income $ 8,943,787 $ 7,836,521
Adjustments to reconcile net
income to net cash
provided by operating activities: 1,806,860 1,565,762
Depreciation and amortization 4,225,709 3,666,605
Amortization of intangible assets 392,271 544,465
Provision for losses on
accounts receivable
Gain on sale of assets (2,078,405) (1,222,201)
------------- -------------
13,290,222 12,391,152
Changes in operating assets
and liabilities net of effects
from insurance agency
acquisitions:
Decrease in accounts receivable 2,011,244 3,286,376
Decrease in prepaid expenses 1,475,525 951,640
Increase (decrease) in
premiums payable to 2,890,969 (2,720,185)
insurance companies
Increase (decrease) in
premium deposits and
credits 1,546,610 (1,280,803)
Decrease in accounts payable (168,433) (1,465,959)
and accrued expenses
Other operating activities (137,076) 1,387,786
------------- -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 20,909,061 12,550,007
INVESTING ACTIVITIES
Proceeds from maturities of held-
to-maturity investments
2,283,930 7,456,943
Purchase of investments (2,389,131) (3,125,000)
Purchase of property and (1,180,969) (2,678,251)
equipment
Purchase of insurance agencies,
net of cash acquired (5,445,618) (3,796,453)
Proceeds from sale of assets 2,106,300 1,182,961
Other investing activities 113,879 163,839
------------- -------------
NET CASH USED IN INVESTING
ACTIVITIES (4,511,609) (795,961)
FINANCING ACTIVITIES
Proceeds from long-term debt 1,000,000 9,700,000
Principal payments on long-term
debt (714,454) (6,402,726)
Repurchase of Common Stock (5,217,649) (6,544,680)
Dividends (4,032,337) (4,052,544)
Other financing activities 54,941 7,425
------------- -------------
NET CASH USED IN FINANCING
ACTIVITIES (8,909,499) (7,292,525)
------------- -------------
INCREASE IN CASH AND CASH
EQUIVALENTS 7,487,953 4,461,521
Cash and cash equivalents at
beginning of period 19,774,374 17,020,706
------------ -------------
CASH AND CASH EQUIVLENTS AT END OF
PERIOD $ 27,262,327 $ 21,482,227
============= =============
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
June 30, 1997
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
the Company have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period
ended June 30, 1997, are not necessarily indicative of the
results that may be expected for the year ending December 31,
1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1996.
NOTE B--INCOME TAXES
The Company (except for its Canadian subsidiary) files a
consolidated federal income tax return. Deferred taxes result from
temporary differences between the reporting for income tax and
financial statement purposes primarily related to bad debt expense,
depreciation expense, basis differences in intangible assets,
deferred compensation arrangements and the recognition of net
operating loss carryforwards from pooled entities.
NOTE C--ACQUISITIONS
During the first six months of 1997, the Company acquired certain
assets and liabilities of three insurance agencies for $5,920,000
($3,814,000 in cash, $1,806,000 in deferred cash payments and
22,305 shares of Common Stock) in purchase accounting
transactions. Proforma revenues and net income are not material
to the consolidated financial statements.
NOTE D--SALE OF ASSETS
During the six months ended June 30, 1997 and 1996, the Company
sold certain insurance accounts and other assets resulting in
gains of approximately $2,078,000 and $1,222,000, respectively,
including $1,990,000 and $568,000 in the second quarters of 1997
and 1996, respectively. These amounts are included in other
revenues in the statement of consolidated income. Revenues,
expenses and assets of these operations were not material to the
consolidated financial statements.
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY (THE "COMPANY")
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
For the three months ended June 30, 1997, commissions and fees
were $41.7 million, an increase of 13.2% from commissions and
fees of $36.8 million during the comparable period of the prior
year. Approximately $4.8 million of core commissions were
derived from purchase acquisitions of new insurance agencies.
This increase was in part offset by decreases of approximately
$0.8 million from the sale of certain offices and accounts in
1996 and 1997. Core commissions and fees from operations owned
during both periods increased 1.6%.
Investment and other income increased $1.5 million or 140.3% from
the prior year primarily due to the gains on the sale of
substantially all of the assets of the Orange County, California
and Charlottesville, Virginia offices during June 1997.
Expenses increased by $4.7 million or 14.0%. Increases include
$2.4 million in compensation and benefits primarily related to
purchase acquisitions of new insurance agencies. Other operating
expenses and amortization of intangibles increased approximately
$2.1 million and $0.2 million, respectively, primarily due to the
aforementioned purchase acquisitions and consulting fees totaling
$550,000, associated with the Company's strategic plan.
The Company's overall tax rate for the three months ended June
30, 1997 was 42.1% versus 39.6% for the same period of the prior
year. This increase is primarily due to a modest increase in the
anticipated corporate effective tax rate due to higher earnings.
For the six months ended June 30, 1997, commissions and fees were
$89.0 million, an increase of 12.9% from commissions and fees of
$78.8 million during the comparable period of the prior year.
Approximately $10.1 million of core commissions were derived from
purchase acquisitions of new insurance agencies. This increase
was in part offset by decreases of approximately $1.4 million
from the sale of certain offices and accounts in 1996 and early
1997. Core commissions and fees from operations owned during
both periods increased 2.6%.
Investment and other income increased $1.0 million or 46.4% from
the prior year primarily due to the net impact of nonrecurring
gains from the sale of assets.
Expenses increased by $9.2 million or 13.6%. Increases include
$4.8 million in compensation and benefits primarily related to
purchase acquisitions of new insurance agencies. Other operating
expenses and amortization of intangibles increased approximately
$3.3 million and $0.6 million, respectively, primarily due to the
aforementioned purchase acquisitions and consulting fees totaling
$850,000 associated with the Company's strategic plan.
The Company's overall tax rate of 41.1% for the six months ended
June 30, 1997, was relatively comparable to the rate of 40.5%
for the same period of the prior year and reflects a modest
increase in the anticipated corporate effective tax rate.
<PAGE>
The timing of contingent commissions, policy renewals and
acquisitions may cause revenues, expenses and net income to vary
significantly from quarter to quarter. As a result of the
factors described above, operating results for the six months
ended June 30, 1997 should not be considered indicative of the
results that may be expected for the entire year ending December
31, 1997.
Liquidity and Capital Resources:
Net cash provided by operations totaled $20.9 million and $12.6
million for the six months ended June 30, 1997 and 1996,
respectively, and is primarily dependent upon the timing of the
collection of insurance premiums from clients and payment of
those premiums to the appropriate insurance underwriters.
The Company has historically generated sufficient funds
internally to finance capital expenditures for property and
equipment. Cash expenditures for the acquisition of property and
equipment were $1.2 million and $2.7 million for the six months
ended June 30, 1997 and 1996, respectively. The timing and
extent of the purchase and sale of investments is dependent upon
cash needs and yields on alternate investments and cash
equivalents. The purchase of insurance agencies accounted for
under the purchase method of accounting utilized cash of $5.4
million and $3.8 million in the six months ended June 30, 1997
and 1996, respectively. Cash expenditures for such insurance
agency acquisitions have been primarily funded through operations
and long-term borrowings. In addition, a portion of the purchase
price in such acquisitions may be paid through Common Stock and
deferred cash payments. Cash proceeds from the sale of accounts
and other assets amounted to $2.1 million and $1.2 million in the
six months ended June 30, 1997 and 1996, respectively. The
Company did not have any material capital expenditure commitments
as of June 30, 1997.
