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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Hilb, Rogal and Hamilton Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF HRH]
March 31, 2000
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, May 2, 2000, at 10:00 a.m. at The Jefferson Hotel, 101 W. Franklin
Street, Richmond, Virginia. At the meeting, you will be asked to elect six
directors, four to the class of directors whose term of office expires in 2003
and one each for the classes of 2001 and 2002. Additionally, we seek your
approval of the 2000 Stock Incentive Plan. On the following pages, you will
find the formal notice of annual meeting and the proxy statement.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Therefore, you are urged to
complete, sign, date and mail your proxy promptly in the enclosed postage-paid
envelope.
We hope you will participate in the annual meeting, either in person or by
proxy.
Sincerely,
/s/ Andrew L. Rogal
Andrew L. Rogal
Chairman and Chief Executive Officer
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
P. O. Box 1220
Glen Allen, Virginia 23060-1220
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2000
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The Annual Meeting of Shareholders of Hilb, Rogal and Hamilton Company (the
Company) will be held on Tuesday, May 2, 2000, at 10:00 a.m. at The Jefferson
Hotel, 101 W. Franklin Street, Richmond, Virginia, for the following purposes:
1. To elect six directors, four to the class of directors whose term of
office expires in 2003 and one director for each class of directors
whose term of office expires in 2001 and 2002;
2. To approve the 2000 Stock Incentive Plan; and
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on March 27, 2000, the
record date fixed by the Board of Directors of the Company, are entitled to
notice of, and to vote at, the meeting.
By Order of The Board of Directors
/s/ Walter L. Smith
Walter L. Smith
Vice President, General Counsel and
Corporate Secretary
March 31, 2000
IMPORTANT
Whether or not you plan to attend the meeting, please vote, sign, date and
return the enclosed proxy as promptly as possible. If you attend the meeting,
you may vote your shares in person, even though you have previously signed and
returned your proxy.
<PAGE>
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of Directors for the
Annual Meeting of Shareholders to be held on May 2, 2000, and any duly
reconvened meeting after adjournment thereof (the Meeting). Any shareholder who
executes a proxy has the power to revoke it at any time by written notice to
the Secretary of the Company, by executing a proxy dated as of a later date or
by voting in person at the Meeting. It is expected that this proxy statement
and the enclosed proxy card will be mailed on or about March 31, 2000, to all
shareholders entitled to vote at the Meeting.
The Company will pay all of the costs associated with this proxy
solicitation. To the extent necessary, certain officers and employees of the
Company or its subsidiaries, without additional compensation, may use their
personal efforts, by telephone or otherwise, to obtain proxies. The Company may
also reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy
materials to the beneficial owners of the shares.
On the record date of March 27, 2000, the date for determining shareholders
entitled to notice of, and to vote at, the Meeting, there were outstanding
13,107,989 shares of Common Stock. Each share of Common Stock is entitled to
one vote on each matter to be acted upon at the Meeting. A majority of the
shares entitled to vote, represented in person or by proxy, will constitute a
quorum for the transaction of business at the Meeting. Shares held in street
name (Broker Shares) that are not voted on any matter at the Meeting will not
be included in determining the number of shares present or represented at the
Meeting.
The management and directors are not aware of any matters to be presented
for action at the Meeting other than the matters stated in the notice of the
Meeting. If any such matter requiring a vote of the shareholders should
properly come before the Meeting, unless otherwise instructed, it is the
intention of the persons named in the proxy card to vote such proxy in
accordance with their best judgment.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2000, certain information
with respect to the beneficial ownership of the Company's Common Stock by each
director and nominee; the Chief Executive Officer, Andrew L. Rogal, and each of
the Company's four other most highly paid executive officers, Timothy J.
Korman, John P. McGrath, Richard F. Galardini and Michael A. Janes
(collectively, the Named Executive Officers); and all directors and executive
officers as a group. Except as otherwise indicated, each individual named has
sole investment and voting power with respect to the shares shown. On March 1,
2000, the Company had 13,153,009 shares of Common Stock issued and outstanding.
Each of the individuals listed below is the owner of less than 1% of the shares
outstanding, except for Martin L. Vaughan, III, who owns 1.10% of the issued
and outstanding shares of Common Stock, Robert H. Hilb who owns 1.13% and would
upon exercise of his exercisable options own 1.21% of the Common Stock issued
and outstanding, and Andrew L. Rogal who would own 1.19% of the Common Stock
issued and outstanding upon exercise of his exercisable options. As a group,
the directors and executive officers own 5.28% and would upon exercise of their
exercisable options own 8.63% of the Common Stock issued and outstanding.
<TABLE>
<CAPTION>
Number of Shares Under Deferred
Common Exercisable Stock
Name Shares (1) Options (2) Units (3)
- ---- --------- ------------ --------
<S> <C> <C> <C>
Theodore L. Chandler, Jr.................... 11,000 24,000 4,198
Norwood H. Davis, Jr........................ 10,000 18,000 4,182
Philip J. Faccenda (4)...................... 325 0 0
Robert W. Fiondella (5)..................... 0 5,000 1,120
J. S. M. French............................. 42,500 24,000 3,605
Richard F. Galardini........................ 16,361 9,750 N/A
Robert H. Hilb.............................. 148,900 10,000 4,325
Michael A. Janes............................ 15,247 23,500 N/A
Timothy J. Korman........................... 50,895 36,250 N/A
Anthony F. Markel........................... 7,000 10,000 3,402
John P. McGrath............................. 21,501 32,000 N/A
Thomas H. O'Brien (4)....................... 11,579 24,000 0
Andrew L. Rogal (6)......................... 81,449 75,500 N/A
David W. Searfoss (5)....................... 1,000 5,000 1,299
Robert S. Ukrop (7)......................... 20,648 24,000 3,316
Martin L. Vaughan, III...................... 144,058 0 N/A
All directors and executive officers as a
group (28 persons, including those named).. 695,097 480,975 25,447
</TABLE>
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(1) The number of shares of Common Stock shown in the table includes 51,954
shares held for certain executive officers in the Company's Retirement
Savings Plan as of March 1, 2000, and 79,220 shares of Restricted Stock
granted to executive officers pursuant to the Company's 1989 Stock Plan.
(2) The number of shares indicated includes shares which may be acquired
through the exercise of stock options within sixty days after March 1,
2000, pursuant to the Company's 1986 Incentive Stock Option Plan, 1989
Stock Plan and Non-employee Directors Stock Incentive Plan.
(3) Nonemployee directors who do not elect to receive all or a portion of their
fees in cash or Common Stock may elect to defer all or a portion of their
fees into Deferred Stock Units (DSU's). DSU's represent hypothetical shares
of Common Stock and are credited to a director's account on the date fees
are earned at the closing price of Common Stock on that date. Additional
DSU's are credited to a director's account at the time Common Stock
dividends are paid by the Company. DSU's are payable in cash at the end of
the deferral period elected by the Director. See "Directors Compensation."
(4) Includes 325 shares of Common Stock for Mr. Faccenda and 443 shares of
Common Stock for Mr. O'Brien earned pursuant to the Non-employee Directors
Stock Incentive Plan as of March 1, 2000, and issued on March 31, 2000.
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(5) The number of shares listed does not include 865,042 shares of Common Stock
owned by Phoenix Home Life Mutual Insurance Company (Phoenix Home Life) and
debentures owned by Phoenix Home Life which are convertible into 1,406,593
shares of Common Stock at $22.75 per share, beneficial ownership of each of
which is disclaimed by Messrs. Fiondella and Searfoss.
(6) The number of shares indicated includes 17,300 shares held in a trust for
which Andrew L. Rogal is one of the trustees. Mr. Rogal, as a trustee,
shares voting and investment power for these shares and disclaims
beneficial ownership thereof.
(7) The number of shares indicated includes 1,250 shares owned by an investment
club in which Robert S. Ukrop is an officer possessing shared voting and
investment power. He disclaims beneficial ownership thereof.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person known by the Company to be the beneficial owner of 5% or more of the
outstanding shares of Common Stock of the Company. In preparing the table
below, the Company has relied, without further investigation, on information
contained in the filings by each reporting person with the Securities and
Exchange Commission (the Commission) under the Securities Exchange Act of 1934,
as amended.
<TABLE>
<CAPTION>
Name of Common
Shares and Nature Percent of
Number and Address of Beneficial Owner of Beneficial Ownership Class (1)
-------------------------------------- ----------------------- ----------
<S> <C> <C>
Southeastern Asset Management, Inc. (2)... 2,502,500 19.03%
Longleaf Partners Small-Cap Fund
O. Mason Hawkins
6410 Poplar Avenue
Suite 900
Memphis, Tennessee 38119
Phoenix Home Life Mutual Insurance
Company (3).............................. 2,271,635 (3)
1 American Row
Hartford, Connecticut 06103
I. G. Investment Management, Ltd. (4)..... 1,598,650 12.15%
1 Canada Center
447 Portage Avenue
P. O. Box 5000
Winnipeg, Manitoba R3C 3B6
Westport Asset Management, Inc. (5)....... 701,500 5.33%
Westport Advisers, LLC
253 Riverside Avenue
Westport Connecticut 06880
Artisan Partners Limited Partnership (6).. 683,100 5.19%
Artisan Investment Corporation, the
General
Partner of Artisan Partners
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
</TABLE>
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(1) Based on 13,153,009 shares of Common Stock issued and outstanding on March
1, 2000.
(2) Southeastern Asset Management, Inc. (Southeastern), an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940,
Longleaf Partners Small-Cap Fund (Longleaf), an investment
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company registered under Section 8 of the Investment Company Act of 1940,
and O. Mason Hawkins (Hawkins) filed a joint Schedule 13G with the
Commission reporting beneficial ownership as of December 31, 1999, of
2,502,500 shares of Common Stock, which are held in various capacities.
Southeastern reported that it has sole voting power as to 620,100 shares,
shared voting power as to 1,777,400 shares, owned by Longleaf, a series of
Longleaf Partners Funds Trust, and no voting power as to 105,000 shares.
