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, 1998 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, 1998
Common stock, no par value 12,216,237
(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 30,1998 and 1997 3
Consolidated Balance Sheet,
June 30, 1998 and December
31, 1997 4
Statement of Consolidated Shareholders'
Equity for the six months ended
June 30, 1998 and 1997 5
Statement of Consolidated Cash Flows
for the six months ended June
30, 1998 and 1997 6
Notes to Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9-10
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, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Commissions and fees $43,054,132 $41,687,098 $91,031,861 $88,952,127
Investment income 440,664 408,187 816,469 786,589
Other 2,428,765 2,227,834 2,773,145 2,497,239
----------- ----------- ----------- -----------
45,923,561 44,323,119 94,621,475 92,235,955
Operating expenses
Compensation and
employee benefits 24,490,568 23,898,152 49,287,468 48,867,525
Other operating expenses 11,404,623 11,708,930 22,735,267 22,920,709
Amortization of intangibles 1,959,477 2,095,691 3,896,708 4,225,710
Interest expense 535,312 514,452 1,099,061 1,032,170
----------- ----------- ----------- -----------
38,389,980 38,217,225 77,018,504 77,046,114
INCOME BEFORE
INCOME TAXES 7,533,581 6,105,894 17,602,971 15,189,841
Income taxes 3,087,984 2,568,823 7,211,833 6,246,054
----------- ----------- ----------- -----------
NET INCOME $ 4,445,597 $ 3,537,071 $10,391,138 $ 8,943,787
=========== =========== =========== ===========
NET INCOME PER
COMMON SHARE:
Basic $0.35 $0.27 $0.82 $0.67
===== ===== ===== =====
Dilutive $0.35 $0.27 $0.80 $0.67
===== ===== ===== =====
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
---------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 28,144,592 $ 22,314,860
Investments 2,509,086 3,892,533
Receivables:
Premiums, less allowance for doubtful
accounts of $2,363,000 and
$2,299,000, respectively 40,656,327 41,292,489
Other 6,204,389 5,720,513
------------ ------------
46,860,716 47,013,002
Prepaid expenses and other current
assets 2,449,990 3,612,523
------------ ------------
TOTAL CURRENT ASSETS 79,964,384 76,832,918
INVESTMENTS 4,491,383 5,030,000
PROPERTY AND EQUIPMENT (NET) 11,303,758 11,762,080
INTANGIBLE ASSETS
Expiration rights 77,315,801 75,193,075
Goodwill 35,029,516 33,411,145
Noncompetition agreements 12,067,594 11,636,847
------------ ------------
124,412,911 120,241,067
Less accumulated amortization 41,772,790 38,071,304
------------ ------------
82,640,121 82,169,763
OTHER ASSETS 5,419,956 5,811,797
------------ ------------
$183,819,602 $181,606,558
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 68,349,289 $ 67,520,370
Accounts payable and accrued expenses 13,774,682 10,925,646
Premium deposits and credits due
customers 7,379,501 7,752,502
Current portion of long-term debt 2,125,332 2,074,788
------------ ------------
TOTAL CURRENT LIABILITIES 91,628,804 88,273,306
LONG-TERM DEBT 31,598,133 32,457,882
OTHER LONG-TERM LIABILITIES 10,032,807 9,536,771
SHAREHOLDERS' EQUITY
Common Stock, no par value; authorized
50,000,000 shares; outstanding
12,434,137 and 12,813,023 shares,
respectively 9,352,650 16,540,461
Retained earnings 41,207,208 34,798,138
------------ ------------
50,559,858 51,338,599
------------ ------------
$183,819,602 $181,606,558
============ ============
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, 1998 $16,540,461 $34,798,138
Issuance of 98,014 shares
of Common Stock 1,251,975
Purchase of 476,900 shares of
Common Stock (8,270,524)
Payment of dividends ($.315 per share) (3,982,068)
Other (169,262)
Net income 10,391,138
------------ ------------
Balance at June 30, 1998 $ 9,352,650 $41,207,208
============ ============
Balance at January 1, 1997 $25,266,279 $30,031,992
Issuance of 29,796 shares
of Common Stock 354,941
Purchase of 349,564 shares
of Common Stock (5,217,649)
Payment of dividends ($.31 per share) (4,032,337)
Other (46,778)
Net income 8,943,787
------------ ------------
Balance at June 30, 1997 $20,356,793 $34,943,442
============ ============
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $10,391,138 $ 8,943,787
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,730,591 1,806,860
Amortization of intangible 3,896,708 4,225,709