Financing activities utilized cash of $8.9 million and $7.3
million in the six months ended June 30, 1997 and 1996,
respectively. The Company has consistently made scheduled debt
payments and annually increased its dividend rate. In addition,
during the six months ended June 30, 1997 and 1996, the Company
repurchased 349,564 and 479,000, respectively, shares of its
Common Stock under a stock repurchase program. The Company is
currently authorized to purchase an additional 1,100,000 shares
and expects to continue to repurchase shares during the remainder
of 1997. The Company does not anticipate any change in the current
dividend rate in the foreseeable future. The Company has a
bank credit agreement for $30.0 million under loans due through
2001. At June 30, 1997, there were loans of $24.0 million
outstanding under the agreement.
The Company had a current ratio (current assets to current
liabilities) of 0.87 to 1.00 as of June 30, 1997. Shareholders'
equity approximated $55.3 million at both June 30, 1997 and
December 31, 1996. The debt to equity ratio of 0.52 to 1.00 is
increased from the ratio at December 31, 1996 of 0.49 to 1.00 due
to net income offset by the impact of the aforementioned purchase
of Common Stock of the Company and additional long-term
borrowings.
The Company believes that cash generated from operations,
together with proceeds from borrowings, will provide sufficient
funds to meet the Company's short and long-term funding needs.
<PAGE>
PART II - OTHER INFORMATION
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of Shareholders (the "Meeting") of
Hilb, Rogal and Hamilton Company (the "Company") was
held on Tuesday, May 6, 1997.
c) The Shareholders voted for the election of the
following persons to serve as directors of the Company
for the terms of three (3) years expiring on the date
of the Annual Meeting in 2000. The results of the
voting in these elections are set forth below.
Votes Votes Votes Non-
For Against Withheld Votes
Robert H. Hilb 10,682,931 0 1,236,407 1,402,658
Andrew L. Rogal 10,791,651 0 1,127,687 1,402,658
Philip J.Faccenda 10,791,651 0 1,127,687 1,402,658
At the Meeting, the shareholders voted for the
appointment of Ernst & Young, LLP as the independent
auditors for the Company for the fiscal year ending
December 31, 1997. The results of the voting of this
proposal are set forth below.
Votes Votes Votes Non-
For Against Abstained Votes
11,891,487 26,588 1,263 1,402,658
No other matters were voted upon at the Meeting or
during the quarter for which this report is filed.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit - 10.1 Consulting Agreement
b) Exhibit - 10.2 Employment Agreement with Andrew L. Rogal
c) Exhibit - 10.3 1989 Stock Plan as amended August 5,1997
d) Exhibit - 11 Computation of per share earnings
e) No reports on Form 8-K have been filed during the six
months ended June 30, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Hilb,Rogal and Hamilton Company
(Registrant)
Date August 8, 1997 By: /s/ Andrew L. Rogal
President and Chief
Executive Officer
(Principal Executive Officer)
Date August 8, 1997 By: /s/ Carolyn Jones
Senior Vice President-Finance
(Principal Financial Officer)
Date August 8, 1997 By: /s/ Robert W. Blanton, Jr.
Assistant Vice President
and Controller
(Chief Accounting Officer)
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of
June 1, 1997, by and between HILB, ROGAL AND HAMILTON COMPANY, a
Virginia corporation (the "Company"), and ROBERT H. HILB, an
Illinois resident ("Consultant").
RECITALS
A. The Company is engaged in the insurance business and
prior to the date hereof, Consultant served as the Chief
Executive Officer of the Company.
B. Effective as of the Company's annual meeting on May 6,
1997, Consultant resigned as Chief Executive Officer of the
Company and effective as of May 31, 1997, Consultant resigned as
an employee of the Company, and Consultant's resignation was
accepted by the Board of Directors of the Company.
C. The Company desires to continue to receive the benefit
of Consultant's business expertise, knowledge regarding the
insurance industry and extensive experience with the operations
of the Company, and Consultant desires to assist the Company in
its endeavors by providing consulting services to the Company
pursuant to the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Consulting Services. The Company and Consultant agree
that Consultant shall provide the Company with his personal and
unique consulting services as requested by the Board of Directors
and/or the Chief Executive Officer of the Company. Consultant's
consulting services may include advising members of the Company's
management team on matters relating to strategic planning,
mergers and acquisitions opportunities, financing for the Company
and other matters as may be requested from time to time. The
services are not expected to exceed twenty (20) hours per month,
on average.
2. Compensation and Reimbursement of Expenses. As the
total consideration for the services provided by Consultant
hereunder, the Company shall pay Consultant Twenty-Three Thousand
Six Hundred Sixty-Six Dollars ($23,666.00) for each of June, July
and August of 1997 and Seven Thousand Dollars ($7,000.00)
thereafter each month payable on the first day of each month
during the term of this Agreement. The Company shall reimburse
Consultant for all reasonable expenses incurred by him while
providing consulting services to the Company; provided that, all
requests submitted by Consultant for reimbursement by the Company
<PAGE>
shall be supported by original receipts and such additional
documentation as is reasonably required by the Company.
3. Term. The term of this Agreement shall commence on the
date first above written and shall continue (unless sooner
terminated by death) until May 31, 2000, after which it will
continue, if desired by the Company's Board of Directors and
Consultant, on a month-to-month basis.
4. Independent Contractor. Consultant's relationship to
the Company shall be that of an independent contractor retained
on a consulting basis. Nothing in this Agreement shall be
construed as creating any type of agency relationship including,
without limitation, that of employer and employee between the
Company and Consultant. Consultant is not an agent of the
Company and has no authority to execute or deliver or to accept
any agreement on behalf of the Company.
5. Office Space. You will be provided office space and
secretarial support comparable to your current space and support
to enable you to carry out your duties under this Agreement.
6. Nonsolicitation. Consultant agrees that during the
period he is providing consulting services to the Company and for
a period of two (2) years after the date this Agreement
terminates, whether or not during the term of this Agreement, he
will not hire any person who was employed by the Company within
the twelve-month period preceding the date of such hiring, or
solicit, entice, persuade or induce, directly or indirectly, any
person or entity doing business with the Company to terminate
such relationship. Consultant acknowledges that the Company will
be irrevocably damaged if the provisions of this Section 6 are
not specifically enforced. Accordingly, Consultant agrees that,
in addition to any other relief to which the Company may be
entitled, the Company will be entitled to seek and obtain
injunctive relief from a court of competent jurisdiction for the
purpose of restraining Consultant from any actual or threatened
breach of this Section 6.
7. Survival. The obligations of Consultant contained in
Section 6 hereof shall survive the termination of this Agreement.
8. Binding Effect. This Agreement shall be binding upon
the parties, their heirs, legal representatives, successors, and
assigns.
9. Entire Agreement. This Agreement supersedes all
agreements previously made between the parties relating to its
subject matter. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
10. Notices. All notices or other documents under this
Agreement shall be in writing and delivered personally or mailed
by certified mail, postage prepaid, addressed to the parties at
their last known addresses.
11. Severability. The unenforceability, invalidity or
illegality of any of the provisions of this Agreement will not
render the other provisions unenforceable, invalid or illegal.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
HILB, ROGAL AND HAMILTON COMPANY ROBERT H. HILB
By /s Andrew L. Rogal /s Robert H. Hilb
Andrew L. Rogal, Chief Executive Officer Robert H. Hilb
0309966.02
HILB, ROGAL AND HAMILTON COMPANY
Employment Agreement With
ANDREW L. ROGAL
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective the 1st day of June, 1997, by and
between ANDREW L. ROGAL, an individual residing in the County of
Henrico, Virginia (the "Executive"), and HILB, ROGAL AND HAMILTON
COMPANY, a Virginia corporation with corporate offices located at
4235 Innslake Drive, Glen Allen, Virginia (the "Company").
WHEREAS, the Company has promoted the Executive to the
position of Chief Executive Officer of the Company and wants to
assure itself of the benefit of the Executive's services and
experience; and
WHEREAS, the Executive has assumed the position of Chief
Executive Officer and is willing to continue in the employ of the
Company upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and
covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
I. Term Of Employment.
(A) The term of the employment of the Executive under this
Agreement shall be for a five year period commencing on June 1,
1997, and ending on May 31, 2002.
