-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IogkjdGR25BTm2kSP3Q/UB+Gg25EpgI0A3rFNqDPwIcB+BffnrzB2PHvYajiuyKg uhU4okSVUnDkEbKzq+RfAA== 0000814898-97-000004.txt : 19970815 0000814898-97-000004.hdr.sgml : 19970815 ACCESSION NUMBER: 0000814898-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILB ROGAL & HAMILTON CO /VA/ CENTRAL INDEX KEY: 0000814898 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 541194795 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15981 FILM NUMBER: 97660844 BUSINESS ADDRESS: STREET 1: 4235 INNSLAKE DR CITY: GLEN ALLEN STATE: VA ZIP: 23060 BUSINESS PHONE: 8047476500 MAIL ADDRESS: STREET 1: P O BOX 1220 CITY: GLEN ALLEN STATE: VA ZIP: 23060 10-Q 1 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1997 Commission file number 0-15981 HILB, ROGAL AND HAMILTON COMPANY (Exact name of registrant as specified in its charter) Virginia 54-1194795 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 1220, Glen, Allen, VA 23060-1220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 747-6500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1997 Common stock, no par value 13,005,439 (This document contains 12 pages) HILB, ROGAL AND HAMILTON COMPANY INDEX Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statement of Consolidated Income for the three months and six months ended June 30,1997 and 1996 3 Consolidated Balance Sheet, June 30, 1997 and December 31, 1996 4 Statement of Consolidated Shareholders' Equity for the six months ended June 30, 1997 and 1996 5 Statement of Consolidated Cash Flows for the six months ended June 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Exhibits to Part I Exhibit 11 - Computation of Earnings Per Share 10 Part II. OTHER INFORMATION Item 4.Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1997 JUNE 30, 1996 JUNE 30,1997 JUNE 30, 1996 ------------- ------------- ------------ ------------- Revenues Commissions $41,687,098 $36,839,284 $88,952,127 $78,768,286 and fees Investment and other income 2,636,021 1,096,973 3,283,828 2,243,540 ----------- ----------- ----------- ----------- 44,323,119 37,936,257 92,235,955 81,011,826 Operating expenses Compensation and employee benefits 23,898,152 21,494,224 48,867,525 44,115,134 Other operating expenses 11,708,930 9,912,252 22,920,710 19,603,610 Amortization of intangibles 2,095,691 1,874,264 4,225,709 3,666,605 Interest expense 514,452 229,565 1,032,170 461,460 ----------- ----------- ----------- ----------- 38,217,225 33,510,305 77,046,114 67,846,809 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 6,105,894 4,425,952 15,189,841 13,165,017 Income taxes 2,568,823 1,751,746 6,246,054 5,328,496 NET INCOME $ 3,537,071 $ 2,674,206 $ 8,943,787 $ 7,836,521 ============ ============ ============ ============ NET INCOME PER COMMON SHARE $0.27 $0.20 $0.68 $0.58 ===== ===== ===== ===== Dividends per Common Share $0.155 $0.15 $0.31 $0.30 ====== ===== ===== ===== Weighted Average Number of Shares Outstanding 13,166,333 13,524,232 13,239,878 13,626,914 ============ ============ ============ ============
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) JUNE 30, DECEMBER 31, 1997 1996 ------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 27,262,327 $ 19,774,374 Investments 6,620,567 5,088,020 Receivables: Premiums, less allowance for doubtful accounts of $2,577,000 and $2,445,000, respectively 40,136,567 41,453,677 Other 5,169,293 6,122,612 ------------ ----------- 45,305,860 47,576,289 Prepaid expenses and other current assets 2,355,140 3,816,819 ------------ ----------- TOTAL CURRENT ASSETS 81,543,894 76,255,502 INVESTMENTS 4,758,339 6,185,686 PROPERTY AND EQUIPMENT (NET) 15,534,952 16,092,075 INTANGIBLE ASSETS Expiration rights 78,368,079 76,402,292 Goodwill 32,696,352 32,718,982 Noncompetition agreements 11,864,313 11,421,278 ------------ ----------- 122,928,744 120,542,552 Less accumulated amortization 42,479,454 40,536,482 ------------ ----------- 80,449,290 80,006,070 OTHER ASSETS 5,737,393 2,936,014 ------------ ----------- $188,023,868 $181,475,347 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance $ 69,418,567 $ 66,527,381 companies Accounts payable and accrued expenses 11,260,362 11,401,805 Premium deposits and credits due customers 10,554,806 8,837,483 Current portion of long-term debt 2,710,117 2,345,059 ------------ ----------- TOTAL CURRENT LIABILITIES 93,943,852 89,111,728 LONG-TERM DEBT 29,029,634 27,195,571 OTHER LONG-TERM LIABILITIES 9,750,147 9,869,777 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 13,000,139 and 13,320,577 shares, respectively 20,356,793 25,266,279 Retained earnings 34,943,442 30,031,992 ------------ ----------- 55,300,235 55,298,271 ------------ ----------- $188,023,868 $181,475,347 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) Common Stock Retained Earnings Balance at January 1, 1997 $25,266,279 $30,031,992 Issuance of 29,796 shares of Common Stock 354,941 Purchase of 349,564 shares of Common Stock (5,217,649) (4,032,337) Payment of dividends Other (46,778) Net income 8,943,787 ------------ ------------ Balance at June 30, 1997 $20,356,793 $34,943,442 ============ ============ Balance at January 1, 1996 $29,903,900 $26,741,990 Issuance of 145,448 shares of Common Stock 1,987,725 Purchase of 479,000 shares of Common Stock (6,544,680) (4,052,544) Payment of dividends Other 3,275 Net income 7,836,521 ------------ ------------ Balance at June 30, 1996 $25,350,220 $30,525,967 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1997 JUNE 30, 1996 OPERATING ACTIVITIES Net income $ 8,943,787 $ 7,836,521 Adjustments to reconcile net income to net cash provided by operating activities: 1,806,860 1,565,762 Depreciation and amortization 4,225,709 3,666,605 Amortization of intangible assets 392,271 544,465 Provision for losses on accounts receivable Gain on sale of assets (2,078,405) (1,222,201) ------------- ------------- 13,290,222 12,391,152 Changes in operating assets and liabilities net of effects from insurance agency acquisitions: Decrease in accounts receivable 2,011,244 3,286,376 Decrease in prepaid expenses 1,475,525 951,640 Increase (decrease) in premiums payable to 