___________ ____________
Net income plus amortization and
depreciation 16,018,437 14,976,356
Provision for losses on
accounts receivable 244,181 392,271
Gain on sale of assets (2,321,176) (2,078,405)
Changes in operating assets and
liabilities net of effects from
insurance agency acquisitions and
dispositions:
(Increase) decrease in accounts receivable (89,333) 2,011,244
Decrease in prepaid expenses 1,351,435 1,475,525
Increase in premiums payable to insurance
companies 828,919 2,890,969
Increase (decrease) in premium deposits
and credits (373,001) 1,546,610
Increase (decrease) in accounts payable
and accrued expenses 1,376,447 (168,433)
Other operating activities 313,528 (137,076)
___________ ____________
NET CASH PROVIDED BY OPERATING
ACTIVITIES 17,349,437 20,909,061
INVESTING ACTIVITIES
Proceeds from maturities of held-to-maturity
investments 2,230,206 2,283,930
Purchase of investments (308,141) (2,389,131)
Purchase of property and equipment (1,645,065) (1,180,969)
Purchase of insurance agencies,
net of cash acquired (4,248,804) (5,445,618)
Proceeds from sale of assets 4,241,526 2,106,300
Other investing activities 20,396 113,879
___________ ____________
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 290,118 (4,511,609)
FINANCING ACTIVITIES
Proceeds from long-term debt -- 1,000,000
Principal payments on long-term debt (809,205) (714,454)
Proceeds from issuance of Common Stock 1,251,975 54,941
Repurchase of Common Stock (8,270,524) (5,217,649)
Dividends (3,982,069) (4,032,337)
___________ ____________
NET CASH USED IN FINANCING ACTIVITIES (11,809,823) (8,909,499)
___________ ____________
INCREASE IN CASH AND CASH EQUIVALENTS 5,829,732 7,487,953
Cash and cash equivalents at beginning of period 22,314,860 19,774,374
___________ ____________
CASH AND CASH EQUIVLENTS AT END OF
PERIOD $28,144,592 $ 27,262,327
=========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
June 30, 1998
(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, 1998, are not necessarily indicative of the
results that may be expected for the year ending December 31,
1998. 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, 1997.
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 1998, the Company acquired certain
assets and liabilities of one insurance agency for $700,000 in a
purchase accounting transaction. 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, 1998 and 1997, the Company
sold certain insurance accounts and other assets resulting in
gains of approximately $2,321,000 and $2,078,000, respectively,
including $2,173,000 and $1,990,000 in the second quarters of
1998 and 1997, 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>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
June 30, 1998
(UNAUDITED)
NOTE E-NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted
net income per share.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------------------------------------------------------
<C> <C> <C> <C>
<S>
Numerator for basic and dilutive net income
per share - net income $ 4,445,597 $ 3,537,071 $10,391,138 $ 8,943,787
=========== =========== =========== ===========
Denominator
Weighted average shares 12,651,328 13,166,333 12,710,292 13,239,878
Effect of guaranteed future shares to be
issued in connection with an agency
acquisition 12,000 22,059 11,051 24,791
___________ ____________ ___________ ____________
Denominator for basic net income per
share 12,663,328 13,188,392 12,721,343 13,264,669
Effect of dilutive securities
Employee stock options 156,873 44,061 181,807 33,323
Contingent stock - acquisitions 17,320 970 8,660 485
___________ ____________ ___________ ____________
Dilutive potential common shares 174,193 45,031 190,467 33,808
___________ ____________ ___________ ____________
Denominator for diluted net income per
share - adjusted weighted average
shares and assumed conversions 12,837,521 13,233,423 12,911,810 13,298,477
=========== ============ =========== ============
Net Income per Common Share:
Basic $0.35 $0.27 $0.82 $0.67
===== ===== ===== =====
Diluted $0.35 $0.27 $0.80 $0.67
===== ===== ===== =====
<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, 1998 commissions and fees
were $43.1 million, an increase of 3.3% from commissions and fees
of $41.7 million during the comparable period of the prior year.