Southeastern also reported that it has sole dispositive power as to 725,100
shares and shared dispositive power as to 1,777,400 shares, owned by
Longleaf. Hawkins may be deemed to be a controlling person of Southeastern
as a result of his official positions with or ownership of its voting
securities; however, the existence of such control is expressly disclaimed
as Hawkins does not own directly or indirectly any shares for his own
account. The reporting group represented in the Schedule 13G that the shares
of Common Stock reported thereon were acquired in the ordinary course of
business and were not acquired for the purpose of and do not have the effect
of changing or influencing the control of the Company and were not acquired
in connection with or as a participant in any transaction having such
purpose or effect.
(3) Phoenix Home Life filed a Form 3 for May 1999 reporting that as of May 3,
1999, it had sole voting and dispositive power as to 865,042 shares of
Common Stock, which represents 6.58% of the Common Stock issued and
outstanding as of March 1, 2000. Additionally, Phoenix Home Life holds
$32,000,000 of subordinated debentures convertible into 1,406,593 shares of
Common Stock at a price of $22.75 per share. If the debentures were
converted as of March 1, 2000, 14,559,602 shares of Common Stock would be
outstanding and Phoenix Home Life would own 15.60% of the issued and
outstanding Common Stock.
(4) I. G. Investment Management, Ltd. filed a Form 4 for February 2000
reporting that as of February 29, 2000, it had sole voting and dispositive
power as to 1,598,650 shares of Common Stock, of which 697,650 shares were
held in its Investors U.S. Opportunities Fund, and 901,000 were held in its
Investors U.S. Growth Fund.
(5) Westport Asset Management, Inc. (Westport) reported on Schedule 13G that as
of December 31, 1999, it is deemed to be the beneficial owner of 701,500
shares of Common Stock for purposes of Rule 13(d) based upon shared power
to make decisions whether to retain or dispose of the securities of many
unrelated clients. Westport disclaims any economic interest in the
securities of those clients. The clients are actual owners of the
securities and have the sole right to receive and the power to direct the
receipt of dividends from or proceeds from the sale of such securities.
Westport disclaims beneficial ownership of such shares and disclaims the
existence of any group. Westport filed the Schedule 13(G) pursuant to Rule
13d-1(b)(ii)(G) as the owner of 50% of Westport Advisers, LLC, and does not
individually beneficially own over 1% of the Company as of the date of
filing. Westport is an investment advisor and Westport Advisors, LLC is an
investment advisor for a series of public mutual funds.
(6) Artisan Partners Limited Partnership reported on Schedule 13G that as of
December 31, 1999, since it serves as investment adviser to Artisan Funds,
Inc., comprised of four series designated Artisan Small Cap Fund, Artisan
International Fund, Artisan Mid Cap Fund and Artisan Small Cap Value Fund
(the "Funds"), it has shared power to vote and dispose of 683,100 shares of
Common Stock. Various of Artisan Partners' limited partners and employees
are also officers and directors of the Funds, but Artisan Partners does not
consider the Funds to be controlled by such persons. Although the Funds are
not controlled by Artisan Partners, pursuant to Rule 13d-3(a) the shares
beneficially owned by the Funds, with respect to which each of the Funds
has delegated to Artisan Partners shared voting power and shared
dispositive power, are considered to be shares beneficially owned by
Artisan Partners by reason of such delegated powers. Other clients of
Artisan Partners may own shares which are not included in the aggregate
number of shares reported herein because Artisan Partners does not have or
share voting or investment power over those shares.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Six (6) directors are to be elected at the Meeting, four (4) to serve for
terms of three (3) years expiring on the date of the Annual Meeting in 2003 and
until their successors are elected, one (1) to serve for a term of two (2)
years expiring as of the Annual Meeting in 2002 and until his successor is
elected and one (1) to serve for a term of one (1) year expiring as of the
Annual Meeting in 2001 and until his successor is elected.
It is intended that votes represented by proxies, unless otherwise
specified, will be cast for the election as directors of the nominees listed
below, all of whom are now directors of the Company. The election of each
nominee for director requires the affirmative vote of the holders of a
plurality of the shares of Common Stock of the Company cast in the election of
directors. Votes that are withheld and Broker Shares that are not voted in the
election of directors will not be included in determining the number of votes
cast. Each nominee has consented to being named in the proxy statement and has
agreed to serve if elected.
If, at the time of the Meeting, any nominee should be unable to serve as a
director, votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Board of Directors. As of the
date of this proxy statement, the Board of Directors has no reason to believe
that any of the nominees will be unable or unwilling to serve.
The following information is furnished with respect to each nominee and each
director whose term of office will continue after the Meeting.
Nominee for Election for Term Expiring in 2001
David W. Searfoss, 48, has been Executive Vice President and Chief Financial
Officer of Phoenix Home Life, a company providing insurance services throughout
the Northeast since 1988 and has been a director of the Company since 1999. He
is a director of PXRE Group, Ltd. Mr. Searfoss is a member of the Audit
Committee.
Nominee for Election for Term Expiring in 2002
Timothy J. Korman, 47, has been Executive Vice President, Finance and
Administration of the Company since 1997 and a director of the Company since
1999. He was Executive Vice President, Chief Financial Officer and Treasurer of
the Company from 1995 to 1997.
Nominees for Election for Terms Expiring in 2003
Robert W. Fiondella, 57, has been Chairman of the Board, President and Chief
Executive Officer of Phoenix Home Life since February 1994 and has been a
director of the Company since June 1999. Mr. Fiondella is the President of PM
Holdings, Inc. (Holdings) and is also a member of the Board of Directors of
several of Phoenix Home Life's subsidiaries, including Holdings and Phoenix
Charter Oak Trust Company. Mr. Fiondella is also a member of the boards of
directors of PXRE, PXRE Reinsurance, Advest Group, Inc. and Barnes Group. Mr.
Fiondella is Chairman of the Product Development Committee.
Robert H. Hilb, 72, has been Chairman Emeritus since January 2000. He was
Chairman of the Company from 1991 until December 1999 and has been a director
of the Company since 1982. He was Chief Executive Officer of the Company from
1991 to May 1997. Mr. Hilb is a member of the Executive Committee, Corporate
Governance Committee and Compensation Committee.
Andrew L. Rogal, 51, has been Chairman and Chief Executive Officer since
January 2000. He was Chief Executive Officer of the Company since May 1997 and
President of the Company from 1995 until December 1999 and has been a director
of the Company since 1989. He was Chief Operating Officer of the Company
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from 1995 to May 1997. He was Executive Vice President of the Company from
1991 to 1995. Mr. Rogal is Chairman of the Executive Committee.
Martin L. Vaughan, III, has been President and Chief Operating Officer of
the Company since January 2000. He has been Chief Operating Officer and a
director of the Company since June 1999. He was President and Chief Executive
Officer of American Phoenix Corporation from 1990 to 1999.
The Board of Directors recommends that the shareholders vote FOR the
nominees set forth above.
Incumbent Directors Whose Terms Expire at 2001 Annual Meeting
J.S.M. French, 59, has been President of Dunn Investment Company, a
construction materials and construction investment company in Birmingham,
Alabama, since 1978 and has been a director of the Company since 1984. He is a
director of Regions Financial Corporation, Energen Corporation and Protective
Life Corporation. Mr. French is a member of the Audit Committee.
Robert S. Ukrop, 53, has been President and Chief Executive Officer of
Ukrop's Super Markets, Inc., a company owning 27 retail food stores and 3 food
manufacturing facilities in Central Virginia, since 1994 and has been a
director of the Company since 1989. He is a first cousin of Timothy J. Korman,
Executive Vice President, Finance and Administration of the Company. Mr. Ukrop
is Chairman of the Corporate Affairs Committee.
Anthony F. Markel, 58, has been President and Chief Operating Officer of
Markel Corporation, an insurance company comprised of five operating units
underwriting specialty insurance products and programs to a variety of niche
markets, headquartered in Richmond, Virginia, since March 1992 and has been a
director of the Company since 1998. He is a director of Markel Corporation and
Open Plan Systems, Inc. Mr. Markel is Chairman of the Audit Committee.
Incumbent Directors Whose Terms Expire at the 2002 Annual Meeting
Theodore L. Chandler, Jr., 47, has been Senior Executive Vice President of
LandAmerica Financial Group, Inc., a company providing title insurance and
related services through its underwriting and other subsidiaries, since
January 2000. He had been a principal in the law firm of Williams, Mullen,
Clark & Dobbins in Richmond, Virginia from 1982 to January 2000 and has been a
director of the Company since 1986. Williams, Mullen, Clark & Dobbins has
represented the Company as legal counsel since the Company's formation in
1982. Mr. Chandler is a director of LandAmerica Financial Group, Inc. and Open
Plan Systems, Inc. Mr. Chandler is Chairman of the Corporate Governance
Committee and a member of the Compensation Committee and the Executive
Committee.
Norwood H. Davis, Jr., 60, has been Chairman of the Board of Trigon
Healthcare, Inc., a company providing health care coverage and specialty
health services in Virginia, since 1989, was Chief Executive Officer from 1981
to 1999 and has been a director of the Company since 1994. Mr. Davis is a
director of Trigon Healthcare, Inc. and First Union Corporation. Mr. Davis is
a member of the Compensation Committee, Executive Committee and Corporate
Governance Committee.
Thomas H. O'Brien, 63, has been Chairman and Chief Executive Officer of The
PNC Financial Services Group, Inc., a multi-bank holding company engaged in
financial services activities in Pittsburgh, Pennsylvania, since 1985 and has
been a director of the Company since 1982. He has been Chairman of PNC Bank,
N.A., a national banking institution in Pittsburgh, Pennsylvania, since 1993.
He is a director of Bell Atlantic Corporation and The PNC Financial Services
Group, Inc. Mr. O'Brien is Chairman of the Compensation Committee and a member
of the Executive Committee and Corporate Governance Committee.