2,890,969 (2,720,185) insurance companies Increase (decrease) in premium deposits and credits 1,546,610 (1,280,803) Decrease in accounts payable (168,433) (1,465,959) and accrued expenses Other operating activities (137,076) 1,387,786 ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 20,909,061 12,550,007 INVESTING ACTIVITIES Proceeds from maturities of held- to-maturity investments 2,283,930 7,456,943 Purchase of investments (2,389,131) (3,125,000) Purchase of property and (1,180,969) (2,678,251) equipment Purchase of insurance agencies, net of cash acquired (5,445,618) (3,796,453) Proceeds from sale of assets 2,106,300 1,182,961 Other investing activities 113,879 163,839 ------------- ------------- NET CASH USED IN INVESTING ACTIVITIES (4,511,609) (795,961) FINANCING ACTIVITIES Proceeds from long-term debt 1,000,000 9,700,000 Principal payments on long-term debt (714,454) (6,402,726) Repurchase of Common Stock (5,217,649) (6,544,680) Dividends (4,032,337) (4,052,544) Other financing activities 54,941 7,425 ------------- ------------- NET CASH USED IN FINANCING ACTIVITIES (8,909,499) (7,292,525) ------------- ------------- INCREASE IN CASH AND CASH EQUIVALENTS 7,487,953 4,461,521 Cash and cash equivalents at beginning of period 19,774,374 17,020,706 ------------ ------------- CASH AND CASH EQUIVLENTS AT END OF PERIOD $ 27,262,327 $ 21,482,227 ============= ============= See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 1997 (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 1996. NOTE B--INCOME TAXES The Company (except for its Canadian subsidiary) files a consolidated federal income tax return. Deferred taxes result from temporary differences between the reporting for income tax and financial statement purposes primarily related to bad debt expense, depreciation expense, basis differences in intangible assets, deferred compensation arrangements and the recognition of net operating loss carryforwards from pooled entities. NOTE C--ACQUISITIONS During the first six months of 1997, the Company acquired certain assets and liabilities of three insurance agencies for $5,920,000 ($3,814,000 in cash, $1,806,000 in deferred cash payments and 22,305 shares of Common Stock) in purchase accounting transactions. Proforma revenues and net income are not material to the consolidated financial statements. NOTE D--SALE OF ASSETS During the six months ended June 30, 1997 and 1996, the Company sold certain insurance accounts and other assets resulting in gains of approximately $2,078,000 and $1,222,000, respectively, including $1,990,000 and $568,000 in the second quarters of 1997 and 1996, respectively. These amounts are included in other revenues in the statement of consolidated income. Revenues, expenses and assets of these operations were not material to the consolidated financial statements. HILB, ROGAL AND HAMILTON COMPANY (THE "COMPANY") MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: For the three months ended June 30, 1997, commissions and fees were $41.7 million, an increase of 13.2% from commissions and fees of $36.8 million during the comparable period of the prior year. Approximately $4.8 million of core commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $0.8 million from the sale of certain offices and accounts in 1996 and 1997. Core commissions and fees from operations owned during both periods increased 1.6%. Investment and other income increased $1.5 million or 140.3% from the prior year primarily due to the gains on the sale of substantially all of the assets of the Orange County, California and Charlottesville, Virginia offices during June 1997. Expenses increased by $4.7 million or 14.0%. Increases include $2.4 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $2.1 million and $0.2 million, respectively, primarily due to the aforementioned purchase acquisitions and consulting fees totaling $550,000, associated with the Company's strategic plan. The Company's overall tax rate for the three months ended June 30, 1997 was 42.1% versus 39.6% for the same period of the prior year. This increase is primarily due to a modest increase in the anticipated corporate effective tax rate due to higher earnings. For the six months ended June 30, 1997, commissions and fees were $89.0 million, an increase of 12.9% from commissions and fees of $78.8 million during the comparable period of the prior year. Approximately $10.1 million of core commissions were derived from purchase acquisitions of new insurance agencies. This increase was in part offset by decreases of approximately $1.4 million from the sale of certain offices and accounts in 1996 and early 1997. Core commissions and fees from operations owned during both periods increased 2.6%. Investment and other income increased $1.0 million or 46.4% from the prior year primarily due to the net impact of nonrecurring gains from the sale of assets. Expenses increased by $9.2 million or 13.6%. Increases include $4.8 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies. Other operating expenses and amortization of intangibles increased approximately $3.3 million and $0.6 million, respectively, primarily due to the aforementioned purchase acquisitions and consulting fees totaling $850,000 associated with the Company's strategic plan. The Company's overall tax rate of 41.1% for the six months ended June 30, 1997, was relatively comparable to the rate of 40.5% for the same period of the prior year and reflects a modest increase in the anticipated corporate effective tax rate. The timing of contingent commissions, policy renewals and acquisitions may cause revenues, expenses and net income to vary significantly from quarter to quarter. As a result of the factors described above, operating results for the six months ended June 30, 1997 should not be considered indicative of the results that may be expected for the entire year ending December 31, 1997. Liquidity and Capital Resources: Net cash provided by operations totaled $20.9 million and $12.6 million for the six months ended June 30, 1997 and 1996, respectively, and is primarily dependent upon the timing of the collection of insurance