Approximately $1.6 million of core commissions were derived from
purchase acquisitions of new insurance agencies. This increase
was offset by decreases of approximately $1.7 million from the
sale of certain offices and accounts in 1998 and 1997. Excluding
the effect of acquisitions and dispositions, commissions and fees
from operations owned during both periods increased 3.7%.
Investment income was comparable to the same period of the prior
year. Other income increased $0.2 million or 9.0% from the prior
year primarily due to $2.2 million in gains from divestitures,
including the sale of substantially all of the assets of the Fort
Lauderdale, Florida office during June 1998, compared with net
gains of $2.0 million a year earlier, including gains on the sale
of substantially all of the assets of the Orange County,
California and Charlottesville, Virginia offices.
Expenses increased by $0.2 million or 0.5%. Increases include
$0.6 million in compensation and benefits primarily related to
purchase acquisitions of new insurance agencies and increased
earnings, offset in part by decrease from the sale of certain
offices and accounts in 1998 and 1997. Other operating expenses
and amortization of intangibles decreased approximately $0.3
million and $0.1 million, respectively, primarily due to the
impact of dispositions in 1997 and consulting fees totaling
$550,000 in 1997, associated with the Company's strategic plan.
The Company's overall tax rate for the three months ended June
30, 1998 was 41.0%, relatively comparable to the rate of 42.1%
for the same period of the prior year.
For the six months ended June 30, 1998, commissions and fees were
$91.0 million, an increase of 2.3% from commissions and fees of
$89.0 million during the comparable period of the prior year.
Approximately $2.7 million of core commissions were derived from
purchase acquisitions of new insurance agencies. This increase
was offset by decreases of approximately $4.1 million from the
sale of certain offices and accounts in 1997 and 1998.
Commissions and fees, excluding the effect of acquisitions and
dispositions, from operations owned during both periods increased
4.2%.
Investment and other income increased $0.3 million or 9.3% from
the prior year primarily due to the net impact of nonrecurring
gains from the sale of assets.
Expenses remained relatively level with the prior year.
Decreases relate to the impact of certain offices sold in 1997
and consulting fees of $850,000 in 1997 related to the Company's
strategic plan were offset by the impact of acquisitions.
The Company's overall tax rate of 41.0% for the six months ended
June 30, 1998, was relatively comparable to the rate of 41.1%
for the same period of the prior year.
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, 1998 should not be considered indicative of the
results that may be expected for the entire year ending December
31, 1998.
Liquidity and Capital Resources:
Net cash provided by operations totaled $17.3 million and $20.9
million for the six months ended June 30, 1998 and 1997,
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 $1.6 million and $1.2 million for the six months
ended June 30, 1998 and 1997, 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 $4.2 million and
$5.4 million in the six months ended June 30, 1998 and 1997,
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 $4.2 million and $2.1 million in the
six months ended June 30, 1998 and 1997, respectively. The
Company did not have any material capital expenditure commitments
as of June 30, 1998.
Financing activities utilized cash of $11.8 million and $8.9
million in the six months ended June 30, 1998 and 1997,
respectively. The Company has consistently made scheduled debt
payments and annually increased its dividend rate. In addition,
during the six months ended June 30, 1998 and 1997, the Company
repurchased 476,900 and 349,564, respectively, shares of its
Common Stock under a stock repurchase program. The Company is
currently authorized to purchase an additional 241,180 shares and
expects to continue to repurchase shares during the remainder of
1998. The Company anticipates the continuance of its dividend
policy. The Company has a bank credit agreement for $30.0
million under loans due through 2001. At June 30, 1998, there
were loans of $30.0 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, 1998. Shareholders'
equity of $50.6 million at June 30, 1998, is decreased from $51.3
million at December 31, 1997. The debt to equity ratio of 0.62
to 1.00 is decreased from the ratio at December 31, 1997 of 0.63
to 1.00 due to net income offset by the impact of the
aforementioned purchase of Common Stock of the Company.
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.
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 5, 1998.
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 2001. The results of the
voting in these elections are set forth below.