(B) Notwithstanding the foregoing provision (A) of this
Section I., the term of employment of the Executive under this
Agreement shall be subject to earlier termination by:
(1) determination of disability of the Executive
pursuant to Section IV.; or
(2) dismissal of the Executive from his position as
Chief Executive Officer pursuant to resolution by the Board
of Directors of the Company, or failure or refusal of the
Board of Directors to re-elect the Executive to the position
of Chief Executive Officer; or
(3) death of the Executive;
provided, however, that
(i) in the event of termination for
determination of disability pursuant to Paragraph (1)
above, Section IV. shall apply;
(ii) in the event of termination pursuant to
Paragraph (2) above for "Proper Cause" (defined in
Section V.(A)), Section V.(B) shall apply;
(iii) in the event of termination
pursuant to Paragraph (2) above without "Proper Cause"
(defined in Section V.(A)), Section VI. shall apply; or
(iv) in the event of termination due to the
death of the Executive pursuant to Paragraph (3) above,
Section VII. shall apply.
<PAGE>
II. Services To Be Rendered.
The Company agrees to employ the Executive as the Chief
Executive Officer of the Company, subject to the terms,
conditions and provisions of this Agreement. The Executive
hereby accepts such employment and agrees that he shall devote
the same degree of skill and diligence in rendering services to
the Company under this Agreement as he applied during his prior
employment by the Company. The Executive shall report to and be
subject to the direction of the Board of Directors of the
Company. The Executive agrees that his employment as Chief
Executive Officer of the Company pursuant to this Agreement is a
full time position. Notwithstanding the foregoing, the Executive
may devote a reasonable amount of his time to serving as an
officer and director of other companies affiliated with the
Company; to his personal investments and business affairs,
including service as a director of unaffiliated companies; and to
civic, political and charitable activities; provided however, the
Executive shall not accept any position as a director of any
unaffiliated for-profit business organization, other than
positions presently held by him, without prior approval of the
Board of Directors of the Company (which approval will not be
unreasonably withheld).
III. Compensation.
In consideration for the services rendered to the Company
under this Agreement, the Company shall pay and provide to the
Executive the following compensation and benefits:
(A) Salary.
The Company shall pay the Executive an annual base salary of
$400,000.00, payable in twelve equal monthly installments on the
last business day of each calendar month. This annual base
salary shall be reviewed annually by the Compensation Committee
of the Board of Directors (the "Compensation Committee") to
consider appropriate increases, but in no event shall the amount
of the base salary be reduced.
(B) Annual Incentive Bonus.
In addition to the base salary to be paid to the Executive
under Section III.(A), the Executive shall also be entitled to an
annual incentive bonus as established and modified, from time to
time, by the Compensation Committee.
(C) Ancillary Benefits.
The Executive shall also be entitled to vacations,
participation in the Company's Profit Sharing Savings Plan (401K)
and Supplemental Executive Retirement Plan, sick leave benefits,
post-retirement benefit plan, and all other ancillary benefits
provided by the Company, including, but not limited to, group
life, health and disability insurance coverages, consistent with
the compensation policies and practices of the Company from time
to time prevailing with respect to persons who are executive
officers of the Company.
(D) The Executive shall receive such stock option awards
each year as determined by the Compensation Committee in it's
sole discretion.
<PAGE>
IV. Disability.
(A) The term of employment of the Executive may be
terminated at the election of the Company upon a determination by
the Board of Directors of the Company, made based upon a
qualified medical opinion, that the Executive will be unable, by
reason of physical or mental incapacity, to perform the
reasonably expected or customary duties of Chief Executive
Officer of the Company on a full-time basis for a period longer
than three (3) consecutive months or more than six (6) months in
any consecutive twelve (12)-month period. In the exercise of its
determination, the Board of Directors shall give due
consideration to the opinion of the Executive's personal
physician or physicians and to the opinion of any physician or
physicians selected by the Board of Directors for these purposes.
If the Executive's personal physician disagrees with the
physician retained by the Company, the Board of Directors will
retain an impartial physician selected by the Executive's
personal physician and the Company's physician and the opinion of
the impartial physician shall be binding upon the Company and the
Executive. The Executive shall submit to examination by any
physician or physicians so selected by the Board of Directors,
and shall otherwise cooperate with the Board of Directors in
making the determination contemplated hereunder, such cooperation
to include, without limitation, consenting to the release of
information by any such physician(s) to the Board of Directors.
(B) In the event of such termination for disability, the
Company shall thereupon be relieved of its obligations to pay any
compensation and benefits under Section III., except for accrued
and unpaid items, but shall, in addition, pay to the Executive
such disability compensation as set forth in any disability plan
established by the Company for its executive offices.
V. Termination For Proper Cause.
(A) The occurrence of any of the following events shall
constitute "Proper Cause" for termination of the employment of
the Executive under this Agreement, at the election of the Board
of Directors of the Company:
(1) the Executive shall voluntarily resign as a
director, officer or employee of the Company or any of its
affiliates without the written consent of the Board of
Directors of the Company;
(2) the Executive shall breach this Agreement in any
material respect and fail to cure such breach within sixty
(60) calendar days after receiving written notice of such
breach from the Company; or
(3) the commission of a fraud, or other criminal act,
by the Executive directly involving the Company or any of
its affiliates which would constitute a felony if prosecuted
under criminal law;
provided, however, the inability of the Executive to
achieve favorable results of operations shall clearly not be
deemed Proper Cause for termination hereunder.
(B) In the event of termination of the Executive's
employment pursuant to Section I.(B)(2) for Proper Cause, the
Company shall thereupon be relieved of its obligations to pay any
compensation and benefits under Section III., except for accrued
and unpaid items.
<PAGE>
VI. Termination Without Proper Cause.
(A) In the event of termination of the Executive pursuant
to Section I.(B)(2) without Proper Cause (as defined in Section
V.(A) above), the Company shall thereafter be and remain
obligated to pay to the Executive (or his estate or designated
beneficiary) the compensation and benefits provided under Section
III.(A) and III.(B) and such benefits under III.(C) as are
payable to a terminated employee until expiration of the five
year term of employment established by Section I.(A). In the
event of a dispute as to whether Executive was terminated for or
without "Proper Cause," or regarding the amount of compensation
Executive is entitled to receive under this Section VI., the
Company shall be obligated to continue to pay to the Executive
(or his estate or designated beneficiary) all of the compensation
and benefits reserved under Section III. until the dispute is
resolved by an arbitrator pursuant to Section XVIII. hereof.
(B) For purposes of calculating the annual incentive bonus
payable under Section III.(B), the Company shall make to the
Executive (or his estate or designated beneficiary), an annual
payment equal to the greater of the (i) highest annual incentive
bonus payment received by Executive pursuant to Section III.(B)
for the term of this Agreement, or (ii) the sum of $100,000.00.
VII. Death.
In the event of termination of the Executive's employment
pursuant to Section I.(B)(3) above, the Company shall pay the
Executive's estate or designated beneficiary such death benefits
as may be set forth in any life insurance plan established by the
Company for its executive officers.