6
<PAGE>
Certain Nomination and Voting Arrangements
On May 3, 1999, the Company acquired from Holdings and Martin L. Vaughan,
III (Vaughan) all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation (APC), resulting in APC becoming a wholly owned
subsidiary of the Company. In connection with the acquisition, the Company,
Holdings and Holdings' parent, Phoenix Home Life, entered into a Voting and
Standstill Agreement (the Voting Agreement). The Voting Agreement provides,
among other things, that (i) in connection with the Meeting, the Company will
nominate and recommend for election two directors, Vaughan and a person
designated by the Company, and (ii) commencing with the Meeting and continuing
during the term of the Voting Agreement, the Company will nominate and
recommend for election two additional directors, Robert W. Fiondella and a
person designated by Holdings, to serve on the Board of Directors of the
Company. Timothy J. Korman and David W. Searfoss are the designees of the
Company and Holdings, respectively. The Voting Agreement requires the Holdings
designee to resign from the Board of Directors once Holdings' ownership
percentage of the Company's adjusted outstanding shares of Common Stock (as
defined in the Voting Agreement) is reduced to less than 10%.
Pursuant to the Voting Agreement, Phoenix Home Life and Holdings have agreed
to vote the shares of Common Stock owned by them or their affiliates in
accordance with the recommendation of the Board of Directors on matters
relating to (i) the election of directors nominated by the Board of Directors
or a nominating committee thereof, (ii) certain tender or exchange offers,
election contests and other attempts to acquire control of the Company or the
Board of Directors and (iii) for a period of five years, business combination
and similar transactions for which shareholder approval is sought. Unless
terminated earlier by written agreement of the parties, the Voting Agreement
will remain in effect until May 3, 2009.
Meetings and Committees of the Board of Directors
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Compensation Committee, the Corporate
Affairs Committee, the Product Development Committee and the Corporate
Governance Committee. The Executive Committee, which is subject to the
supervision and control of the Board of Directors, has been delegated
substantially all of the powers of the Board of Directors in order for the
Executive Committee to act between meetings of the Board. The responsibilities
of the Audit Committee include the review of the scope and the results of the
work of the independent auditors and internal auditors, the review of internal
accounting controls and the recommendation of the independent auditors to be
designated for the ensuing year. As more fully discussed below under
"Compensation Committee Report on Executive Compensation," the Compensation
Committee establishes the compensation of all executive officers of the Company
and administers the Company's stock option plans, the Outside Directors
Deferral Plan, the Executive Voluntary Deferral Plan and the Supplemental
Executive Retirement Plan. The Corporate Affairs Committee is responsible for
monitoring the Company's external relations in its communities. The Product
Development Committee is charged with investigating and developing new products
for the Company's subsidiaries to sell. The Corporate Governance Committee,
which until February 10, 2000, was known as the Nominating Committee, is
responsible for recommending to the Board of Directors persons to be nominated
for election as directors of the Company and other matters related to corporate
governance and procedures. Refer to "Proposals for 2001 Annual Meeting."
In 1999, there were five meetings of the Board of Directors, three meetings
of the Audit Committee, five meetings of the Compensation Committee, one
meeting of the Executive Committee and two meetings of the Nominating
Committee. Each member of the Board of Directors attended at least 75% of the
aggregate total number of meetings of the Board and the committees on which he
served.
Directors' Compensation
Each director who is not an employee of the Company receives an annual
retainer of $14,000, a fee of $2,500 for each Board meeting attended and a fee
of $1,000 for each committee meeting attended. Additionally, the chair of every
committee receives an annual retainer of $2,000. Directors who are also
officers of the Company receive no compensation for their services as
directors.
7
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The Company has an Outside Directors Deferral Plan which permits a non-
employee director to defer all or a portion of his compensation. On February 3,
1998, the Board of Directors approved the Amended and Restated Outside
Directors Deferral Plan (the Amended and Restated Plan), which superseded the
Outside Directors Deferral Plan with an effective date of January 1, 1995.
Under the Amended and Restated Plan, directors of the Company who are not
employees of the Company may elect to defer all or part of their annual fees
and meeting fees in Deferred Stock Units. Each Deferred Stock Unit represents a
hypothetical share of the Company's Common Stock. A participant's Deferred
Stock Unit Account is increased by phantom dividends equal to the Common Stock
dividends paid by the Company. Those directors who elect to defer 100% of their
total compensation into Deferred Stock Units for a given year shall receive
additional compensation in the form of Deferred Stock Units equal to 30% of
their total compensation. Any amounts deferred under the former Outside
Directors Deferral Plan will continue to be credited with interest annually at
the rate of return set forth in the Amended and Restated Plan, which is
currently 9%. The amounts accrued for the director under the former plan and
the Amended and Restated Plan are paid out in cash, in installments or in a
lump sum, at the director's irrevocable election.
On May 5, 1998, the shareholders of the Company approved the Non-employee
Directors Stock Incentive Plan which provides that each non-employee director
will receive a grant of an option to purchase 5,000 shares of the Common Stock
on the first business day following the Annual Meeting of Shareholders.
Therefore, pursuant to said plan, on June 9, 1999, Theodore L. Chandler, Jr.,
Norwood H. Davis, Jr., Philip J. Faccenda, Robert W. Fiondella, J.S.M. French,
Robert H. Hilb, Anthony F. Markel, Thomas H. O'Brien, David W. Searfoss and
Robert S. Ukrop were each granted an option to purchase 5,000 shares of the
Common Stock of the Company. The exercise price of all options granted to each
non-employee director is the fair market value of the Common Stock on the date
of grant. All of the options become exercisable six months after the date of
grant and expire ten years from the date of grant. Also, pursuant to the
Company's Non-employee Directors Stock Incentive Plan, directors may elect to
receive some or all of their fees in shares of the Company's Common Stock.
Those directors electing to receive 100% of their fees in Common Stock receive
additional compensation in the form of Common Stock equal to 30% of their
compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership of Common Stock with the
Securities and Exchange Commission. Such persons are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely upon a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that applicable Section 16(a)
filing requirements were satisfied for transactions that occurred in 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, the Company is required to
provide certain information with respect to the compensation and benefits
provided to the Company's Chief Executive Officer, Andrew L. Rogal, and the
other Named Executive Officers. The following report of the Compensation
Committee of the Board of Directors addresses the Company's compensation
policies in effect during 1999.
Role of Compensation Committee
Decisions on compensation of certain executive officers of the Company are
made by the Compensation Committee of the Board of Directors. The Compensation
Committee has authority from the Board of Directors to review and determine the
salaries of all of the Company's executive officers with the title of Vice
President and above. In addition to determining salaries, the Compensation
Committee reviews and approves
8
<PAGE>
management incentive programs and other benefits for executive officers. The
Compensation Committee also administers the Company's stock option plans.
Finally, the Committee recommends to the Board of Directors such other forms of
remuneration as the Committee deems appropriate. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reported to the full Board of Directors.
The following is the text of the report adopted by the Compensation
Committee with respect to executive compensation for 1999.
Executive Compensation Policies
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals, recognize individual
initiative and achievement and assist the Company in attracting and retaining
highly qualified executives. They provide for competitive base salaries which
reflect individual performance and level of responsibility, annual bonuses
payable in cash on the basis of Company financial success, individual merit and
achievement in obtaining annual performance goals and long-term stock-based
incentive opportunities which strengthen the mutuality of interests between
senior management and the Company's shareholders.
To further this mutuality of interests, the Insider Stock Ownership Plan was
adopted in 1998 to align the interests of senior management with the
shareholders by requiring senior management to attain certain stock ownership
levels and therefore maintain a vested interest in the equity performance of
the Company. Over a five year period, the executives covered by such plan are
expected to reach a prescribed ownership level, which is expressed as a
multiple of the executive's base salary and which ranges from five times base
salary to one times base salary depending on the executive's position. By
December 31, 1999, all Named Executive Officers had achieved their respective
goals.
In furtherance of its responsibility to determine executive compensation,
the Compensation Committee annually, or more frequently, reviews the Company's
executive compensation program. The Compensation Committee evaluates the
salaries and compensation structures of executive officers of peer companies in
the industry in order to establish general parameters within which it may fix
competitive compensation for its executive officers. The peer group used for
compensation analysis for 1999 is the same as the peer group reflected in the
performance graph included in this proxy statement.
The Compensation Committee then determines the appropriate salary and
management incentive opportunity for each executive officer using a number of
factors, including the executive officer's individual duties and
responsibilities in the Company, tenure, his or her relative importance to the
overall success of the Company's short and long-term goals and attainment of
individual performance goals, if appropriate. This is a more specific
reiteration of the core compensation philosophy of the Compensation Committee
that incentive compensation should be a very substantial component of total
compensation.
Combining subjective and objective policies and practices, the Compensation
Committee undertakes this assessment process annually, or more frequently, in
order to implement the Company's aggressive pay-for-performance policy. As part
of this process, the Committee reviews the compensation of the Company's
executives with comparable positions collected from industry data. The
Committee believes that the Company's compensation of its executive officers is
comparable to its peer companies and provides proper incentives to the
executive officer group.
1999 Base Salaries and Annual Incentives
On June 1, 1997, the Company entered into an employment agreement with
Andrew L. Rogal to serve as Chief Executive Officer of the Company. Pursuant to
the terms of the employment agreement, Mr. Rogal's annual base salary was fixed
at $400,000, subject to an annual review by the Committee to consider
appropriate increases. In 1999, Mr. Rogal received a base salary of $440,000.
This annual base salary was set based on Mr. Rogal's individual duties and
responsibilities, his tenure and salaries paid to the chief executive officers
of
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<PAGE>
the Company's peer group companies. In addition, Mr. Rogal is to receive an
annual incentive bonus as established and modified from time to time by the
Committee. In awarding the annual incentive bonus to Mr. Rogal for 1999, the
Committee considered his individual merit and achievement in attaining annual
performance goals, the Company's financial success and Mr. Rogal's leadership
in strategically focusing the Company. Mr. Rogal is also eligible to receive
stock option awards and other long-term equity incentives, as determined by the
Committee. Due to the acquisition of American Phoenix Corporation and the
uncertainty of the number of shares available for grant after the assimilation
of American Phoenix Corporation, the Committee did not grant any options to the
Named Executive Officers in 1999.
The Company's other executive officers are also eligible for an annual
management incentive award in the form of a cash bonus. On June 7, 1999, the
Committee approved the 1999 Corporate Incentive Plan for certain key executives
of the Company. The purpose of the program is to more closely align the
interests of the senior executives with the shareholders and further strengthen
the Company's pay-for-performance policy by providing a pool based on increased
earnings per share. Under the Plan, those individuals responsible for
overseeing and driving the strategic initiatives of the Company and for the
overall earnings per share of the Company are eligible to participate in the
executive bonus pool. The available dollar pool is based on improved earnings
per share. On February 10, 2000, utilizing the aforementioned factors, the
Committee awarded Mr. Rogal an incentive bonus of $272,900 out of the pool for
his 1999 performance.