Votes Votes Votes Non-
For Against Withheld Votes
J. S. M. French 10,746,128 0 668,215 1,268,680
Robert S. Ukrop 10,797,717 0 616,626 1,268,680
Anthony F. Markel 11,204,730 0 209,613 1,268,680
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, 1998. The results of the voting of this
proposal are set forth below.
Votes Votes Votes Non-
For Against Abstained Votes
11,355,128 56,335 2,880 1,268,680
At the Meeting, the shareholders voted for the approval
of the Non-employee Directors Stock Incentive Plan,
which had previously been adopted by the Board. The
results of the voting of this proposal are set forth
below:
Votes Votes Votes Non-
For Against Abstained Votes
10,413,346 469,486 531,511 1,268,680
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
The following exhibits are included herein:
a) Exhibit - 10.1 Non-employee Directors Stock Incentive
Plan
b) No reports on Form 8-K have been filed during the six
months ended June 30, 1998.
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 7, 1998 By: /s/ Andrew L. Rogal
President and Chief Executive
Officer
(Principal Executive Officer)
Date August 7, 1998 By: /s/ Carolyn Jones
Senior Vice President-Finance
(Principal Financial Officer)
Date August 7, 1998 By: /s/ Robert W. Blanton, Jr.
Vice President and Controller
(Chief Accounting Officer)
</TABLE>
HILB, ROGAL AND HAMILTON COMPANY
NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Hilb, Rogal and Hamilton
Company Non-employee Directors Stock Incentive Plan (the "Plan")
is to encourage ownership in the Company by non-employee members
of the Board, to promote long-term shareholder value and to
provide non-employee members of the Board with an incentive to
continue as directors of the Company.
2. Definitions. As used in the Plan, the following terms
have the meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934,
as amended.
(b) "Agreement" means a written agreement (including
any amendment or supplement thereto) between the
Company and an Eligible Director specifying the
terms and conditions of an Option granted to such
Eligible Director.
(c) "Annual Meeting" means the annual meeting of
shareholders at which members of the Board are
routinely elected.
(d) "Board" means the Board of Directors of the
Company.
(e) "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 Act) (a "Person")
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 the date hereof, constitute the Board
(the Board as of such date 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 such date 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 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, (a) the Company
shall consolidate with, or merge with, any other
Person and the Company shall not be the continuing
or surviving corporation, (b) 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 other
securities of any other Person or cash or any
other property, (c) 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 (d) 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.
(f) "Company" means Hilb, Rogal and Hamilton Company.
(g) "Committee" means the Compensation Committee of
the Board.
.
(h) "Common Stock" means the Common Stock of the
Company. In the event of a change in the capital
structure of the Company (as provided in Section
13), the shares resulting from such a change shall
be deemed to be the Common Stock within the
meaning of the Plan.
(i) "Date of Grant" means the date as of which a
director is automatically awarded an Option
pursuant to Section 6.
(j) "Effective Date" means the date the Plan is
adopted by shareholders of the Company.
(k) "Eligible Director" means a member of the Board
who is not an employee of the Company or any
Subsidiary.
(l) "Fair Market Value" means, on 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 on the next preceding day
that the Common Stock was traded on such exchange,
all as reported by such source as the Committee
may select.
(m) "Fees" means all amounts payable to an Eligible
Director for services rendered as a director,
including retainer fees, meeting fees and
committee fees, but excluding travel and other out
of pocket expense reimbursements.
(n) "Option" means a stock option, not otherwise
specifically qualified for favorable tax treatment
under a section of the Internal Revenue 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, at a price determined in accordance
with the Plan.
(o) "Plan Year" means the period beginning on the date
of an Annual Meeting and ending on the day before
the next Annual Meeting.
(p) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations
beginning with the Company if each of the
corporations in the unbroken chain (other than the
last corporation) owns stock possessing at least
50% of the total combined voting power of all
classes of stock in one of the other corporations
in such chain.
3. Participation in the Plan. Each Eligible Director who
is not an employee of the Company or Subsidiary shall be eligible
to receive Options under Section 6. Each Eligible Director shall
be eligible to elect to receive Common Stock in lieu of Fees
under Section 7.
4. Stock Subject to the Plan. The maximum number of
shares of Common Stock that may be issued upon exercise of
Options granted pursuant to the Plan shall be 200,000, subject to
adjustment as provided in Section 13.