premiums from clients and payment of those premiums to the appropriate insurance underwriters. The Company has historically generated sufficient funds internally to finance capital expenditures for property and equipment. Cash expenditures for the acquisition of property and equipment were $1.2 million and $2.7 million for the six months ended June 30, 1997 and 1996, respectively. The timing and extent of the purchase and sale of investments is dependent upon cash needs and yields on alternate investments and cash equivalents. The purchase of insurance agencies accounted for under the purchase method of accounting utilized cash of $5.4 million and $3.8 million in the six months ended June 30, 1997 and 1996, respectively. Cash expenditures for such insurance agency acquisitions have been primarily funded through operations and long-term borrowings. In addition, a portion of the purchase price in such acquisitions may be paid through Common Stock and deferred cash payments. Cash proceeds from the sale of accounts and other assets amounted to $2.1 million and $1.2 million in the six months ended June 30, 1997 and 1996, respectively. The Company did not have any material capital expenditure commitments as of June 30, 1997. Financing activities utilized cash of $8.9 million and $7.3 million in the six months ended June 30, 1997 and 1996, respectively. The Company has consistently made scheduled debt payments and annually increased its dividend rate. In addition, during the six months ended June 30, 1997 and 1996, the Company repurchased 349,564 and 479,000, respectively, shares of its Common Stock under a stock repurchase program. The Company is currently authorized to purchase an additional 1,100,000 shares and expects to continue to repurchase shares during the remainder of 1997. The Company does not anticipate any change in the current dividend rate in the foreseeable future. The Company has a bank credit agreement for $30.0 million under loans due through 2001. At June 30, 1997, there were loans of $24.0 million outstanding under the agreement. The Company had a current ratio (current assets to current liabilities) of 0.87 to 1.00 as of June 30, 1997. Shareholders' equity approximated $55.3 million at both June 30, 1997 and December 31, 1996. The debt to equity ratio of 0.52 to 1.00 is increased from the ratio at December 31, 1996 of 0.49 to 1.00 due to net income offset by the impact of the aforementioned purchase of Common Stock of the Company and additional long-term borrowings. The Company believes that cash generated from operations, together with proceeds from borrowings, will provide sufficient funds to meet the Company's short and long-term funding needs. PART II - OTHER INFORMATION Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The Annual Meeting of Shareholders (the "Meeting") of Hilb, Rogal and Hamilton Company (the "Company") was held on Tuesday, May 6, 1997. c) The Shareholders voted for the election of the following persons to serve as directors of the Company for the terms of three (3) years expiring on the date of the Annual Meeting in 2000. The results of the voting in these elections are set forth below. Votes Votes Votes Non- For Against Withheld Votes Robert H. Hilb 10,682,931 0 1,236,407 1,402,658 Andrew L. Rogal 10,791,651 0 1,127,687 1,402,658 Philip J.Faccenda 10,791,651 0 1,127,687 1,402,658 At the Meeting, the shareholders voted for the appointment of Ernst & Young, LLP as the independent auditors for the Company for the fiscal year ending December 31, 1997. The results of the voting of this proposal are set forth below. Votes Votes Votes Non- For Against Abstained Votes 11,891,487 26,588 1,263 1,402,658 No other matters were voted upon at the Meeting or during the quarter for which this report is filed. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit - 10.1 Consulting Agreement b) Exhibit - 10.2 Employment Agreement with Andrew L. Rogal c) Exhibit - 10.3 1989 Stock Plan as amended August 5,1997 d) Exhibit - 11 Computation of per share earnings e) No reports on Form 8-K have been filed during the six months ended June 30, 1997. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hilb,Rogal and Hamilton Company (Registrant) Date August 8, 1997 By: /s/ Andrew L. Rogal President and Chief Executive Officer (Principal Executive Officer) Date August 8, 1997 By: /s/ Carolyn Jones Senior Vice President-Finance (Principal Financial Officer) Date August 8, 1997 By: /s/ Robert W. Blanton, Jr. Assistant Vice President and Controller (Chief Accounting Officer) EX-10 2 EXHIBIT 10.1 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT is made and entered into as of June 1, 1997, by and between HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation (the "Company"), and ROBERT H. HILB, an Illinois resident ("Consultant"). RECITALS A. The Company is engaged in the insurance business and prior to the date hereof, Consultant served as the Chief Executive Officer of the Company. B. Effective as of the Company's annual meeting on May 6, 1997, Consultant resigned as Chief Executive Officer of the Company and effective as of May 31, 1997, Consultant resigned as an employee of the Company, and Consultant's resignation was accepted by the Board of Directors of the Company. C. The Company desires to continue to receive the benefit of Consultant's business expertise, knowledge regarding the insurance industry and extensive experience with the operations of the Company, and Consultant desires to assist the Company in its endeavors by providing consulting services to the Company pursuant to the terms and conditions set forth in this Agreement. AGREEMENT In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Consulting Services. The Company and Consultant agree that Consultant shall provide the Company with his personal and unique consulting services as requested by the Board of Directors and/or the Chief Executive Officer of the Company. Consultant's consulting services may include advising members of the Company's management team on matters relating to strategic planning, mergers and acquisitions opportunities, financing for the Company and other matters as may be requested from time to time. The services are not expected to exceed twenty (20) hours per month, on average. 