Tax Considerations
The Omnibus Budget Reconciliation Act of 1993 established certain criteria
for the tax deductibility of compensation in excess of $1.0 million paid to the
Company's executive officers. The Company is not in danger of losing deductions
under the law. The Committee will carefully consider any plan or compensation
arrangement that would result in the disallowance of compensation deductions.
The Committee will use its best judgment in such cases, taking all factors into
account, including the materiality of any deductions that may be lost. To date,
the Committee has not adopted a policy that dictates its decision in such a
situation.
The tables which follow this report, and accompanying narrative and
footnotes, reflect the decisions covered by the above discussion.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE COMPANY'S BOARD OF
DIRECTORS:
Thomas H. O'Brien, Chairman
Theodore L. Chandler, Jr.
Norwood Davis
Robert H. Hilb
Compensation Committee Interlocks And Insider Participation
Theodore L. Chandler, Jr., a member of the Company's Compensation Committee,
was formerly a principal in the law firm of Williams, Mullen, Clark & Dobbins,
Richmond, Virginia, which serves as outside counsel to the Company. Robert H.
Hilb, a member of the Company's Compensation Committee, is the former Chairman
and Chief Executive Officer of the Company and currently holds the position of
Chairman Emeritus.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term compensation paid by
the Company to each of the Named Executive Officers for the fiscal years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Securities
Other Annual Underlying All Other
Name and Principal Bonus Compensation Options Compensation
Position Year Salary($) ($)(1) ($)(2) (#)(3) ($)
------------------ ---- --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Andrew L. Rogal......... 1999 437,076 272,899 -- -- 34,156(4)(5)(6)
Chairman and Chief 1998 413,126 384,000 -- 30,000 31,261(4)(5)(6)
Executive Officer 1997 360,428 325,000 -- 60,000 105,776(4)(5)
Timothy J. Korman....... 1999 235,208 128,700 -- -- 24,532(4)(5)(6)
Executive Vice 1998 206,563 196,300 -- 13,000 22,443(4)(5)(6)
President, Finance and 1997 183,333 150,000 -- 30,000 34,119(4)(5)
Administration
Richard F. Galardini.... 1999 350,016 78,900 -- -- 13,024(4)(5)(6)
Vice President 1998 350,016 88,200 -- 9,000 13,592(4)(5)(6)
1997 270,215 -- -- 15,000 8,000(4)
Michael A. Janes........ 1999 226,042 128,700 -- -- 7,990(4)(5)(6)
Vice President 1998 205,984 170,000 -- 10,000 7,870(4)(5)(6)
1997 182,500 127,702 -- 25,000 8,000(4)
John P. McGrath......... 1999 304,376 166,100 -- -- 10,725(4)(5)(6)
Senior Vice President- 1998 291,586 250,000 -- 12,000 11,256(4)(5)(6)
Business & Product 1997 251,356 234,897 -- 30,000 8,000(4)
Development
</TABLE>
- --------
(1) Bonuses reported in the table reflect the amount earned by the Named
Executive Officer for each year shown. Payment of such bonuses occurred in
the year following the year in which such bonuses were earned.
(2) The dollar value of perquisites and other personal benefits received by
each of the Named Executive Officers did not exceed the lesser of either
$50,000 or 10 percent of the total amount of annual salary and bonus
reported for any named individual.
(3) The stock options detailed above, granted pursuant to the Company's 1989
Stock Plan in May 1998 and June of 1997, contain a provision whereby the
right to exercise such options vests at a rate of 25% of the aggregate
number of shares covered by such options for each one full year of
continued employment from the grant date, with total exercisability
occurring upon four full years of continued employment by the Company, and
expire seven years from grant date.
(4) The amount shown for each Named Executive Officer for 1999 includes the
Company's 401(k) matching contributions as follows: Mr. Rogal, $4,800; Mr.
Korman, $4,800; Mr. Galardini, $4,800; Mr. Janes, $4,800 and Mr. McGrath,
$4,800. The amount shown for each Named Executive Officer for 1998 includes
the Company's profit sharing and 401(k) matching contributions as follows:
Mr. Rogal, $4,900; Mr. Korman, $5,900; Mr. Galardini, $5,525; Mr. Janes,
$5,913 and Mr. McGrath, $5,687. The amount shown for each Named Executive
Officer for 1997 includes the Company's profit sharing and 401(k) matching
contributions as follows: Mr. Rogal, $8,000; Mr. Korman, $8,000; Mr.
Galardini, $8,000; Mr. Janes, $8,000 and Mr. McGrath, $8,000.
(5) The amount shown for each Named Executive Officer for 1999 includes the
Company's expense to the Supplemental Executive Retirement Plan as follows:
Mr. Rogal, $26,596 ($8,742 contribution and $17,854 interest accrual); Mr.
Korman, $18,172 ($4,704 contribution and $13,468 interest accrual); Mr.
Galardini, $6,384 ($5,700 contribution and $684 interest accrual); Mr.
Janes, $2,130 ($1,981 contribution and $149 interest accrual) and Mr.
McGrath, $4,805 ($4,331 contribution and $474 interest accrual). The amount
11
<PAGE>
shown for each Named Executive Officer for 1998 includes the Company's
expense to the Supplemental Executive Retirement Plan as follows: Mr.
Rogal, $25,669 ($10,125 contribution and $15,544 interest accrual); Mr.
Korman, $16,146 ($4,131 contribution and $12,015 interest accrual); Mr.
Galardini, $7,601; Mr. Janes, $1,663 and Mr. McGrath, $5,263. The amount
shown for each Named Executive Officer for 1997 includes the Company's
expense to the Supplemental Executive Retirement Plan as follows:
Mr. Rogal, $97,776 and Mr. Korman, $26,119.
(6) The amount shown for each Named Executive Officer for 1999 includes the
value of life insurance provided as follows: Mr. Rogal, $2,760; Mr.
Korman, $1,560; Mr. Galardini, $1,840; Mr. Janes, $1,060 and Mr. McGrath,
$1,120. The amount shown for each Named Executive Officer for 1998
includes the value of life insurance provided as follows: Mr. Rogal, $692;
Mr. Korman, $397; Mr. Galardini, $466; Mr. Janes, $294 and Mr. McGrath,
$306.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during fiscal
year 1999. No stock appreciation rights (SARs) were granted in fiscal year
1999 and there are no outstanding SARs.
During fiscal year 1999, stock options to acquire 40,100 shares of Common
Stock were granted to employees, 16,500 of which were granted to executive
officers of the Company other than the Named Executive Officers. The
nonqualified stock options granted to the executive officers vest at the rate
of 25% per year of full employment after the grant on June 7, 1999, are
exercisable at $20.9375 per share and expire on June 7, 2006.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table provides information concerning the value of the
outstanding options for the Named Executive Officers on December 31, 1999.
Messrs. Rogal and Korman were the only Named Executive Officers to exercise
options during 1999. There are no outstanding SARs.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End (#)(2) Fiscal Year End ($)(3)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Andrew L. Rogal......... 2,500 16,250 75,500 / 52,500 1,008,969 / 605,156
Timothy J. Korman....... 2,500 16,250 36,250 / 24,750 479,578 / 286,734
Richard F. Galardini.... N/A N/A 9,750 / 14,250 115,641 / 163,172
Michael A. Janes........ N/A N/A 23,500 / 20,000 299,031 / 232,344
John P. McGrath......... N/A N/A 32,000 / 24,000 416,438 / 278,813
</TABLE>
- --------
(1) The value realized represents the difference between the exercise price of
the option and the fair market value of the Company's stock on the date of
exercise.
(2) The aggregate number of exercisable and unexercisable options detailed
above are based on the provisions of the Company's stock option plans of
December 31, 1999.
(3) The value of in-the-money options at fiscal year end was calculated by
determining the difference between the closing price of $28.25 per share
of the Company's Common Stock on the New York Stock Exchange on December
31, 1999, the last trading day of the fiscal year, and the exercise price
of the options.
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<PAGE>
HRH RETIREMENT SAVINGS PLAN
The Company administers the HRH Retirement Savings Plan (the Retirement
Savings Plan) in which the Named Executive Officers are permitted to
participate on the same terms as other employees who meet applicable
eligibility criteria. The Retirement Savings Plan's main component is a salary
reduction provision under Section 401(k) of the Internal Revenue Code. As of
April 1, 1998, the Retirement Savings Plan was amended to provide that the
Company's matching contribution would increase from 50% of the first 4% of a
participant's salary reduction to 100% of the first 3% of a participant's
salary reduction. Therefore, as of April 1, 1998, the profit sharing component
of the Retirement Savings Plan was not expected to be used except in
exceptional circumstances. The Company matching contribution for 1999 for the
Named Executive Officers was $24,000, and for all executive officers as a group
was $81,714, under the salary reduction provision of the Retirement Savings
Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Named Executive Officers participate in the Company's Supplemental
Executive Retirement Plan (the SERP), which as of January 1, 1998, was amended
and restated to convert the plan from a defined benefit arrangement to a cash
balance arrangement, to provide a contribution to participants equal to the
Company's profit sharing and matching contributions applied to the
participants' base salary in excess of the Internal Revenue Service (the IRS)
maximum allowable salary for qualified plans, which was $160,000 for 1999. The
SERP was further amended to allow all current and future employees earning in
excess of the IRS maximum allowable salary for qualified plans to become
participants in the plan, to grandfather the current participants and provide
these individuals with a contribution each year equal to the greater of a fixed
2% contribution of their base salary or the calculation for regular
participants, to convert the vested benefit accrued for current participants to
a cash balance as of December 31, 1997, and to add a provision wherein
terminated or retired participants who are employed by a competing entity of
the Company will forfeit their remaining account balance.
Contributions to the SERP for 1999 for each of the Named Executive Officers
were as follows: Mr. Rogal, $8,742; Mr. Korman, $4,704; Mr. Galardini, $5,700;
Mr. Janes, $1,981 and Mr. McGrath, $4,331. For all executive officers as a
group, the 1999 contribution to the SERP was $48,859. Additionally, interest
accruals on their balances for 1999 were as follows: Mr. Rogal, $17,854; Mr.