VIII. Confidentiality.
For purposes of this Agreement, "Confidential Information"
shall mean any information of a proprietary or confidential
nature and trade secrets of the Company and its affiliates
relating to the business of the Company and its affiliates that
have not previously been publicly released by duly authorized
representatives of the Company. The Executive agrees to regard
and preserve as confidential all Confidential Information
pertaining to the Company's business that has been or may be
obtained by the Executive in the course of his employment with
the Company, whether he has such information in his memory or in
writing or other physical form. The Executive shall not, without
written authority from the Company to do so, use for his personal
benefit or his personal purposes, unrelated to business of the
Company, nor disclose to others, either during the term of his
employment hereunder or for two (2) years thereafter, except as
required by the conditions of his employment hereunder, any
Confidential Information of the Company. This provision shall
not apply after the Confidential Information has been voluntarily
disclosed to the public by a duly authorized representative of
the Company, independently developed and disclosed by others, or
otherwise enters the public domain through lawful means.
IX. Removal Of Documents Or Objects.
The Executive agrees not to remove from the premises of the
Company, except as an employee of the Company in pursuit of the
business of the Company or any of its affiliates, or except as
specifically permitted in writing by the Company, any document or
object containing or reflecting any Confidential Information of
the Company. The Executive recognizes that all documents or
material containing Confidential Information developed by him or
by someone else in the course of employment by the Company, are
the exclusive property of the Company.
<PAGE>
X. Nonpiracy Covenants.
(A) For the purpose of this Agreement, the following terms
shall have the following meanings:
(1) "HRH Customers" shall be limited to those
customers of the Company or its affiliates for whom there is
an insurance policy or bond in force or to or for whom the
Company or its affiliates are rendering services as of the
date of termination of the Executive's employment;
(2) "Affiliates of the Company" shall mean each of the
subsidiary corporations of Hilb, Rogal and Hamilton Company
engaged in business as an insurance agency as of the date of
termination of the Executive's employment;
(3) "Prohibited Services" shall mean services in the
fields of insurance performed by the Company or its
affiliates, their agents or employees in any other business
engaged in by the Company or its affiliates on the date of
termination of the Executive's employment. "Fields of
Insurance" does not include title insurance, but does
include all lines of insurance sold by the Company or its
affiliates, including, without limitation, property and
casualty, life, group, accident, health, disability, and
annuities;
(4) "Prospective Customers" shall be limited to those
parties known by the Executive to have been solicited for
business within any Prohibited Service within the twelve
(12) month period preceding the date of termination of the
Executive's employment, and with or from whom, within the
twelve (12) month period preceding the date of termination
of the Executive's employment, someone acting on behalf of
the Company or its affiliates either had met for the purpose
of offering any Prohibited Service or had received a written
response to an earlier solicitation to provide a Prohibited
Service;
(5) "Restricted Period" shall mean the period of two
(2) years immediately following the date of termination of
the Executive's employment.
(B) The Executive recognizes that over a period of many
years the Company has developed, at considerable expense,
relationships with, and knowledge about, Customers and
Prospective Customers which constitute a major part of the value
of the Company. During the course of his employment by the
Company, the Executive will either have substantial contact with,
or obtain substantial knowledge about, these Customers and
Prospective Customers. In order to protect the value of the
Company's business, the Executive covenants and agrees that, in
the event of the termination of his employment, but only if said
termination is voluntary or for Proper Cause, he shall not,
directly or indirectly, for his own account or for the account of
any other person or entity, as an owner, stockholder, director,
employee, partner, agent, broker, consultant or other participant
during the Restricted Period:
(1) solicit a Customer for the purpose of providing
Prohibited Services to such Customer;
<PAGE>
(2) accept an invitation from a Customer for the
purpose of providing Prohibited Services to such Customer;
(3) solicit a Prospective Customer for the purpose of
providing Prohibited Services to such Prospective Customer;
and
(4) accept an invitation from a Prospective Customer
for the purpose of providing Prohibited Services to such
Prospective Customer.
Subsections (1), (2), (3), and (4) are separate and
divisible covenants; if for any reason any one covenant is held
to be illegal, invalid or unenforceable, in whole or in part, the
remaining covenants shall remain valid and enforceable and shall
not be affected thereby. Further, the periods and scope of the
restrictions set forth in any such subsection shall be reduced by
the minimum amount necessary to reform such subsection to the
maximum level of enforcement permitted to the Company by the law
governing this Agreement. Additionally, the Executive agrees
that no separate geographic limitation is needed for the
foregoing nonpiracy covenants as such are not a prohibition on
the Executive's employment in the insurance agency business and
are already limited to only those entities which are included
within the definition of "Customer" and "Prospective Customer."
XI. Nonraiding of Employees.
The Executive covenants that during his employment hereunder
and the Restricted Period specified in Section X. hereof, but
only if said termination is voluntary or for proper cause, he
will not solicit, induce or encourage for the purposes of
employing or offering employment to any individuals who, as of
the date of termination of the Executive's employment, are
employees of the Company or its affiliates, nor will he directly
or indirectly solicit, induce or encourage any of the Company's
or its affiliates' employees to seek employment with any other
business, whether or not the Executive is then affiliated with
such business.
XII. Notification of Former and New Employment.
During the term of this Agreement and the Restricted Period
specified in Section X. hereof, but only if the termination of
employment by the Executive is voluntary or with Proper Cause,
the Executive covenants to notify any prospective employer or
joint venturer, which is a competitor of the Company of this
Agreement with the Company; and if the Executive accepts
employment or establishes a relationship with such competitor,
the Executive covenants to notify the Company immediately of such
relationship. If the Company reasonably believes that the
Executive is affiliated or employed by or with a competitor of
the Company during the Restricted Period, after termination of
his employment voluntarily or with Proper Cause, then the
Executive grants the Company the right to forward a copy of this
Agreement to such competitor.
XIII. Remedies Upon Employee Breach of Agreement.
(A) If the Executive materially breaches any provision of
this Agreement and fails to cure any such material breach within
sixty (60) days after written notice of said material breach is
received from the Company, the Company reserves the right to
avail itself of any reasonable remedy available to it at law or
in equity. Further, if the Executive fails to cure any such
material breach after sixty (60) days from receipt of written
notice of the material breach, the Company may, at its sole
option, employ reasonable disciplinary procedures against the
<PAGE>
Executive for any material breach, up to and including discharge.
The Executive acknowledges and agrees that the Company shall be
entitled to injunctive relief against the Executive for any
material violation by the Executive of Sections VIII. IX., X.,
XI., or XII. of this Agreement which the Executive fails to cure
within sixty (60) days after receipt of written notice from the
Company. The Executive agrees that the foregoing remedies shall
be cumulative and not exclusive, shall not be waived by any
partial exercise or nonexercise thereof and shall be in addition
to any other remedies available to the Company at law or in
equity.
(B) Notwithstanding the foregoing, if the Executive
materially breaches Sections IX. or X. of this Agreement, the
Company may, at its sole option, seek liquidated damages with
respect to each Customer or Prospective Customer procured by or
through the Executive, directly or indirectly, in violation of
Sections IX. or X. of this Agreement (with such Customers being
hereafter referred to as "Lost Customers" and with such
Prospective Customers being hereafter referred to as "Lost
Prospects"). The Executive acknowledges that it would be
difficult to calculate damages incurred by the Company in the
event of such a material breach and that the following liquidated
damages clause, when so elected by the Company, is necessary and
reasonable for the protection of the Executive. The Company
agrees that, if it elects to exercise the liquidated damages
provision with respect to a Lost Customer or Lost Prospect, it
shall not seek an injunction with respect thereto if the
Executive pays such liquidated damages. The Executive also
acknowledges that the Company may or may not choose to exercise
this liquidated damages provision and that the Company may, at
its sole option, seek injunctive relief with respect to some Lost
Customers and Lost Prospects and liquidated damages with respect
to other Lost Customers and Lost Prospects. Finally, the
Executive acknowledges that he has no right whatsoever to force
the Company to exercise this liquidated damages provision, and
that such choice remains entirely the Company's. Liquidated
damages shall be calculated as follows:
(1) A Lost Customer shall be valued at 150% of the
gross revenue to the Company in the most recent twelve (12)
month period preceding the date of loss of such account. If
such Lost Customer had not been a Customer of the Company
for an entire twelve (12) month period, such liquidated
damages shall be 150% of the gross revenue which would have
been, in the absence of a material breach by the Executive,
realized by the Company in the initial twelve (12) month
period of such Customer being served by the Company. A Lost
Prospect shall be valued at 150% of the gross revenue
realized in the initial twelve (12) month period of such
Lost Prospect being served by any one or more persons or
entities receiving such revenue as a direct result of the
Executive's material breach.