2. Compensation and Reimbursement of Expenses. As the total consideration for the services provided by Consultant hereunder, the Company shall pay Consultant Twenty-Three Thousand Six Hundred Sixty-Six Dollars ($23,666.00) for each of June, July and August of 1997 and Seven Thousand Dollars ($7,000.00) thereafter each month payable on the first day of each month during the term of this Agreement. The Company shall reimburse Consultant for all reasonable expenses incurred by him while providing consulting services to the Company; provided that, all requests submitted by Consultant for reimbursement by the Company shall be supported by original receipts and such additional documentation as is reasonably required by the Company. 3. Term. The term of this Agreement shall commence on the date first above written and shall continue (unless sooner terminated by death) until May 31, 2000, after which it will continue, if desired by the Company's Board of Directors and Consultant, on a month-to-month basis. 4. Independent Contractor. Consultant's relationship to the Company shall be that of an independent contractor retained on a consulting basis. Nothing in this Agreement shall be construed as creating any type of agency relationship including, without limitation, that of employer and employee between the Company and Consultant. Consultant is not an agent of the Company and has no authority to execute or deliver or to accept any agreement on behalf of the Company. 5. Office Space. You will be provided office space and secretarial support comparable to your current space and support to enable you to carry out your duties under this Agreement. 6. Nonsolicitation. Consultant agrees that during the period he is providing consulting services to the Company and for a period of two (2) years after the date this Agreement terminates, whether or not during the term of this Agreement, he will not hire any person who was employed by the Company within the twelve-month period preceding the date of such hiring, or solicit, entice, persuade or induce, directly or indirectly, any person or entity doing business with the Company to terminate such relationship. Consultant acknowledges that the Company will be irrevocably damaged if the provisions of this Section 6 are not specifically enforced. Accordingly, Consultant agrees that, in addition to any other relief to which the Company may be entitled, the Company will be entitled to seek and obtain injunctive relief from a court of competent jurisdiction for the purpose of restraining Consultant from any actual or threatened breach of this Section 6. 7. Survival. The obligations of Consultant contained in Section 6 hereof shall survive the termination of this Agreement. 8. Binding Effect. This Agreement shall be binding upon the parties, their heirs, legal representatives, successors, and assigns. 9. Entire Agreement. This Agreement supersedes all agreements previously made between the parties relating to its subject matter. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. 10. Notices. All notices or other documents under this Agreement shall be in writing and delivered personally or mailed by certified mail, postage prepaid, addressed to the parties at their last known addresses. 11. Severability. The unenforceability, invalidity or illegality of any of the provisions of this Agreement will not render the other provisions unenforceable, invalid or illegal. 12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. HILB, ROGAL AND HAMILTON COMPANY ROBERT H. HILB By /s Andrew L. Rogal /s Robert H. Hilb Andrew L. Rogal, Chief Executive Officer Robert H. Hilb 0309966.02 EX-10 3 EXHIBIT 10.2 HILB, ROGAL AND HAMILTON COMPANY Employment Agreement With ANDREW L. ROGAL EMPLOYMENT AGREEMENT THIS AGREEMENT, effective the 1st day of June, 1997, by and between ANDREW L. ROGAL, an individual residing in the County of Henrico, Virginia (the "Executive"), and HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation with corporate offices located at 4235 Innslake Drive, Glen Allen, Virginia (the "Company"). WHEREAS, the Company has promoted the Executive to the position of Chief Executive Officer of the Company and wants to assure itself of the benefit of the Executive's services and experience; and WHEREAS, the Executive has assumed the position of Chief Executive Officer and is willing to continue in the employ of the Company upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: I. Term Of Employment. (A) The term of the employment of the Executive under this Agreement shall be for a five year period commencing on June 1, 1997, and ending on May 31, 2002. (B) Notwithstanding the foregoing provision (A) of this Section I., the term of employment of the Executive under this Agreement shall be subject to earlier termination by: (1) determination of disability of the Executive pursuant to Section IV.; or (2) dismissal of the Executive from his position as Chief Executive Officer pursuant to resolution by the Board of Directors of the Company, or failure or refusal of the Board of Directors to re-elect the Executive to the position of Chief Executive Officer; or (3) death of the Executive; provided, however, that (i) in the event of termination for determination of disability pursuant to Paragraph (1) above, Section IV. shall apply; (ii) in the event of termination pursuant to Paragraph (2) above for "Proper Cause" (defined in Section V.(A)), Section V.(B) shall apply; (iii) in the event of termination pursuant to Paragraph (2) above without "Proper Cause" (defined in Section V.