Korman, $13,468; Mr. Galardini, $684; Mr. Janes, $149 and Mr. McGrath, $474.
For all executive officers as a group, interest accruals on their balances for
1999 equaled $36,684.
EMPLOYMENT AGREEMENTS
Mr. Rogal entered into an employment agreement with the Company on June 1,
1997, for an original term of five (5) years. The agreement provides for an
annual review of his salary by the Compensation Committee of the Board of
Directors of the Company to consider appropriate increases, but in no event
shall his base annual salary of $400,000 be reduced. The agreement may be
terminated by the Company with or without proper cause; however, should the
agreement be terminated without proper cause, Mr. Rogal would be entitled to
receive compensation, annual incentive bonus and benefits until the expiration
of the five year term of employment. The annual incentive bonus would be equal
to the greater of the highest annual incentive bonus payment previously
received by Mr. Rogal during the term of the aforementioned agreement or the
sum of $100,000.
Mr. McGrath entered into an employment agreement with the Company on July 1,
1999, for an original term of two (2) years, subject to the review of the Board
of Directors, at a base annual salary of $306,000, which cannot be reduced. The
agreement may be terminated by the Company with or without proper cause;
however, should the agreement be terminated without proper cause, Mr. McGrath
would be entitled to receive
13
<PAGE>
compensation, annual incentive bonus and benefits until the expiration of the
two year term of employment. The annual incentive bonus would be equal to the
greater of the highest annual incentive bonus payment previously received by
Mr. McGrath during the term of the aforementioned agreement or 50% of his base
salary.
Messrs. Galardini, Janes and Korman are each employed under standard
employment agreements. All such agreements may be terminated for cause and may
be terminated without cause on notice of 90 days or less. In no case would any
of the foregoing individuals be entitled to compensation greater than 90 days
of base salary and any pro-rated portion of any applicable incentive.
All of the employment agreements contain restrictive covenants relating to
the protection of confidential information and clients of the Company.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
To ensure continuity and the continued dedication of key executives during
any period of uncertainty caused by the threat or occurrence of a takeover, the
Company has entered into change of control employment agreements with its
executive officers, including each of the Named Executive Officers named in the
Summary Compensation Table.
In the event there is a change of control of the Company, the executive will
be employed for a period of three years after the change of control. If the
employment of the executive terminates at any time during the three year period
following a change of control for any reason other than death, cause or the
executive's election, the executive will receive an agreed upon amount of
severance pay equal to two to three times such executive's highest applicable
annual salary and bonus. Additionally, the executive would be eligible to
receive benefits substantially equivalent to those which would have been
received under the Company's qualified and non-qualified plans. The change of
control employment agreements provide that any excise taxes shall be paid by
the Company, as well as any legal expenses of the executive. If an executive
elects to terminate his employment in the first year after the change of
control, but without any deemed breach by the Company or its successor, the
executive shall be entitled to severance equal to one-half to one times the
executive's highest applicable annual salary and bonus.
Mr. Rogal and Mr. Korman each have a change of control employment agreement
which provides for a three times severance formula (except for death or cause)
and a one-time severance formula for a voluntary termination in the first year
after the change of control. The change of control agreements for the other
Named Executive Officers provide for a two times and a one-half times severance
formula.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 3, 1999, the Company issued to Holdings and Phoenix Home Life
$32,000,000 in aggregate principal amount of the Company's 5.25% Convertible
Subordinated Debentures Due 2014 (Debentures) in connection with the Company's
acquisition of APC from Holdings and Vaughan. Two directors of the Company,
Robert W. Fiondella and David W. Searfoss, are executive officers of Phoenix
Home Life and Mr. Fiondella is an executive officer of Holdings. Immediately
after the Company's acquisition of APC, Holdings distributed all of its
consideration received, including the Debentures, to Phoenix Home Life. The
aggregate amount of the Company's indebtedness to Phoenix Home Life represented
approximately 10% of the Company's total consolidated assets as of December 31,
1999.
Effective as of January 1, 1996, Mr. Galardini sold an interest in certain
employee benefits business to the Company's Pittsburgh office. Pursuant to the
terms of such agreement, for each of the calendar years 1996 through 2000, Mr.
Galardini would receive the lesser of 10% of the revenues realized or $150,000.
14
<PAGE>
Additionally, Mr. Galardini could, subject to certain conditions, receive the
same amounts for each of the calendar years 2001 through 2005. For each of
1997, 1998 and 1999, Mr. Galardini received the maximum payment of $150,000.
PERFORMANCE GRAPH
The following Performance Graph sets forth the Company's cumulative total
shareholder return on its Common Stock, assuming reinvestment of dividends,
with the cumulative total return on the published Standard & Poor's 500 Stock
Index and the cumulative total return on the Company-constructed composite
industry index, consisting of Arthur J. Gallagher & Co., Brown & Brown, Inc.,
Marsh & McLennan Cos., Inc., and Aon Corporation, over the five year period
ended December 31, 1999. The Company selected the businesses in the composite
industry index in its good faith belief that these other public companies are
most similar to the Company's insurance agency business.
[GRAPH]
HILB, ROGAL, S&P 500 PEER
AND HAMILTON INDEX GROUP
------------ ----- -----
1994 100 100 100
1995 115.44 137.58 131.85
1996 119.57 169.17 160.94
1997 180.8 225.6 234.32
1998 192.69 290.08 259.12
1999 281.99 351.12 376.09
SOURCE: STANDARD & POOR'S COMPUSTAT SERVICES INC.
ASSUMES $100 INVESTED ON JANUARY 1, 1995 IN HILB, ROGAL AND HAMILTON COMPANY
COMMON STOCK, S&P 500 INDEX AND PEER GOROUP INDEX
PROPOSAL TWO
Approval of 2000 Stock Incentive Plan
The Board of Directors has adopted unanimously and recommends that the
shareholders approve the Hilb, Rogal and Hamilton Company 2000 Stock Incentive
Plan (the "2000 Plan"). The 2000 Plan will replace the Hilb, Rogal and Hamilton
Company 1989 Stock Plan (the "1989 Plan"), which shall be terminated as of June
1, 2000 provided the shareholders of the Company approve the 2000 Plan at the
Meeting. The Company's experience with stock options has convinced the Board of
Directors of the important role of stock options and other stock-based
incentives in recruiting and retaining officers, directors and key employees
with ability and initiative and in encouraging such persons to have a greater
financial investment in the Company.
The complete text of the 2000 Plan is set forth as Exhibit A to this Proxy
Statement. The following general description of the principal features of the
2000 Plan is qualified in its entirety by reference to Exhibit A.
15
<PAGE>
General Information
The 2000 Plan would authorize the Compensation Committee of the Board of
Directors (the "Committee") to award shares of Common Stock, restricted stock
and stock options (collectively, "Stock Incentives") to officers, directors and
key employees of the Company and its affiliates who are designated by the
Committee. No determination has been made as to which persons eligible to
participate in the 2000 Plan (currently, all parent and subsidiary directors
and officers, the Company's ten outside directors and over 2,000 employees)
will receive awards under the 2000 Plan, and therefore, the benefits to be
allocated to any individual or to various groups of eligible participants are
not presently determinable.
If the shareholders approve the 2000 Plan, the Company will be authorized to
issue up to 1,200,000 shares of Common Stock under the 2000 Plan. Shares will
be considered to be issued under the 2000 Plan only when the shares are
actually issued to a participant. Shares forfeited or not issued due to
cancellation, termination or expiration of a grant or award under the 1989 Plan
will be available for issuance under the 2000 Plan. Shares tendered or withheld
in payment of all or part of a stock option granted under either the 1989 Plan
or 2000 Plan, or in satisfaction of withholding tax obligations, will be
available for issuance under the 2000 Plan. Shares forfeited under the 2000
Plan, and shares not issued under the 2000 Plan because of (i) payment of cash
in lieu of shares, (ii) the cancellation, termination or expiration of grants
and awards, and/or (iii) other similar events, will be available for issuance
under the 2000 Plan. Notwithstanding the above, any shares of Common Stock that
are authorized to be issued under the 1989 Plan but that are not issued or
covered by grants or awards under the 1989 Plan, shall not be available for
issuance under the 2000 Plan.
The 2000 Plan provides that not more than 300,000 shares of Common Stock
shall be available for awards of Common Stock and/or restricted stock. No
individual may receive grants or awards under the 2000 Plan in any calendar
year which cover more than 200,000 shares of the Company's Common Stock.
There are currently 1,731 shares of Common Stock available for grants and
awards under the 1989 Plan prior to its termination on June 1, 2000;
thereafter, no further grants or awards under the 1989 Plan may be made. The
termination of the 1989 Plan shall not in any manner adversely affect any
outstanding grant or award made under such Plan prior to June 1, 2000.
The 2000 Plan provides that if there is a stock split, stock dividend or
other event that affects the Company's capitalization, appropriate adjustments
will be made in the number of shares that may be issued under the 2000 Plan and
in the terms of all outstanding grants and awards made under the 2000 Plan
before such event.
On March 1, 2000, the closing price for a share of the Company's Common
Stock on the New York Stock Exchange was $28.4375. Through that date, 523,080
exercisable non-qualified stock options and 94,820 shares of restricted stock
were covered by outstanding grants and awards under the 1989 Plan. The Company
has not made any grants of incentive stock options ("ISOs") or stock
appreciation rights under the 1989 Plan, although as of March 1, 2000, there
were outstanding and exercisable ISOs for 3,000 shares of Common Stock under
the 1989 Plan.
Grants and Awards under the 2000 Plan
Stock Options. The 2000 Plan will permit the granting of ISOs and non-
qualified stock options. ISOs qualify for special tax treatment if certain
requirements of the Internal Revenue Code are met. The exercise price for
options will not be less than the fair market value of a share of Common Stock
on the date of grant. The period in which an option may be exercised will be
determined by the Committee on the date of grant, but will not in any event
exceed 10 years. Payment of the option exercise price may be in cash or, if the
grant agreement provides, by surrendering previously owned shares of Common
Stock or the Company withholding shares of Common Stock upon exercise. The
Company may also assist in a "cashless exercise" through a broker with the
consent of the Committee. In addition, the 2000 Plan permits the Committee to
cash out all or
16
<PAGE>
any portion of any option by paying the optionee, in cash or Common Stock, the
difference between the fair market value of the shares covered by the option
and the exercise price.