(2) The Executive acknowledges that the foregoing
damage amounts are fair and reasonable, that an industry
rule of thumb for the valuation of any agency is 150% of
revenue and that, on the margin, selected accounts may be
worth much more than 150% of their annual revenue to an
agency.
(C) The Executive shall pay such liquidated damages to the
Company within ninety (90) business days after a final order is
entered by the Arbitrator and received by the Executive ordering
the Executive to make such payment. Thereafter, such liquidated
damages shall bear interest at the prime rate of interest in
effect at the Bank of Virginia. The Executive acknowledges that
a broker of record letter granted during the Restricted Period,
if applicable, by a Customer or Prospective Customer in favor of
the Executive or any person or entity with whom or which the
Executive is directly affiliated shall be prima facie evidence of
a violation of Section X. of this Agreement and establishes a
rebuttable presumption in favor of the Company that Section X. of
this Agreement has been violated by the Executive. Further, the
<PAGE>
Executive acknowledges that if the Restricted Period is
applicable to him, he has an affirmative duty to inform such
Customer or Prospective Customer that he cannot accept its
business until after the Restricted Period and that he must
minimize all contact with such Customer or Prospective Customer.
XIV. Tolling of Restrictive Covenants During Violation.
If a material breach by the Executive of any of the
restrictive covenants of this Agreement occurs, the Executive
agrees that the restrictive period of each such covenant so
materially violated shall be extended by a period of time equal
to the period of such material violation by the Executive. It is
the intent of this Section that the running of the restricted
period of a restrictive covenant shall be tolled during any
period of material violation of such covenant so that the Company
shall get the full and reasonable protection for which it
contracted and so that the Executive may not profit by his
material breach.
XV. Merger, Consolidation or Sale.
The Company intends to provide certain anti-takeover
protections to its executives in the next twelve (12) months.
Executives shall receive protections at that time commensurate
with his position with the Company.
XVI. Notices.
All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall
be deemed to have been given if delivered personally or sent by
registered or certified mail, return receipt requested, postage
prepaid:
(A) If to the Company, to it at the following address:
4235 Innslake Drive
Glen Allen, Virginia 23060
Attn: Chairman of the Board
(B) If to the Executive, to him at the following address:
9023 Norwick Road
Richmond, Virginia 23229
with a copy to:
Daniel H. Shapira, Esquire
Marcus & Shapira, LLP
35th Floor
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219
or to such other place as either party shall have specified by
notice in writing to the other. A copy of any notice or other
communication given under this Agreement shall also be sent to
the Secretary and the Treasurer of the Company addressed to such
officers at the then principal office of the Company.
<PAGE>
XVII. Governmental Regulation.
Nothing contained in this Agreement shall be construed so as
to require commission of any act contrary to law and whenever
there is any conflict between any provision of this Agreement and
any statute, law, ordinance, order or regulation, the latter
shall prevail, but in such event any such provision of this
Agreement shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
XVIII. Arbitration.
Any dispute or controversy as to the interpretation,
construction, application or enforcement of, or otherwise arising
under or in connection with this Agreement, shall be submitted at
the request of either party hereto for mandatory, final and
binding arbitration in the City of Richmond, Virginia, in
accordance with the commercial arbitration rules then prevailing
of the American Arbitration Association. The Company and
Executive waive the right to submit any controversy or dispute to
a Court and/or a jury. Any award rendered therein shall provide
the full remedies available to the parties under the applicable
law and shall be final and binding on each of the parties hereto
and their heirs, executors, administrators, successors and
assigns and judgment may be entered thereon in any court having
jurisdiction. The prevailing party in any such arbitration shall
be entitled to an award by the arbitrator of all reasonable
attorneys' fees and expenses incurred in connection with the
arbitration.
XIX. Indemnification by the Company.
The Company shall defend, indemnify and hold harmless the
Executive against any all claims, causes of actions, damages and
expenses (including all legal fees and expenses) in any
threatened, pending or completed action, arising out of or
relating in any way to action or conduct by the Executive by
reason of the fact that he was a representative of the Company or
was serving at the request of the Company or acts or conduct
within the course of his employment pursuant to this Agreement or
in his capacity as a director of the Company. If the Company
contends that any action or conduct by the Executive was not
within the course of his employment or is otherwise not subject
to this provision, the Company shall pay to the Executive all
defense costs and expenses to defend such an action and shall
only be entitled to reimbursement of such fees and expenses if
after a final adjudication, including all available appeals,
there is a holding that the Executive was not entitled to the
defense and indemnification under this provision.
XX. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
XXI. Divisibility.
Should an arbitrator declare any provision of this Agreement
to be invalid, such declaration shall not affect the validity of
the remaining portion of any such provision or the validity of
any other term or provision of the Agreement as a whole or any
part thereof, other than the specific portion declared to be
invalid.
<PAGE>
XXII. Headings.
The headings to the Sections and Paragraphs of this
Agreement are for convenience of reference only and in case of
any conflict the text of this Agreement, rather than the
headings, shall control.
XXIII. Successors and Assigns.
This Agreement is binding upon and shall inure to the
benefit of the successors and assigns of the Company and the
heirs, executors and legal representatives of the Executive.
XXIV. Entire Agreement.
This Agreement contains the entire understanding of the
parties with respect to the subject matter contained herein and
supersedes all prior agreements, arrangements and understandings
relating to the subject matter and may only be amended by a
written agreement signed by the parties hereto or their duly
authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
WITNESS:
__/s Timothy J. Korman
______/s Andrew L. Rogal____________
Andrew L. Rogal
ATTEST: HILB, ROGAL and HAMILTON
COMPANY
_/s Dianne F. Fox___
By:___/s Philip J. Faccenda_________
Its: Chairman of the Compensation
Committee of the Board of
Directors
0341685.02
- - 16 -
HILB, ROGAL AND HAMILTON COMPANY
1989 STOCK PLAN
(As Amended August 5, 1997)
I. PURPOSE
This 1989 Stock Plan is intended to assist Hilb, Rogal and
Hamilton Company (the "Company") in recruiting, retaining and
motivating capable individuals as key employees and Directors by
enabling those individuals who contribute significantly to the
Company to participate in its future success and to associate
their interests with those of the Company through equity
participation or equity-based rewards. This Plan is also
intended to assist affiliated corporations in recruiting,
retaining and motivating capable individuals as key employees by
enabling such employees who contribute significantly to the
affiliated corporation and, thereby the Company, to participate
in the Company's future success and to associate their interests
with those of the Company through equity participation or equity-
based rewards. The proceeds received by the Company from the
sale of Common Stock pursuant to this Plan shall be used for
general corporate purposes.
II. DEFINITIONS
For purposes of this Plan, the following terms shall have
the following meanings:
(a) Affiliate means any "subsidiary" or "parent"
corporation (within the meaning of Section 424 of the Code) of
the Company.