5. Non-Standing Stock Options. All Options granted under
the Plan shall be non-statutory in nature and shall not be
entitled to special tax treatment under Internal Revenue Code
Section 422.
6. Award, Terms, Conditions and Form of Options. Each
Option shall be evidenced by a written agreement in such form as
the Committee shall from time to time approve, which Agreement
shall comply with and be subject to the following terms and
conditions:
(a) Each Eligible Director shall receive a grant of an
Option for the purchase of 5,000 shares of Common
Stock on the first business day following the
Annual Meeting. If at any time under the Plan
there are not sufficient shares of Common Stock
available to permit fully the Option grants
described in this Section 6(a), the Option grants
shall be reduced pro rata (to zero, if necessary)
so as not to exceed the number of shares of Common
Stock available.
(b) The Option exercise price shall be the Fair Market
Value of the Common Stock on the Date of Grant.
(c) Subject to Section 6(e) below, all Options shall
become exercisable immediately or 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. Further, the date upon which any Option
granted becomes exercisable may be accelerated by
the Committee in its discretion and the term of
exercisability for any Option granted may be
extended by the Committee. The terms of any
Option granted by the Committee may provide that
the Option is exercisable in whole or in part from
time to time over such period of time as the
Committee shall consider appropriate.
(d) An Option 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 shall not affect the
right to exercise the Option from time to time in
accordance with this Plan with respect to
remaining shares subject to the Option.
(e) Unless otherwise provided by the Agreement,
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, payment of all or a part of the Option
price for a non-statutory Option may be effected
by a "cashless exercise" thereof (i) by the
Eligible Director surrendering shares of Common
Stock to the Company, or (ii) by the Eligible
Director 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.
(f) Options shall become fully exercisable upon a
Change of Control.
7. Receipt of Fees in Stock.
(a) An Eligible Director may elect to receive up to
100 percent of his or her Fees in shares of Common Stock (a
"Stock Election"). A Stock Election must be in writing and shall
be delivered to the Corporate Secretary of the Company prior to
the Annual Meeting for the Plan Year to which the Stock Election
pertains. Except as provided in Section 7(c), a Stock Election
may be revoked prior to the last day of any calendar quarter for
all calendar quarters beginning after the revocation. A Stock
Election must specify the applicable percentage of the Fees that
the Eligible Director wishes to receive in shares of Common Stock
(the "Designated Percentage").
(b) If a Stock Election is made, the amount of Fees to
be paid to an Eligible Director during each calendar quarter
shall be determined on the last day of the quarter. The number
of shares of Common Stock to be issued in lieu of the Fees shall
be determined by multiplying the Designated Percentage times the
Fees otherwise payable for the quarter and dividing that product
by the Fair Market Value of the Common Stock on the last day of
the quarter. If this formula produces a fractional share, the
number of shares shall be rounded down to the next whole share.
(c) If the Designated Percentage in a Stock Election
is 100 percent, the number of shares of Company Stock as
determined under Section 7(b) shall be increased by 30 percent,
rounded down to the next whole share. To receive the increased
amount of Common Stock, the Stock Election must be irrevocable in
respect to the Plan Year to which it pertains.
8. Withholding. In the case of the exercise of an Option,
the Eligible Director shall pay to the Company in cash the full
amount of all federal and state income and employment taxes
required to be withheld by the Company in respect of the taxable
income of the Eligible Director from such exercise. If the
Agreement so provides, payment of all or a part of such taxes may
be made by the Eligible Director surrendering shares of Common
Stock to the Company, provided the shares 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.
9. Transferability. An Option shall not be transferable
by the optionee otherwise than by will, or by the laws of descent
and distribution, and shall be exercised during the lifetime of
the optionee only by him; provided that an Eligible Director may
transfer any Option to members of the Eligible Director's
immediate family or trusts or family partnerships for the benefit
of such persons, subject to such terms and conditions as may be
established by the Committee. Except as specifically provided in
the Agreement, no Option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee during his or
her lifetime, whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process.
10. Administration. The Plan shall be administered by the
Committee. The Committee shall have all powers necessary to
administer the Plan, including, without limitation, the authority
(within the limitations described herein) to construe the Plan,
to determine all questions arising under the Plan and to adopt
and amend rules and regulations for the administration of the
Plan as it may deem desirable. Any decision of the Committee in
the administration of the Plan shall be final and conclusive.