Common Stock and Restricted Stock. Shares of Common Stock and restricted
Common Stock may also be awarded under the 2000 Plan. The restricted stock
would vest and become transferable upon the satisfaction of conditions set
forth in the applicable award agreement. Restricted stock awards may be subject
to forfeiture if, for example, the recipient's employment terminates before the
award vests. During the period of restriction, holders of restricted stock will
have voting rights and the right to receive dividends on their shares.
Change of Control Provisions
The 2000 Plan provides that in the event of a "Change of Control" (as
defined in the 2000 Plan), unless otherwise provided by the Committee in a
grant or award agreement, all outstanding stock options will become fully
exercisable and the restrictions applicable to outstanding restricted stock
will lapse. The Committee may also provide that under such circumstances
holders of restricted stock may elect to receive, in exchange for shares that
were restricted stock, a cash payment equal to the fair market value of the
shares surrendered.
Federal Income Tax Consequences
Non-Qualified Stock Options. Non-qualified stock options granted under the
2000 Plan are not taxable to an optionee at grant but result in taxation at
exercise, at which time the individual will recognize ordinary income in an
amount equal to the difference between the option exercise price and the fair
market value of the Common Stock on the exercise date. The Company will be
entitled to deduct a corresponding amount as a business expense in the year the
optionee recognizes this income.
Incentive Stock Options. An employee will generally not recognize income on
receipt or exercise of an ISO so long as he or she has been an employee of the
Company or its subsidiaries from the date the option was granted until three
months before the date of exercise; however, the amount by which the fair
market value of the Common Stock at the time of exercise exceeds the option
price is a required adjustment for purposes of the alternative minimum tax
applicable to the employee. If the employee holds the Common Stock received
upon exercise of the option for one year after exercise (and for two years from
the date of grant of the option), any difference between the amount realized
upon the disposition of the stock and the amount paid for the stock will be
treated as long-term capital gain (or loss, if applicable) to the employee. If
the employee exercises an ISO and satisfies these holding period requirements,
the Company may not deduct any amount in connection with the ISO.
In contrast, if an employee exercises an ISO but does not satisfy the
holding period requirements with respect to the Common Stock acquired on
exercise, the employee generally will recognize ordinary income in the year of
the disposition equal to the excess, if any, of the fair market value of the
Common Stock on the date of exercise over the option price; and any excess of
the amount realized on the disposition over the fair market value on the date
of exercise will be taxed as long-or short-term capital gain (as applicable).
If, however, the fair market value of the Common Stock on the date of
disposition is less than on the date of exercise, the employee will recognize
ordinary income equal only to the difference between the amount realized on
disposition and the option price. In either event, the Company will be entitled
to deduct an amount equal to the amount constituting ordinary income to the
employee in the year of the premature disposition.
Restricted Stock. The federal income tax consequences of restricted stock
awards depend on the restrictions imposed on the stock. Generally, the fair
market value of the stock received will not be includable in the participant's
gross income until such time as the stock is no longer subject to a substantial
risk of forfeiture or becomes transferable. The employee may, however, make a
tax election to include the value of the stock in gross income in the year of
receipt despite such restrictions. Generally, the Company will be entitled to
deduct the fair market value of the stock transferred to the employee as a
business expense in the year the employee includes the compensation in income.
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Common Stock/Cash Payments. The fair market value of any shares of Common
Stock awarded to a participant and any cash payments a participant receives in
connection with other Stock Incentives or as dividends on restricted stock are
taxable as ordinary income in the year received or made available to the
participant without substantial limitations or restrictions. Generally, the
Company will be entitled to deduct the amount (other than dividends) that the
participant includes as income as a business expense in the year the
participant recognizes such income.
Section 162(m) of the Internal Revenue Code places a $1 million annual limit
on the deductible compensation of certain executives of publicly traded
corporations. The limit, however, does not apply to "qualified performance-
based compensation." The Company believes that grants of options under the 2000
Plan will qualify for the performance-based compensation exception to the
deductibility limit, assuming that the 2000 Plan is approved by the
shareholders.
State tax consequences may in some cases differ from those described above.
Grants and awards under the 2000 Plan may in some instances be made to
employees who are subject to tax in jurisdictions other than the United States
and may result in tax consequences differing from those described above.
Other Information
The 2000 Plan will be effective as of the date on which it is approved by
the shareholders of the Company, and will expire on May 31, 2005, unless
terminated earlier by the Board of Directors. Grants and awards issued before
the 2000 Plan expires or is terminated may extend beyond the expiration or
termination date. The Board of Directors may amend the 2000 Plan at any time,
provided that no such amendment will be made without shareholder approval if
such approval is required under any applicable law, rule or regulation. Except
for adjustments that result from events that affect the Company's
capitalization, the 2000 Plan prohibits any repricing of options without
shareholder approval.
Vote Required
If a quorum exists at the Meeting, the 2000 Plan will be approved if the
number of votes cast in favor of the Plan exceeds the number of votes cast
against it. Broker Shares that are not voted on the matter and abstentions will
not be included in determining the number of votes cast.
The Board of Directors recommends that the shareholders vote FOR Proposal
Two.
INDEPENDENT AUDITORS
Ernst & Young LLP was the auditor for the fiscal year ended December 31,
1999, and the Audit Committee has selected it as auditor for the year ending
December 31, 2000. A representative of Ernst & Young LLP will be present at the
meeting with the opportunity to make a statement or respond to appropriate
questions from shareholders.
PROPOSALS FOR 2001 ANNUAL MEETING
Under the regulations of the Commission, any shareholder desiring to make a
proposal to be acted upon at the 2001 Annual Meeting of Shareholders must cause
such proposal to be delivered, in proper form, to the Corporate Secretary of
the Company, whose address is 4235 Innslake Drive, P.O. Box 1220, Glen Allen,
Virginia 23060-1220, no later than December 1, 2000, in order for the proposal
to be considered for inclusion in the Company's proxy statement and form of
proxy for that meeting. The Company anticipates holding the 2001 Annual Meeting
of Shareholders on May 1, 2001.
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The Company's Bylaws also prescribe the procedure a shareholder must follow
to nominate directors or to bring other business before shareholders' meetings.
For a shareholder to nominate a candidate for director or to bring other
business before a meeting, notice must be received by the Corporate Secretary
of the Company not less than 60 days and not more than 90 days prior to the
date of the meeting. Based on an anticipated date of May 1, 2001 for the 2001
Annual Meeting of Shareholders, the Company must receive such notice no later
than March 2, 2001, and no earlier than February 1, 2001. Notice of a
nomination for director must describe various matters regarding the nominee and
the shareholder giving notice. Notice of other business to be brought before
the meeting must include a description of the proposed business, the reasons
therefor and other specified matters. Any shareholder may obtain a copy of the
Company's Bylaws, without charge, upon written request to the Corporate
Secretary of the Company.
ANNUAL REPORTS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, including consolidated financial statements, is being mailed
to shareholders with this proxy statement. A copy of the Company's Annual
Report on Form 10-K, excluding exhibits, for 1999 filed with the Commission can
be obtained without charge by writing to the Corporate Secretary, 4235 Innslake
Drive, P.O. Box 1220, Glen Allen, Virginia 23060-1220.
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EXHIBIT A
HILB, ROGAL AND HAMILTON COMPANY
2000 STOCK INCENTIVE PLAN
Article I
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
1.01 Affiliate means any "subsidiary corporation" or "parent corporation"
(within the meaning of Section 424 of the Code) of the Company.
1.02 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Grant or an Award issued to such Participant.
1.03 Award means an award of Common Stock or Restricted Stock.
1.04 Board means the Board of Directors of the Company.
1.05 Change of Control means
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 25% or more of either (a) the then outstanding shares
of Common Stock of the Company (the "Outstanding Company Common Stock") or
(b) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (w) any acquisition directly from the
Company, (x) any acquisition by the Company, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (z) any acquisition
by any corporation pursuant to a transaction which complies with clauses
(a), (b) and (c) of subsection (iii) of this Section 1.05; or
(ii) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election, by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (a) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a
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corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (b) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (c) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection (i) of this
Section 1.05, a Change of Control shall not be deemed to have taken place
if, as a result of an acquisition by the Company which reduces the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities, the beneficial ownership of a Person increases to 25% or more
of the Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 25% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of share purchases by the
Company and, after such share purchases by the Company, such Person becomes
the beneficial owner of any additional shares of the Outstanding Company
Common Stock or the Outstanding Company Voting Stock through any means
except an acquisition directly from the Company, for purposes of subsection
(i) of this Section 1.05, a Change of Control shall be deemed to have taken
place.
1.06 Change of Control Date is the date on which an event described in (i)
through (iv) of Section 1.05 occurs.
1.07 Code means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code shall include the valid and binding governmental
regulations, court decisions and other regulatory and judicial authority
issued or rendered thereunder.
1.08 Commission means the Securities and Exchange Commission or any
successor agency.
1.09 Committee means the Compensation Committee of the Board.
1.10 Common Stock means the Common Stock of the Company.
1.11 Company means Hilb, Rogal and Hamilton Company.
1.12 Disability, with respect to a Participant, means "disability" as
defined from time to time under any long-term disability plan of the Company
or Subsidiary with which the Participant is employed.
1.13 Effective Date means the date on which this Plan is approved by the
shareholders of the Company.
1.14 Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
1.15 Fair Market Value means, on any given date, the closing price of a
share of Common Stock as reported on the New York Stock Exchange composite
tape on such day or, if the Common Stock was not traded on the New York Stock
Exchange 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.
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1.16 Grant means the grant of an Option.
1.17 Incentive Stock Option means an Option which qualifies and is intended
to qualify as an "incentive stock option" under Section 422 of the Code.
1.18 Non-Qualified Stock Option means an Option other than an Incentive
Stock Option.
1.19 Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price and on the
conditions set forth in an Agreement.
1.20 Option Price means the price per share for Common Stock purchased on
the exercise of an Option as provided in Article VI.