(b) Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and a
Participant specifying the terms and conditions of an Option, SAR
or Restricted Stock award granted to such Participant.
<PAGE>
(c) Board means the Board of Directors of the Company.
(d) Change of Control means and shall be deemed to have
taken place if: (i) any individual, entity or "group" (within
the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act)
becomes the beneficial owner of shares of the Company having 25
percent or more of the total number of votes that may be cast for
the election of directors of the Company, other than (a) as a
result of any acquisition directly from the Company, or (b) as a
result of any acquisition by any employee benefit plans (or
related trusts) sponsored or maintained by the Company or its
Subsidiaries; or (ii) there is a change in the composition of the
Board such that the individuals who, as of August 5, 1997,
constitute the Board (the Board as of August 5, 1997 shall be
hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, for purposes of this definition, that any individual who
becomes a member of the Board subsequent to August 5, 1997 whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of
the Incumbent Board; or (iii) if at any time, (w) the Company
shall consolidate with, or merge with, any other Person and the
Company shall not be the continuing or surviving corporation, (x)
any Person shall consolidate with, or merge with, the Company,
and the Company shall be the continuing or surviving corporation
and in connection therewith, all or part of the outstanding
Common Stock shall be changed into or exchanged for stock or
<PAGE>
other securities of any other Person or cash or any other
property, (y) the Company shall be a party to a statutory share
exchange with any other Person after which the Company is a
Subsidiary of any other Person, or (z) the Company shall sell or
otherwise transfer 50% or more of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any Person
or Persons.
(e) Change of Control Date is the date of the occurrence of
an event described in (i), (ii) or (iii) of the definition of
"Change of Control" above.
(f) Code means the Internal Revenue Code of 1986, and any
amendments thereto.
(g) Committee means the Compensation Committee which shall
be appointed from time to time by the Board but shall always
consist of three individuals, all of whom shall be Directors of
the Company who are not employees of the Company.
(h) Common Stock means the common stock of the Company.
(i) Director means a member of the Board.
(j) Exchange Act means the Securities Exchange Act of 1934,
as amended from time to time, and any successor thereto.
(k) Fair Market Value means, for any given date, the
closing price per share of Common Stock as reported on the New
York Stock Exchange composite tape on that day or, if the Common
Stock was not traded on such day, then the next preceding day
that the Common Stock was traded on such exchange, all as
reported by such source as the Committee may select.
(l) Initial Value means with respect to any SAR, the Fair
Market Value on the date of the grant of the SAR as set forth in
the applicable Agreement.
(m) Option means a stock option, not otherwise specifically
qualified for favorable tax treatment under a section of the
Code, that entitles the holder to purchase from the Company a
stated number of shares of Common Stock at the price set forth in
an Agreement under the terms of this Plan.
<PAGE>
(n) Participant means an employee of the Company or an
Affiliate or a member of the Board of Directors of the Company,
whether or not an employee of the Company, who satisfies the
requirements of Section IV of the Plan and who either is selected
by the Committee to receive an Option, SAR or award of Restricted
Stock or receives a grant of an Option pursuant to Section VII.
(o) Person shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in Section
13(d).
(p) Plan means the Hilb, Rogal and Hamilton Company 1989
Stock Plan.
(q) 1986 Plan means the Hilb, Rogal and Hamilton Company
1986 Incentive Stock Option Plan.
(r) Restricted Stock means shares of Common Stock awarded
to a Participant under Section X of this Plan. Shares of Common
Stock shall cease to be Restricted Stock when, in accordance with
the terms of the applicable Agreement, they become freely
transferable and free of substantial risk of forfeiture.
(s) SAR means a stock appreciation right entitling the
holder to receive, with respect to each share of Common Stock
encompassed by the exercise of such SAR, the excess of the Fair
Market Value over the Initial Value of the SAR.
(t) Subsidiary means, with respect to any corporation, a
subsidiary of that corporation within the meaning of Code Section
424(f).
<PAGE>
III. ADMINISTRATION
This Plan shall be administered by the Committee. Employees
of the Company and its Affiliates and Directors, whether or not
employees of the Company or an Affiliate, shall be eligible to
participate in this Plan; provided, however, that non-employee
Directors shall only receive awards of Options under Section VII
below and no other awards or grants hereunder except for
adjustments pursuant to Section XI. The Committee shall have
authority to grant Options, Restricted Stock awards, or SARs or
any combination thereof to any individual eligible to be a
Participant other than a non-employee Director, upon such terms
(not inconsistent with the provisions of this Plan) as it may
consider appropriate. The terms upon which each Option,
Restricted Stock award or SAR is granted by the Committee may
include conditions (in addition to those contained in this Plan)
established by the Committee upon the exercisability of all or
any part of the Option or SAR (including the terms of exercise,
Option price, time of vesting, transferability and
forfeitability) and the price, transferability or forfeitability
of Restricted Stock. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which
any Option or SAR which has been granted by the Committee may be
exercised or at which Restricted Stock becomes freely
transferable and free of risk of forfeiture. The Committee, in
its discretion, may establish guidelines supplementing this Plan
regarding the selection of Participants, other than non-employee
Directors, and the amounts, times and terms for grants by the
Committee of Options, Restricted Stock awards and SARs. In
addition, the Committee shall have complete authority to
interpret all provisions of this Plan, to adopt, amend, and
rescind rules and regulations pertaining to the administration of
this Plan, and to make all other determinations necessary or
advisable for the administration of this Plan. The Committee
shall prescribe the form of Agreements, consistent with the Plan,
to set forth terms and conditions for Options, SARs and
<PAGE>
Restricted Stock awards granted to individual Participants. Any
decision made, or action taken, by the Committee in connection
with the administration of this Plan shall be final and
conclusive. No member of the Committee shall be liable for any
act done in good faith with respect to this Plan or any Agreement
or Common Stock or stock right granted under its terms. All
expenses associated with the administration of this Plan shall be
borne by the Company.
IV. ELIGIBILITY
(1) General. Any employee of the Company, or any employee
of an Affiliate, who, in the judgment of the Committee, has
contributed or may be expected to contribute to the profits or
growth of the Company or an Affiliate, as the case may be, may be
granted one or more Options, SARs or awards of Restricted Stock
by the Committee. Non-employee Directors shall receive Options
only under the terms of Sections VII below.
(2) Grants. The Committee will designate employees to whom
Options, SARs or awards of Restricted Stock are to be granted and
will specify the number of shares of Common Stock subject to each
grant. An Option may be granted to an employee with a related
SAR and an SAR may be granted to an employee with a related
Option or each may be granted independently. All Options, SARs
and awards of Restricted Stock granted under this Plan shall be
evidenced by Agreements which shall be subject to applicable
provisions of this Plan and, with respect to grants of Options,
SARs and awards of Restricted Stock to employees, to such other
terms and provisions as the Committee may adopt.
V. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
Upon the proper exercise of any Option, independent SAR or
award of Restricted Stock, and payment therefor, the Company may
<PAGE>
deliver to the Participant authorized but previously unissued
Common Stock. The maximum aggregate number of shares of Common
Stock that may be issued pursuant to both this Plan and the 1986
Plan is 625,000, inclusive of all shares issued pursuant to the
1986 Plan prior to the adoption of this Plan, (the "Maximum
Issuable Shares"). The Maximum Issuable Shares shall be
increased, or decreased, at the end of each fiscal year by 13.39%
of the increase, or decrease, in the number of shares of Common
Stock issued and outstanding between the first and last days of
the fiscal year (other than increases from the issuance of Common
Stock under this Plan or the 1986 Plan); provided, however, that
the Maximum Issuable Shares shall not be reduced below the number
that is the sum of those already issued and those that are the
subject of outstanding options under the 1986 Plan or this Plan
at the end of the fiscal year. This annual adjustment shall
first be made as of the last day of the Company's fiscal year
that begins on January 1, 1989.