(A)), Section VI. shall apply; or (iv) in the event of termination due to the death of the Executive pursuant to Paragraph (3) above, Section VII. shall apply. II. Services To Be Rendered. The Company agrees to employ the Executive as the Chief Executive Officer of the Company, subject to the terms, conditions and provisions of this Agreement. The Executive hereby accepts such employment and agrees that he shall devote the same degree of skill and diligence in rendering services to the Company under this Agreement as he applied during his prior employment by the Company. The Executive shall report to and be subject to the direction of the Board of Directors of the Company. The Executive agrees that his employment as Chief Executive Officer of the Company pursuant to this Agreement is a full time position. Notwithstanding the foregoing, the Executive may devote a reasonable amount of his time to serving as an officer and director of other companies affiliated with the Company; to his personal investments and business affairs, including service as a director of unaffiliated companies; and to civic, political and charitable activities; provided however, the Executive shall not accept any position as a director of any unaffiliated for-profit business organization, other than positions presently held by him, without prior approval of the Board of Directors of the Company (which approval will not be unreasonably withheld). III. Compensation. In consideration for the services rendered to the Company under this Agreement, the Company shall pay and provide to the Executive the following compensation and benefits: (A) Salary. The Company shall pay the Executive an annual base salary of $400,000.00, payable in twelve equal monthly installments on the last business day of each calendar month. This annual base salary shall be reviewed annually by the Compensation Committee of the Board of Directors (the "Compensation Committee") to consider appropriate increases, but in no event shall the amount of the base salary be reduced. (B) Annual Incentive Bonus. In addition to the base salary to be paid to the Executive under Section III.(A), the Executive shall also be entitled to an annual incentive bonus as established and modified, from time to time, by the Compensation Committee. (C) Ancillary Benefits. The Executive shall also be entitled to vacations, participation in the Company's Profit Sharing Savings Plan (401K) and Supplemental Executive Retirement Plan, sick leave benefits, post-retirement benefit plan, and all other ancillary benefits provided by the Company, including, but not limited to, group life, health and disability insurance coverages, consistent with the compensation policies and practices of the Company from time to time prevailing with respect to persons who are executive officers of the Company. (D) The Executive shall receive such stock option awards each year as determined by the Compensation Committee in it's sole discretion. IV. Disability. (A) The term of employment of the Executive may be terminated at the election of the Company upon a determination by the Board of Directors of the Company, made based upon a qualified medical opinion, that the Executive will be unable, by reason of physical or mental incapacity, to perform the reasonably expected or customary duties of Chief Executive Officer of the Company on a full-time basis for a period longer than three (3) consecutive months or more than six (6) months in any consecutive twelve (12)-month period. In the exercise of its determination, the Board of Directors shall give due consideration to the opinion of the Executive's personal physician or physicians and to the opinion of any physician or physicians selected by the Board of Directors for these purposes. If the Executive's personal physician disagrees with the physician retained by the Company, the Board of Directors will retain an impartial physician selected by the Executive's personal physician and the Company's physician and the opinion of the impartial physician shall be binding upon the Company and the Executive. The Executive shall submit to examination by any physician or physicians so selected by the Board of Directors, and shall otherwise cooperate with the Board of Directors in making the determination contemplated hereunder, such cooperation to include, without limitation, consenting to the release of information by any such physician(s) to the Board of Directors. (B) In the event of such termination for disability, the Company shall thereupon be relieved of its obligations to pay any compensation and benefits under Section III., except for accrued and unpaid items, but shall, in addition, pay to the Executive such disability compensation as set forth in any disability plan established by the Company for its executive offices. V. Termination For Proper Cause. (A) The occurrence of any of the following events shall constitute "Proper Cause" for termination of the employment of the Executive under this Agreement, at the election of the Board of Directors of the Company: (1) the Executive shall voluntarily resign as a director, officer or employee of the Company or any of its affiliates without the written consent of the Board of Directors of the Company; (2) the Executive shall breach this Agreement in any material respect and fail to cure such breach within sixty (60) calendar days after receiving written notice of such breach from the Company; or (3) the commission of a fraud, or other criminal act, by the Executive directly involving the Company or any of its affiliates which would constitute a felony if prosecuted under criminal law; provided, however, the inability of the Executive to achieve favorable results of operations shall clearly not be deemed Proper Cause for termination hereunder. (B) In the event of termination of the Executive's employment pursuant to Section I.(B)(2) for Proper Cause, the Company shall thereupon be relieved of its obligations to pay any compensation and benefits under Section III., except for accrued and unpaid items. VI. Termination Without Proper Cause. (A) In the event of termination of the Executive pursuant to Section I.(B)(2) without Proper Cause (as defined in Section V.(A) above), the Company shall thereafter be and remain obligated to pay to the Executive (or his estate or designated beneficiary) the compensation and benefits provided under Section III.(A) and III.(B) and such benefits under III.(C) as are payable to a terminated employee until expiration of the five year term of employment established by Section I.