1.21 Participant means an officer, director or employee of the Company or of
a Subsidiary who satisfies the requirements of Article IV and is selected by
the Committee to receive a Grant or an Award.
1.22 Plan means the Hilb, Rogal and Hamilton Company 2000 Stock Incentive
Plan, as amended from time to time.
1.23 Prior Plan means the Hilb, Rogal and Hamilton Company 1989 Stock Plan.
1.24 Restricted Stock means shares of Common Stock awarded to a Participant
under Article IX and designated as Restricted Stock. Shares of Common Stock
shall cease to be Restricted Stock when, in accordance with the terms of the
applicable Agreement, they become transferable and free of substantial risk of
forfeiture.
1.25 Rule 16b-3 means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time, or any
successor rule.
1.26 Securities Broker means the registered securities broker acceptable to
the Company who agrees to effect the cashless exercise of an Option pursuant to
Section 8.04 hereof.
1.27 Subsidiary means, with respect to any corporation, a "subsidiary
corporation" of that corporation within the meaning of Code Section 424(f).
Article II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
officers, directors and key employees with ability and initiative by enabling
such persons who contribute significantly to the Company or an Affiliate to
participate in its future success and to associate their interests with those
of the Company and its shareholders. The Plan is intended to permit the award
of Common Stock and Restricted Stock and the grant of Options qualifying as
Incentive Stock Options or Non-Qualified Stock Options as designated by the
Committee at the time of grant. No Option that is intended to be an Incentive
Stock Option however, shall be invalid for failure to qualify as an Incentive
Stock Option under Section 422 of the Code but shall be treated as a Non-
Qualified Stock Option.
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Article III
ADMINISTRATION
This Plan shall be administered by the Committee. The Committee shall have
authority to issue Grants and Awards upon such terms (not inconsistent with the
provisions of this Plan) as the Committee may consider appropriate. The terms
of such Grants and Awards may include conditions (in addition to those
contained in this Plan) on (i) the exercisability of all or any part of an
Option and (ii) the transferability or forfeitability of Restricted Stock. In
addition, the Committee shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. To fulfill the purposes of the Plan without
amending the Plan, the Committee may also modify any Grants or Awards issued to
Participants who are nonresident aliens or employed outside of the United
States to recognize differences in local law, tax policy or custom.
The express grant in the Plan of any specific power to the Committee shall
not be construed as limiting any power or authority of the Committee. Any
decision made, or action taken, by the Committee or in connection with the
administration of this Plan shall be final and conclusive. All expenses of
administering this Plan shall be borne by the Company.
Article IV
ELIGIBILITY
4.01 General. Any officer, director or employee of the Company or of any
Company Affiliate (including any corporation that becomes an Affiliate of the
Company after the adoption of this Plan) who, in the judgment of the Committee,
has contributed significantly or can be expected to contribute significantly to
the profits or growth of the Company or a Subsidiary of the Company may receive
one or more Awards or Grants, or any combination or type thereof. Employee and
non-employee directors of the Company are eligible to participate in this Plan.
4.02 Grants and Awards. The Committee will designate the individuals to whom
Grants and/or Awards are to be made and will specify the number of shares of
Common Stock subject to each such Grant or Award. An Option may be granted
alone or in addition to other Grants and/or Awards under the Plan. The
Committee shall have the authority to grant Incentive Stock Options, Non-
Qualified Stock Options or both types of Options to any Participant; provided,
however, that Incentive Stock Options may be granted only to employees of the
Company and its Subsidiaries. All Grants or Awards under this Plan shall be
evidenced by Agreements which shall be subject to applicable provisions of this
Plan and to such other provisions as the Committee may determine. No
Participant may be granted Options that are Incentive Stock Options (under all
plans of the Company and its Affiliates which provide for the grant of
Incentive Stock Options) which are first exercisable in any calendar year for
Common Stock having an aggregate Fair Market Value (determined as of the date
an Option is granted) exceeding $100,000 or such other amount as shall be
specified in Code Section 422 and the rules and regulations thereunder from
time to time. No Participant may receive Grants or Awards under the Plan with
respect to more than 200,000 shares of Common Stock during any one calendar
year.
4.03 Designation of Option as an Incentive Stock Option or Non-Qualified
Stock Option. The Committee will designate at the time an Option is granted
whether the Option is to be treated as an Incentive Stock Option or a Non-
Qualified Stock Option. In the absence, however, of any such designation, such
Option shall be treated as a Non-Qualified Stock Option.
4.04 Qualification of Incentive Stock Option under Section 422 of the
Code. Anything in this Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted,
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amended or altered, nor shall any discretion or authority granted under the
Plan be exercised so as to disqualify the Plan under Section 422 of the Code
or, without the consent of the Participant so affected, to disqualify any
Incentive Stock Option under such Section 422. No Option that is intended to be
an Incentive Stock Option however, shall be invalid for failure to qualify as
an Incentive Stock Option under Section 422 of the Code but shall be treated as
a Non-Qualified Stock Option.
Article V
STOCK SUBJECT TO PLAN
Subject to the adjustment provisions of Article X and the provisions of (a)
through (c) of this Article V, up to 1,200,000 shares of Common Stock may be
issued under the Plan. In addition to such authorization, the following shares
of Common Stock may be issued under the Plan:
(a) Shares of Common Stock that are forfeited under the Prior Plan, and
shares of Common Stock that are not issued under the Prior Plan because of
(i) the cancellation, termination or expiration of Grants and Awards,
and/or (ii) other similar events under the Prior Plan, shall be available
for issuance under this Plan.
(b) If a Participant tenders, or has withheld, shares of Common Stock in
payment of all or part of the Option Price under an Option granted under
the Plan or the Prior Plan, or in satisfaction of withholding tax
obligations thereunder, the shares of Common Stock so tendered by the
Participant or so withheld shall become available for issuance under the
Plan.
(c) Shares of Common Stock that are forfeited under the Plan, and shares
of Common Stock that are not issued under the Plan because of (i) a payment
of cash in lieu of shares of Common Stock, (ii) the cancellation,
termination or expiration of Grants and Awards, and/or (iii) other similar
events under the Plan, shall be available for issuance under this Plan.
Notwithstanding (a) above, any shares of Common Stock that are authorized to
be issued under the Prior Plan but that are not issued or covered by Grants or
Awards under the Prior Plan, shall not be available for issuance under this
Plan.
Subject to the adjustment provisions of Article X, not more than 300,000
shares of Common Stock shall be issued under Awards of Common Stock and/or
Restricted Stock.
Subject to the foregoing provisions of this Article V, if a Grant or an
Award may be paid only in shares of Common Stock, or in either cash or shares
of Common Stock, the shares of Common Stock shall be deemed to be issued
hereunder only when and to the extent that payment is actually made in shares
of Common Stock. However, the Committee may authorize a cash payment under a
Grant or an Award in lieu of shares of Common Stock if there are insufficient
shares of Common Stock available for issuance under the Plan.
Article VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an Option
shall be fixed by the Committee on the date of grant; provided, however, that
the price per share shall not be less than the Fair Market Value on such date.
Notwithstanding the foregoing, if an Incentive Stock Option is granted to a
Participant who, at the time of the Grant, is a 10% shareholder as determined
under Section 422 of the Code, then the Option Price shall be not less than
110% of the Fair Market Value on the date of Grant.
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Article VII
EXERCISE OF OPTIONS
7.01 Maximum Option Period. The period in which an Option may be exercised
shall be determined by the Committee on the date of grant; provided, however,
that an Option shall not be exercisable after the expiration of 10 years (or 5
years in the case of an Incentive Stock Option granted to a 10% shareholder as
determined under Section 422 of the Code) from the date the Option was granted.
The date upon which any Option granted by the Committee becomes exercisable may
be accelerated by the Committee in its discretion. Subject to the terms hereof,
the term of exercisability for any Option 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.
7.02 Transferability of Options. Non-Qualified Stock Options may be
transferable by a Participant and exercisable by a person other than a
Participant, but only to the extent specifically provided in an Option
Agreement. Incentive Stock Options, by their terms, shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation or liability of such Participant.
7.03 Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to Incentive Stock Options), or in the event
that the terms of any Grant provide that it may be exercised only during
employment or within a specified period of time after termination of
employment, the Committee may decide to what extent leaves of absence for
governmental or military service, illness, temporary Disability, or other
reasons shall not be deemed interruptions of continuous employment.
Article VIII
METHOD OF EXERCISE
8.01 Exercise. Subject to the provisions of Articles VII and XI, 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 and such other
requirements as the Committee shall determine. An Option granted under this
Plan may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised. Such 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.
8.02 Payment. Unless otherwise provided by the Agreement, payment of the
Option Price shall be made in cash. If the Agreement provides, payment of all
or part of the Option Price (and any applicable withholding taxes) may be made
by surrendering already owned shares of Common Stock to the Company or by the
Company withholding shares of Common Stock from the Participant upon exercise,
provided the shares surrendered or withheld have a Fair Market Value
(determined as of the day preceding the date of exercise) that is not less than
such price or part thereof and any such withholding taxes. In addition, the
Committee may establish such payment or other terms as it may deem to be
appropriate and consistent with these purposes.
8.03 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his Option until the date he
exercises such Option.
8.04 Cashless Exercise. To the extent permitted under the applicable laws
and regulations, at the request of the Participant and with the consent of the
Committee, the Company agrees to cooperate in a "cashless exercise" of the
Option. The cashless exercise shall be effected by the Participant delivering
to the Securities Broker instructions to exercise all or part of the Option,
including instructions to sell a sufficient number of shares of Common Stock to
cover the costs and expenses associated therewith. The Committee may permit a
Participant to elect to pay any applicable withholding taxes by requesting that
the Company withhold the number of shares of Common Stock equivalent at current
Fair Market Value to the withholding taxes due.
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8.05 Cashing Out of Option. The Committee may elect to cash out all or part
of the portion of any Option to be exercised by paying the optionee an amount,
in cash or Common Stock, equal to the excess of the Fair Market Value of the
Common Stock that is the subject of the portion of the Option to be exercised
over the Option Price times the number of shares of Common Stock subject to the
portion of the Option to be exercised on the effective date of such cash out.