The Committee may act only by a majority of its members in
office, except that members thereof may authorize any one or more
of their number or any officer of the Company to execute and
deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done
by him or any other member of the Committee in connection with
the Plan, except for his or hers own willful misconduct or as
expressly provided by statute.
11. Termination. The Plan shall terminate upon the earlier
of:
(a) the adoption of a resolution of the Board
terminating the Plan; or
(b) the date shares of Common Stock are no longer
available under the Plan for the automatic award
of Option shares; or
(c) the tenth anniversary of the Effective Date. No
termination of the Plan shall materially and
adversely affect any of the rights or obligations
of any Eligible Director under any Option
previously granted by the Plan without such
Eligible Director's consent.
12. Limitation of Rights.
(a) Neither the Plan nor any other action taken
pursuant to the Plan, shall constitute or be
evidence of any agreement or understanding,
express or implied, that the Company will retain
any person as a director for any period of time.
(b) An optionee shall have no rights as a shareholder
with respect to shares of Common Stock covered by
his or her Option until the date of exercise of
the Option, and, except as provided in Section 13,
no adjustment will be made for dividends or other
rights for which the record date is prior to the
date of such exercise.
13. Changes in Capital Structure.
(a) Subject to any required action by the shareholders
of the Company, the number of shares of Common
Stock covered by each outstanding Option and the
price per share thereof 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 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.
(b) Except as expressly provided above in this Section
6(e) or Section 13, an Eligible Director 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 Common Stock subject to any Option.
(c) The grant of an Option 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.
14. Amendment of the Plan. The Plan may be terminated or
amended at any time by the Board, effective as of any date
specified, except as required by applicable law. No amendment or
termination shall decrease an Eligible Director's accrued benefit
prior to the effective date of the amendment or termination.
15. Notice. All notices and other communications required
or permitted to be given under this Plan shall be in writing and
shall be deemed to have been duly given if delivered personally
or mailed first class, postage prepaid, as follows: (a) if to the
Company - at its principal business address to the attention of
the Treasurer; (b) if to any Participant - to the Participant's
address as reflected on the records of the Company.
16. Non-Assignability. Each Participant's rights under the
Plan shall be non-assignable.
17. Responsibility for Legal Effect. Neither the Committee
nor the Company makes any representations or warranties, express
or implied, or assumes any responsibility concerning the legal,
tax or other implications or effects of this Plan.
18. Successors, Acquisitions, Mergers, Consolidations. The
terms and conditions of the Plan shall inure to the benefit of
and bind the Company and the Participants, and their successors,
assigns and personal representatives.
19. Controlling Law. The Plan shall be construed in
accordance with the laws of the Commonwealth of Virginia to the
extent not preempted by laws of the United States of America.
20. Gender and Number. In the construction of the Plan, the
masculine shall include the feminine or neuter and the singular
shall include the plural and vice-versa in all cases where such
meanings would be appropriate.
21. Titles and Captions. Titles and captions and headings
herein have been inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof.
IN WITNESS WHEREOF, the Corporation has caused the Plan to
be signed on its behalf by its duly authorized officer effective
this 5th day of May, 1998.
Hilb, Rogal and Hamilton Company
By: Carolyn Jones
Its Senior Vice President,
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED JUNE 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 28,144,592
<SECURITIES> 2,509,086
<RECEIVABLES> 49,223,716
<ALLOWANCES> 2,363,000
<INVENTORY> 0
<CURRENT-ASSETS> 79,964,384
<PP&E> 34,334,073
<DEPRECIATION> 23,030,315
<TOTAL-ASSETS> 183,819,602
<CURRENT-LIABILITIES> 91,628,804
<BONDS> 31,598,133
<COMMON> 9,352,650
0
0
<OTHER-SE> 41,207,208
<TOTAL-LIABILITY-AND-EQUITY> 183,819,602
<SALES> 0
<TOTAL-REVENUES> 94,621,475
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 75,919,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,099,061
<INCOME-PRETAX> 17,602,971
<INCOME-TAX> 7,211,833
<INCOME-CONTINUING> 10,391,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,391,138
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.80
</TABLE>