(A). In the event of a dispute as to whether Executive was terminated for or without "Proper Cause," or regarding the amount of compensation Executive is entitled to receive under this Section VI., the Company shall be obligated to continue to pay to the Executive (or his estate or designated beneficiary) all of the compensation and benefits reserved under Section III. until the dispute is resolved by an arbitrator pursuant to Section XVIII. hereof. (B) For purposes of calculating the annual incentive bonus payable under Section III.(B), the Company shall make to the Executive (or his estate or designated beneficiary), an annual payment equal to the greater of the (i) highest annual incentive bonus payment received by Executive pursuant to Section III.(B) for the term of this Agreement, or (ii) the sum of $100,000.00. VII. Death. In the event of termination of the Executive's employment pursuant to Section I.(B)(3) above, the Company shall pay the Executive's estate or designated beneficiary such death benefits as may be set forth in any life insurance plan established by the Company for its executive officers. VIII. Confidentiality. For purposes of this Agreement, "Confidential Information" shall mean any information of a proprietary or confidential nature and trade secrets of the Company and its affiliates relating to the business of the Company and its affiliates that have not previously been publicly released by duly authorized representatives of the Company. The Executive agrees to regard and preserve as confidential all Confidential Information pertaining to the Company's business that has been or may be obtained by the Executive in the course of his employment with the Company, whether he has such information in his memory or in writing or other physical form. The Executive shall not, without written authority from the Company to do so, use for his personal benefit or his personal purposes, unrelated to business of the Company, nor disclose to others, either during the term of his employment hereunder or for two (2) years thereafter, except as required by the conditions of his employment hereunder, any Confidential Information of the Company. This provision shall not apply after the Confidential Information has been voluntarily disclosed to the public by a duly authorized representative of the Company, independently developed and disclosed by others, or otherwise enters the public domain through lawful means. IX. Removal Of Documents Or Objects. The Executive agrees not to remove from the premises of the Company, except as an employee of the Company in pursuit of the business of the Company or any of its affiliates, or except as specifically permitted in writing by the Company, any document or object containing or reflecting any Confidential Information of the Company. The Executive recognizes that all documents or material containing Confidential Information developed by him or by someone else in the course of employment by the Company, are the exclusive property of the Company. X. Nonpiracy Covenants. (A) For the purpose of this Agreement, the following terms shall have the following meanings: (1) "HRH Customers" shall be limited to those customers of the Company or its affiliates for whom there is an insurance policy or bond in force or to or for whom the Company or its affiliates are rendering services as of the date of termination of the Executive's employment; (2) "Affiliates of the Company" shall mean each of the subsidiary corporations of Hilb, Rogal and Hamilton Company engaged in business as an insurance agency as of the date of termination of the Executive's employment; (3) "Prohibited Services" shall mean services in the fields of insurance performed by the Company or its affiliates, their agents or employees in any other business engaged in by the Company or its affiliates on the date of termination of the Executive's employment. "Fields of Insurance" does not include title insurance, but does include all lines of insurance sold by the Company or its affiliates, including, without limitation, property and casualty, life, group, accident, health, disability, and annuities; (4) "Prospective Customers" shall be limited to those parties known by the Executive to have been solicited for business within any Prohibited Service within the twelve (12) month period preceding the date of termination of the Executive's employment, and with or from whom, within the twelve (12) month period preceding the date of termination of the Executive's employment, someone acting on behalf of the Company or its affiliates either had met for the purpose of offering any Prohibited Service or had received a written response to an earlier solicitation to provide a Prohibited Service; (5) "Restricted Period" shall mean the period of two (2) years immediately following the date of termination of the Executive's employment. (B) The Executive recognizes that over a period of many years the Company has developed, at considerable expense, relationships with, and knowledge about, Customers and Prospective Customers which constitute a major part of the value of the Company. During the course of his employment by the Company, the Executive will either have substantial contact with, or obtain substantial knowledge about, these Customers and Prospective Customers. In order to protect the value of the Company's business, the Executive covenants and agrees that, in the event of the termination of his employment, but only if said termination is voluntary or for Proper Cause, he shall not, directly or indirectly, for his own account or for the account of any other person or entity, as an owner, stockholder, director, employee, partner, agent, broker, consultant or other participant during the Restricted Period: (1) solicit a Customer for the purpose of providing Prohibited Services to such Customer; (2) accept an invitation from a Customer for the purpose of providing Prohibited Services to such Customer; (3) solicit a Prospective Customer for the purpose of providing Prohibited Services to such Prospective Customer; and (4) accept an invitation from a