Article IX
COMMON STOCK AND RESTRICTED STOCK
9.01 Award. In accordance with the provisions of Article IV, the Committee
will designate the individuals to whom an Award of Common Stock and/or
Restricted Stock is to be made and will specify the number of shares of Common
Stock covered by such Award or Awards.
9.02 Vesting. In the case of Restricted Stock, on the date of the Award, the
Committee 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. Subject
to the provisions of Article XI hereof, the Committee may award Common Stock to
a Participant which is not forfeitable and is free of any restrictions on
transferability.
9.03 Shareholder Rights. Prior to their forfeiture 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, 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.
Article X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
Should the Company effect one or more (x) stock dividends, stock split-ups,
subdivisions or consolidations of shares or other similar changes in
capitalization; (y) spin-offs, spin-outs, split-ups, split-offs, or other such
distribution of assets to shareholders; or (z) direct or indirect assumptions
and/or conversions of outstanding Options due to an acquisition of the Company,
then the maximum number of shares as to which Grants and Awards may be issued
under this Plan shall be proportionately adjusted and their terms shall be
adjusted as the Committee shall determine to be equitably required, provided
that the number of shares subject to any Grant or Award shall always be a whole
number. Any determination made under this Article X by the Committee shall be
final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to any Grant or
Award.
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Article XI
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Grant shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable federal
and state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company may rely on an opinion of its
counsel as to such compliance. Any share certificate issued to evidence Common
Stock for which a Grant is exercised or an Award is issued may bear such
legends and statements as the Committee may deem advisable to assure compliance
with federal and state laws and regulations. No Grant shall be exercisable, no
Common Stock shall be issued, no certificate for shares shall be delivered, and
no payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters.
Article XII
GENERAL PROVISIONS
12.01 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 to terminate the employment of any employee at any time
with or without assigning a reason therefor.
12.02 Unfunded Plan. The Plan, insofar as it provides for a Grant, is not
required to be funded, and the Company shall not be required to segregate any
assets that may at any time be represented by a Grant under this Plan.
12.03 Change of Control. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change of Control:
(a) Unless otherwise provided by the Committee in an Agreement, any
outstanding Option which is not presently exercisable and 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) Unless otherwise provided by the Committee in an Agreement, 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 Award. The Committee may also provide in an Agreement that a
Participant may elect, by written notice to the Company within 60 days
after a Change of Control Date, to receive, in exchange for shares that
were Restricted Stock immediately before the Change of Control Date, a cash
payment equal to the Fair Market Value of the shares surrendered on the
last business day the Common Stock is traded on the New York Stock Exchange
prior to receipt by the Company of such written notice.
(c) The Committee may, in its complete discretion, cause the
acceleration or release of any and all restrictions or conditions related
to a Grant or Award, in such manner, in the case of officers and directors
of the Company who are subject to Section 16(b) of the Exchange Act, as to
conform to the provisions of Rule 16b-3.
12.04 Rules of Construction. Headings are given to the articles and sections
of this Plan solely for ease of reference and are not to be considered in
construing the terms and conditions of the Plan. 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.
A-8
<PAGE>
12.05 Rule 16b-3 Requirements. Notwithstanding any other provisions of the
Plan, the Committee may impose such conditions on any Grant or Award, and the
Board may amend the Plan in any such respects, as they may determine, on the
advice of counsel, are necessary or desirable to satisfy the provisions of Rule
16b-3. Any provision of the Plan to the contrary notwithstanding, and except to
the extent that the Committee determines otherwise: (a) transactions by and
with respect to officers and directors of the Company who are subject to
Section 16(b) of the Exchange Act shall comply with any applicable conditions
of Rule 16b-3; and (b) every provision of the Plan shall be administered,
interpreted and construed to carry out the foregoing provisions of this
sentence.
12.06 Amendment, Modification and Termination. At any time and from time to
time, the Board may terminate, amend or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that such
approval is required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange or system on which the Common
Stock is then listed or reported, by any regulatory body having jurisdiction
with respect thereto or under any other applicable laws, rules, or regulations.
No termination, amendment, or modification of the Plan, other than pursuant to
Section 12.05 herein, shall in any manner adversely affect any Grant or Award
theretofore issued under the Plan, without the written consent of the
Participant. The Committee may amend the terms of any Grant or Award
theretofore issued under this Plan, prospectively or retrospectively, but no
such amendment shall impair the rights of any Participant without the
Participant's written consent except an amendment provided for or contemplated
in the terms of the Grant or Award, an amendment made to cause the Plan, or
Grant or Award, to qualify for the exemption provided by Rule 16b-3, or an
amendment to make an adjustment under Article X. Except as provided in Article
X, the Option Price of any outstanding Option may not be adjusted or amended,
whether through amendment, cancellation or replacement, unless such adjustment
or amendment is approved by the shareholders of the Company.
12.07 Governing Law. The validity, construction and effect of the Plan and
any actions taken or related to the Plan shall be determined in accordance with
the laws of the Commonwealth of Virginia and applicable federal law.
12.08 Successors and Assigns. All obligations of the Company under the Plan,
with respect to Grants and Awards issued hereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company. The Plan shall
be binding on all successors and permitted assigns of a Participant, including,
but not limited to, the estate of such Participant and the executor,
administrator or trustee of such estate, and the guardians or legal
representative of the Participant.
12.09 Effect on Prior Plan and Other Compensation Arrangements. The adoption
of this Plan shall have no effect on Grants and Awards made pursuant to the
Prior Plan and the Company's other compensation arrangements. Nothing contained
in this Plan shall prevent the Company from adopting other or additional
compensation plans or arrangements for its officers, directors or employees.
12.10 Duration of Plan. No Grant or Award may be made under this Plan after
May 31, 2005.
12.11 Grants Prior to Effective Date. Options may be granted under this
Plan, upon its adoption by the Board, provided that no Option 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 granted prior to the Effective Date may be exercised
before the requisite shareholder approval is obtained.
A-9
<PAGE>
PROXY
HILB, ROGAL AND HAMILTON COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shareholder shown on the reverse side hereby appoints Andrew L. Rogal,
Timothy J. Korman and Walter L. Smith, and each or any of them, proxy for said
shareholder, with power of substitution, to vote all the shares of Common Stock
of Hilb, Rogal and Hamilton Company held of record by said shareholder as of
March 27, 2000 at the Annual Meeting of Shareholders of Hilb, Rogal and Hamilton
Company to be held at The Jefferson Hotel, 101 West Franklin Street, Richmond,
Virginia, on May 2, 2000, at 10:00 a.m. eastern time, and at any adjournments or
postponements thereof, upon the matters designated on the reverse side as more
fully set forth in the Proxy Statement and for the transaction of such business
as may properly come before the meeting and any adjournments or postponements
thereof.
(Continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
Items 1 and 2.
Item 1. ELECTION OF DIRECTORS
FOR [_] INSTRUCTIONS: To withhold
--- authority to vote for any individual
nominee, write each such nominee's
Nominees: Robert W. Fiondella name in the following space:
Robert H. Hilb
Timothy J. Korman
Andrew L. Rogal ---------------------------------------
David W. Searfoss
Martin L. Vaughan, III
WITHHOLD AUTHORITY
------------------
to vote for all such nominees
[_]
Item 2. APPROVAL OF 2000 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN
[_] [_] [_]
Item 3. In their discretion, the proxies are authorized to
vote upon such other business as may properly
come before the meeting.
Please sign exactly as name appears. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title of such. If a corporation, please sign in
corporation's name by President or other authorized officer. If a partnership,
please sign in partnership's name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s)__________________Signature(s)____________________Date___________
- --------------------------------------------------------------------------------
Fold and Detach Here
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
TO TRUSTEE, HRH RETIREMENT SAVINGS PLAN
AND HRH FROZEN RETIREMENT SAVINGS PLAN
This Voting Instruction is Solicited on Behalf of the
Board of Directors of Hilb, Rogal and Hamilton Company
Pursuant to Section 12.9 of the HRH Retirement Savings Plan and HRH Frozen
Retirement Savings Plan of Hilb, Rogal and Hamilton Company, you are directed to
vote, in person or by proxy, the whole shares of Common Stock of Hilb, Rogal
and Hamilton Company credited to the undersigned Participant's Account as of
March 27, 2000 at the Annual Meeting of Shareholders of Hilb, Rogal and Hamilton
Company to be held at The Jefferson Hotel, 101 West Franklin Street, Richmond,
Virginia, on May 2, 2000, at 10:00 a.m. eastern time, and at any adjournments or
postponements thereof, upon the matters designated on the reverse side as more
fully set forth in the proxy Statement and for the transaction of such business
as may properly come before the meeting and any adjournments or postponements
thereof.
THIS VOTING INSTRUCTION, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED ON THE REVERSE SIDE BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS
MADE, OR IF A VOTING INSTRUCTION IS NOT PROPERLY EXECUTED AND RECEIVED BY THE
TRUSTEE, THE SHARES CREDITED TO YOUR PARTICIPANT'S ACCOUNT SHALL BE VOTED IN THE
SAME PROPORTION AS THOSE SHARES FOR WHICH THE TRUSTEE HAS RECEIVED PROPER VOTING
INSTRUCTIONS.
------------------------------------------------------------
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY
------------------------------------------------------------
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY
HRH RETIREMENT SAVINGS PLAN AND
HRH FROZEN RETIREMENT SAVINGS PLAN
This Voting Instruction when properly executed will be voted in the manner
directed by the undersigned shareholder.
Item 1. ELECTION OF DIRECTORS
FOR [_] INSTRUCTIONS: To withhold
--- authority to vote for any individual
nominee, write each such nominee's
Nominees: Robert W. Fiondella name in the following space:
Robert H. Hilb
Timothy J. Korman
Andrew L. Rogal ---------------------------------------
David W. Searfoss
Martin L. Vaughan, III
WITHHOLD AUTHORITY
------------------
to vote for all such nominees
[_]
Item 2. APPROVAL OF 2000 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN
[_] [_] [_]
RECORD DATE SHARES:
Please be sure to sign and date this Voting Instruction.
Please sign exactly as name(s) appear(s) hereon.
------------------------------------------- -------------------
------------------------------------------- -------------------
Participant Sign Here Date
DETACH CARD