If an Option is terminated, in whole or in part, for any
reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be
reallocated to other Options to be granted under this Plan or
options under the 1986 Plan. Any shares of Restricted Stock that
are forfeited by a Participant may be reallocated to other awards
of Restricted Stock under this Plan. Upon the exercise of an SAR
granted independently of an Option, the Company may deliver to
the Participant authorized but previously unissued Common Stock,
cash, or a combination thereof as provided in Section IX(3). If
such an SAR is terminated, in whole or in part, for any reason
other than its exercise, the number of shares of Common Stock
allocated to that SAR, or portion thereof, respectively, may be
reallocated to other Options under this Plan or options under the
1986 Plan or SARs which may be granted independently of Options
under this Plan.
<PAGE>
VI. OPTION PRICE
The price per share for Common Stock which may be purchased
by the exercise of any Option granted by the Committee under this
Plan shall be set by the Committee. Such Option price may differ
between Options and may be less than Fair Market Value at the
time of grant in the discretion of the Committee.
VII. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
Each Director of the Company who is not an employee of the
Company at the time of the grant shall receive a grant of an
Option for the purchase of 2,000 shares of Common Stock on the
first business day following the 1993, 1994, 1995, 1996 and 1997
Annual Meetings of the Shareholders of the Company. Each such
Option granted to a non-employee Director shall be for a purchase
price equal to the Fair Market Value of the Common Stock at the
time of the grant and shall be evidenced by an Agreement. Such
Agreement shall contain terms and provisions consistent with the
applicable provisions of this Plan.
VIII. EXERCISE OF OPTIONS AND SARS
(1) Maximum Option or SAR Period. Options and SARs granted
to employees may be exercisable immediately or become exercisable
after any term of months or years and may remain exercisable for
any term of months or years as set by the Committee in its
discretion at the time of granting. The date upon which any
Option or SAR granted by the Committee becomes exercisable may be
accelerated by the Committee in its discretion. The term of
exercisability for any Option or SAR granted by the Committee may
be extended by the Committee and may be made contingent upon the
continued employment of the Participant by the Company or
Affiliate. The terms of any Option or SAR granted by the
Committee may provide that the Option or SAR is exercisable in
<PAGE>
whole or in part from time to time over such period of time as
the Committee shall consider appropriate.
(2) Nontransferability. Any Option or SAR granted under
this Plan shall be nontransferable except, in the case of the
death of the Participant, by will or by the laws of descent and
distribution. In the event of any such transfer upon the death
of the Participant, the Option and any related SAR must be
transferred to the same person or persons, trust or estate and
may not be separated. During the lifetime of the Participant to
whom an Option or SAR is granted, the Option or SAR may be
exercised only by the Participant. No right or interest of a
Participant in any Option or SAR shall be liable for, or subject
to, any obligation, lien, or liability of such Participant.
(3) Employee Status. In the event that the terms of any
Option or SAR granted to an employee of the Company provide that
the Option or SAR may be exercised only during the employment of
the Participant or within a specified period of time after the
termination of his employment, the Committee may decide in each
case whether and the extent to which leaves of absence for
governmental or military service, illness, temporary disability,
or other reasons shall be deemed interruptions of continuous
employment.
IX. METHODS OF EXERCISE
(1) Exercise. Subject to the provisions of Sections VIII,
XI and XIII, an Option or SAR granted by the Committee may be
exercised in whole at any time or in part from time to time at
such times and in compliance with the applicable Agreement and
such other requirements as the Committee shall determine. An
Option granted under Section VII hereof may be exercised in whole
at any time or in part from time to time at such times and in
compliance with the applicable Agreement. A partial exercise of
an Option or SAR shall not affect the right to exercise the
<PAGE>
Option or SAR from time to time in accordance with this Plan with
respect to remaining shares subject to the Option or SAR, except
that the exercise of an Option shall result in the termination of
any related SAR to the extent of the number of shares with
respect to which the Option is exercised.
(2) Payment for Option Exercises. Unless otherwise
provided by the Agreement (or permitted by the Committee for non-
qualified Options granted by the Committee), payment of the
Option price shall be made in cash (in United States dollars) or
a cash equivalent acceptable to the Committee. If the Agreement
so provides (or the Committee so permits), payment of all or a
part of the Option price for a non-qualified Option may be
effected by a "cashless exercise" thereof (i) by the Participant
surrendering shares of Common Stock to the Company, or (ii) by
the Participant delivering to a broker instructions to sell a
sufficient number of the shares of Common Stock being acquired
upon exercise of the Option to cover the Option price and any
additional costs and expenses associated with the cashless
exercise. If Common Stock is surrendered to pay all or part of
the Option price, the shares surrendered must have a Fair Market
Value (determined as of the date of exercise of the Option) that
is not less than such Option price or part thereof.
(3) Settlement of SARs. At the discretion of the
Committee, the amount payable as a result of the exercise of an
SAR may be settled in cash, Common Stock or a combination of cash
and Common Stock. No fractional share shall be delivered upon
the exercise of an SAR but cash shall be paid in lieu thereof.
(4) Shareholder Rights. No Participant shall, as a result
of receipt of any Option or SAR, have any rights as a shareholder
until the date he exercises such Option or SAR.
(5) Tax Withholding With Respect to Options. In the case
of the exercise of an Option, the Participant shall pay to the
Company in cash the full amount of all federal and state income
<PAGE>
and employment taxes required to be withheld by the Company in
respect of the taxable income of the Participant from such
exercise. If the Agreement so provides (or the Committee so
permits for non-qualified Options granted by the Committee),
payment of all or a part of such taxes may be made by the
Participant surrendering shares of Common Stock to the Company,
provided the shares surrendered have a Fair Market Value
(determined as of the date of exercise of the Option) that is not
less than the amount of such taxes or part thereof, or by the
sale of shares of Common Stock upon the cashless exercise of an
Option through a broker.
X. RESTRICTED STOCK.
(1) Award. In accordance with the provisions of Section
IV, the Committee will designate employees to whom an award of
Restricted Stock is to be made and will specify the number of
shares of Restricted Stock to be awarded, and the purchase price
per share to be paid by the Participant.
(2) Vesting. The Committee, on the date of the award, may
prescribe that the Participant's rights in the Restricted Stock
shall be forfeitable or otherwise restricted in any manner in the
discretion of the Committee for such period of time as is set
forth in the Agreement. By way of example and not limitation,
the restrictions may postpone transferability of the shares or
may provide that the shares will be forfeited if the employment
of the Participant by the Company or an Affiliate or the service
of the Participant as a Director terminates before the expiration
of a stated term.
(3) Shareholder Rights. Prior to the forfeiture of shares
in accordance with the terms of the Agreement and while the
shares are Restricted Stock, a Participant will have all rights
of a shareholder with respect to Restricted Stock, including the
right to receive dividends and vote the shares; provided,
however, that (i) a Participant may not sell, transfer, pledge,
<PAGE>
exchange, hypothecate, or otherwise dispose of Restricted Stock,
(ii) the Company shall retain custody of the certificates
evidencing shares of Restricted Stock, and (iii) the Participant
will deliver to the Company a stock power, endorsed in blank,
with respect to each award of Restricted Stock. The limitations
set forth in the preceding sentence shall not apply after the
shares cease to be Restricted Stock.