Prospective Customer for the purpose of providing Prohibited Services to such Prospective Customer. Subsections (1), (2), (3), and (4) are separate and divisible covenants; if for any reason any one covenant is held to be illegal, invalid or unenforceable, in whole or in part, the remaining covenants shall remain valid and enforceable and shall not be affected thereby. Further, the periods and scope of the restrictions set forth in any such subsection shall be reduced by the minimum amount necessary to reform such subsection to the maximum level of enforcement permitted to the Company by the law governing this Agreement. Additionally, the Executive agrees that no separate geographic limitation is needed for the foregoing nonpiracy covenants as such are not a prohibition on the Executive's employment in the insurance agency business and are already limited to only those entities which are included within the definition of "Customer" and "Prospective Customer." XI. Nonraiding of Employees. The Executive covenants that during his employment hereunder and the Restricted Period specified in Section X. hereof, but only if said termination is voluntary or for proper cause, he will not solicit, induce or encourage for the purposes of employing or offering employment to any individuals who, as of the date of termination of the Executive's employment, are employees of the Company or its affiliates, nor will he directly or indirectly solicit, induce or encourage any of the Company's or its affiliates' employees to seek employment with any other business, whether or not the Executive is then affiliated with such business. XII. Notification of Former and New Employment. During the term of this Agreement and the Restricted Period specified in Section X. hereof, but only if the termination of employment by the Executive is voluntary or with Proper Cause, the Executive covenants to notify any prospective employer or joint venturer, which is a competitor of the Company of this Agreement with the Company; and if the Executive accepts employment or establishes a relationship with such competitor, the Executive covenants to notify the Company immediately of such relationship. If the Company reasonably believes that the Executive is affiliated or employed by or with a competitor of the Company during the Restricted Period, after termination of his employment voluntarily or with Proper Cause, then the Executive grants the Company the right to forward a copy of this Agreement to such competitor. XIII. Remedies Upon Employee Breach of Agreement. (A) If the Executive materially breaches any provision of this Agreement and fails to cure any such material breach within sixty (60) days after written notice of said material breach is received from the Company, the Company reserves the right to avail itself of any reasonable remedy available to it at law or in equity. Further, if the Executive fails to cure any such material breach after sixty (60) days from receipt of written notice of the material breach, the Company may, at its sole option, employ reasonable disciplinary procedures against the Executive for any material breach, up to and including discharge. The Executive acknowledges and agrees that the Company shall be entitled to injunctive relief against the Executive for any material violation by the Executive of Sections VIII. IX., X., XI., or XII. of this Agreement which the Executive fails to cure within sixty (60) days after receipt of written notice from the Company. The Executive agrees that the foregoing remedies shall be cumulative and not exclusive, shall not be waived by any partial exercise or nonexercise thereof and shall be in addition to any other remedies available to the Company at law or in equity. (B) Notwithstanding the foregoing, if the Executive materially breaches Sections IX. or X. of this Agreement, the Company may, at its sole option, seek liquidated damages with respect to each Customer or Prospective Customer procured by or through the Executive, directly or indirectly, in violation of Sections IX. or X. of this Agreement (with such Customers being hereafter referred to as "Lost Customers" and with such Prospective Customers being hereafter referred to as "Lost Prospects"). The Executive acknowledges that it would be difficult to calculate damages incurred by the Company in the event of such a material breach and that the following liquidated damages clause, when so elected by the Company, is necessary and reasonable for the protection of the Executive. The Company agrees that, if it elects to exercise the liquidated damages provision with respect to a Lost Customer or Lost Prospect, it shall not seek an injunction with respect thereto if the Executive pays such liquidated damages. The Executive also acknowledges that the Company may or may not choose to exercise this liquidated damages provision and that the Company may, at its sole option, seek injunctive relief with respect to some Lost Customers and Lost Prospects and liquidated damages with respect to other Lost Customers and Lost Prospects. Finally, the Executive acknowledges that he has no right whatsoever to force the Company to exercise this liquidated damages provision, and that such choice remains entirely the Company's. Liquidated damages shall be calculated as follows: (1) A Lost Customer shall be valued at 150% of the gross revenue to the Company in the most recent twelve (12) month period preceding the date of loss of such account. If such Lost Customer had not been a Customer of the Company for an entire twelve (12) month period, such liquidated damages shall be 150% of the gross revenue which would have been, in the absence of a material breach by the Executive, realized by the Company in the initial twelve (12) month period of such Customer being served by the Company. A Lost Prospect shall be valued at 150% of the gross revenue realized in the initial twelve (12) month period of such Lost Prospect being served by any one or more persons or entities receiving such revenue as a direct result of the Executive's material breach. (2) The Executive acknowledges that the foregoing damage