(4) Tax Withholding With Respect to Restricted Stock. The
Participant shall pay or provide for the payment to the Company
in cash of the full amount of all federal and state income and
employment taxes required to be withheld by the Company with
respect to the inclusion in the taxable income of the Participant
of any amount pursuant to an award of Restricted Stock, including
an election made pursuant to Section 83(b) of the Code or the
lapse of any restriction with respect thereto.
XI. CHANGES IN CAPITAL STRUCTURE
Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each
outstanding Option or SAR, and the price per share thereof, and
the number of shares of Restricted Stock awarded, shall be
adjusted proportionately for any increase or decrease in the
number of issued and outstanding shares of Common Stock of the
Company by reason of any stock dividend, stock split,
combination, reclassification, recapitalization, or the general
issuance to holders of Common Stock of rights to purchase Common
Stock at substantially below its then fair market value, or any
change in the number of shares of Common Stock outstanding
effected without receipt of cash, property, labor or services by
the Company, or any spin-off or other type of distribution of
assets to shareholders.
In the event of a change in the Common Stock of the Company
as presently constituted, which is limited to a change of all or
part of its authorized shares without par value into the same
<PAGE>
number of shares with a par value, or any subsequent change into
the same number of shares with a different par value, the shares
resulting from any such change shall be deemed to be the Common
Stock within the meaning of the Plan.
Except as expressly provided above in this Section XI or in
Section XIII(3), a Participant shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class
or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another corporation. Any issue
by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Restricted Stock or of
Common Stock subject to any Option or SAR.
The grant of an Option, SAR or Restricted Stock award
pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure
or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
<PAGE>
XII. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock or
Restricted Stock shall be issued, no certificates for shares of
Common Stock or Restricted Stock shall be delivered, and no
payment shall be made under this Plan (i) except in compliance
with all applicable federal and state laws and regulations and
rules of all domestic stock exchanges on which the Company's
shares may be listed and (ii) until the Company has obtained such
consent or approval as the Board or the Committee may deem
advisable from regulatory bodies having jurisdiction over such
matters and from the shareholders. The Company and the Committee
shall have the right to rely on the opinion of counsel for either
of them as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option or SAR is exercised or
to evidence Restricted Stock may bear such legends and statements
as the Board or the Committee may deem advisable to assure
compliance with federal and state laws and regulations.
XIII. GENERAL PROVISIONS
(1) Effect on Employment. Neither the adoption of this
Plan, its operation, nor any documents describing or referring to
this Plan (or any part thereof) shall confer upon any employee
any right to continue in the employ of the Company or an
Affiliate or in any way affect any right and power of the Company
or an Affiliate, as the case may be, to terminate the employment
of any employee at any time with or without assigning a reason
therefor.
(2) Unfunded Plan. This Plan, insofar as it provides for
grants, shall be unfunded, and the Company shall not be required
to segregate any assets that may at any time be represented by
grants under the Plan. Any liability of the Company to any
person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the Company shall
<PAGE>
be deemed to be secured by any pledge of, or other encumbrance
on, any property of the Company.
(3) Change of Control. Notwithstanding any other provision
of the Plan to the contrary, in the event of a Change of Control:
(a) Any outstanding Option or SAR which is not
presently exercisable or vested as of a Change of Control Date
shall become fully exercisable and vested to the full extent of
the original grant upon such Change of Control Date.
(b) The restrictions applicable to any outstanding
Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested,
nonforfeitable and transferable to the full extent of the
original grant.
(4) Rules of Construction. Headings are given to the
articles and sections of this Plan solely as a convenience to
facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
XIV. AMENDMENTS
The Board may amend or terminate this Plan from time to
time; provided, however, that: (i) no amendment may become
effective until the approval of the Company's shareholders is
obtained if the amendment (a) increases the aggregate number of
shares that may be issued hereunder or (b) changes the class of
individuals eligible to become Participants and, (ii) the Board
may amend Section VII hereof but only to provide for the granting
of Options to non-employee Directors in a year or years after
1997 which Option grants must not cause this Plan to fail to
qualify for exemption from Section 16(b) of the Securities
Exchange Act of 1934 under the provisions of Rule 16b-3 or any
successor rule and provided that such amendment to Section VII
<PAGE>
hereof must also be approved by a majority of the employee
Directors then serving on the Board. No amendment shall, without
a Participant's consent, adversely affect any rights of such
Participant under any Option or SAR outstanding or Restricted
Stock issued at the time such amendment is made unless required
by law, regulation or rule of stock exchange.
XV. EFFECTIVE DATE OF PLAN
Options and SARs may be granted under this Plan, upon its
adoption by the Board, provided that no Option or SAR will be
effective unless and until this Plan is approved by the holders
of a majority of the shares of the Company's outstanding voting
stock present in person, or represented by proxy, and entitled to
vote at a duly held meeting of the shareholders. No Option or
SAR granted prior to such shareholder approval may be exercised
before the requisite shareholder approval is obtained.
XVI. GOVERNING LAW
The Plan shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia, except
to the extent that federal law shall be deemed to apply.
0290858.04
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Quarter Ended Six Months Ended
June 30, June 30,
------------------------------------------------
1997 1996 1997 1996
PRIMARY: ---- ---- ---- ----
Average shares outstanding 13,166,333 13,524,232 13,239,878 13,626,914
Net effect of dilutive
stock options
- -- based on the treasury
stock method using average
fair value 44,061 30,782 67,809 31,051
Net effect of
guaranteed future shares
to be issued in connection
with an agency acquisition 22,059 22,059
Net effect of future
shares to be issued in
connection with an agency
acquisition contingent
upon performance 88,235 88,235
----------- ---------- --------- ---------
Average number of
shares as adjusted 13,320,688 13,555,014 13,417,981 13,657,965
=========== ========== ========== ==========
Net income $3,537,071 $2,674,207 $8,943,787 $7,836,521
=========== ========== ========== ==========
Per share amount $.27 $.20 $.67 $.57
==== ==== ==== ====
FULLY DILUTED:
Average shares outstanding 13,166,333 13,524,232 13,239,878 13,626,914
Net effect of dilutive
stock options
- -- based on the treasury
stock method using the
end of period value, if higher
than average fair value 153,373 46,189 153,018 46,654
Net effect of
guaranteed future shares
to be issued in connection
with an agency acquisition 22,059 22,059
Net effect of future
shares to be issued in
connection with an agency
acquisition contingent
upon performance 176,470 176,470
----------- ---------- --------- ---------
Average number of
shares as adjusted 13,518,235 13,570,421 13,591,425 13,673,568
=========== ========== ========== ==========
Net income $3,537,071 $2,674,207 $8,943,787 $7,836,521
=========== ========== ========== ==========
Per share amount $.26 $.20 $.66 $.57
==== ==== ==== ====
Note:The per share amounts for each period presented above
do not necessarily support amounts in the statement of
consolidated income because common stock equivalents are
less than 3% dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10Q
FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 27,262,327
<SECURITIES> 6,620,567
<RECEIVABLES> 47,882,860
<ALLOWANCES> 2,577,000
<INVENTORY> 0
<CURRENT-ASSETS> 81,543,894
<PP&E> 37,514,336
<DEPRECIATION> 21,979,384
<TOTAL-ASSETS> 188,023,868
<CURRENT-LIABILITIES> 93,943,852
<BONDS> 29,029,634
<COMMON> 20,356,793
0
0
<OTHER-SE> 34,943,442
<TOTAL-LIABILITY-AND-EQUITY> 188,023,868
<SALES> 0
<TOTAL-REVENUES> 92,235,955
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 76,013,944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,032,170
<INCOME-PRETAX> 15,189,841
<INCOME-TAX> 6,246,054
<INCOME-CONTINUING> 8,943,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,943,787
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