amounts are fair and reasonable, that an industry rule of thumb for the valuation of any agency is 150% of revenue and that, on the margin, selected accounts may be worth much more than 150% of their annual revenue to an agency. (C) The Executive shall pay such liquidated damages to the Company within ninety (90) business days after a final order is entered by the Arbitrator and received by the Executive ordering the Executive to make such payment. Thereafter, such liquidated damages shall bear interest at the prime rate of interest in effect at the Bank of Virginia. The Executive acknowledges that a broker of record letter granted during the Restricted Period, if applicable, by a Customer or Prospective Customer in favor of the Executive or any person or entity with whom or which the Executive is directly affiliated shall be prima facie evidence of a violation of Section X. of this Agreement and establishes a rebuttable presumption in favor of the Company that Section X. of this Agreement has been violated by the Executive. Further, the Executive acknowledges that if the Restricted Period is applicable to him, he has an affirmative duty to inform such Customer or Prospective Customer that he cannot accept its business until after the Restricted Period and that he must minimize all contact with such Customer or Prospective Customer. XIV. Tolling of Restrictive Covenants During Violation. If a material breach by the Executive of any of the restrictive covenants of this Agreement occurs, the Executive agrees that the restrictive period of each such covenant so materially violated shall be extended by a period of time equal to the period of such material violation by the Executive. It is the intent of this Section that the running of the restricted period of a restrictive covenant shall be tolled during any period of material violation of such covenant so that the Company shall get the full and reasonable protection for which it contracted and so that the Executive may not profit by his material breach. XV. Merger, Consolidation or Sale. The Company intends to provide certain anti-takeover protections to its executives in the next twelve (12) months. Executives shall receive protections at that time commensurate with his position with the Company. XVI. Notices. All notices and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid: (A) If to the Company, to it at the following address: 4235 Innslake Drive Glen Allen, Virginia 23060 Attn: Chairman of the Board (B) If to the Executive, to him at the following address: 9023 Norwick Road Richmond, Virginia 23229 with a copy to: Daniel H. Shapira, Esquire Marcus & Shapira, LLP 35th Floor One Oxford Centre 301 Grant Street Pittsburgh, PA 15219 or to such other place as either party shall have specified by notice in writing to the other. A copy of any notice or other communication given under this Agreement shall also be sent to the Secretary and the Treasurer of the Company addressed to such officers at the then principal office of the Company. XVII. Governmental Regulation. Nothing contained in this Agreement shall be construed so as to require commission of any act contrary to law and whenever there is any conflict between any provision of this Agreement and any statute, law, ordinance, order or regulation, the latter shall prevail, but in such event any such provision of this Agreement shall be curtailed and limited only to the extent necessary to bring it within the legal requirements. XVIII. Arbitration. Any dispute or controversy as to the interpretation, construction, application or enforcement of, or otherwise arising under or in connection with this Agreement, shall be submitted at the request of either party hereto for mandatory, final and binding arbitration in the City of Richmond, Virginia, in accordance with the commercial arbitration rules then prevailing of the American Arbitration Association. The Company and Executive waive the right to submit any controversy or dispute to a Court and/or a jury. Any award rendered therein shall provide the full remedies available to the parties under the applicable law and shall be final and binding on each of the parties hereto and their heirs, executors, administrators, successors and assigns and judgment may be entered thereon in any court having jurisdiction. The prevailing party in any such arbitration shall be entitled to an award by the arbitrator of all reasonable attorneys' fees and expenses incurred in connection with the arbitration. XIX. Indemnification by the Company. The Company shall defend, indemnify and hold harmless the Executive against any all claims, causes of actions, damages and expenses (including all legal fees and expenses) in any threatened, pending or completed action, arising out of or relating in any way to action or conduct by the Executive by reason of the fact that he was a representative of the Company or was serving at the request of the Company or acts or conduct within the course of his employment pursuant to this Agreement or in his capacity as a director of the Company. If the Company contends that any action or conduct by the Executive was not within the course of his employment or is otherwise not subject to this provision, the Company shall pay to the Executive all defense costs and expenses to defend such an action and shall only be entitled to reimbursement of such fees and expenses if after a final adjudication, including all available appeals, there is a holding that the Executive was not entitled to the defense and indemnification under this provision. XX. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. XXI. Divisibility. Should an arbitrator declare any provision of this Agreement to be invalid, such declaration shall not affect the validity of the remaining portion of any such provision or the validity of any other term or provision of the Agreement as a whole or any part thereof, other than the specific portion declared to be invalid. XXII. Headings. The headings to the Sections and Paragraphs of this Agreement are for convenience of reference only and in case of any conflict the text of this Agreement, rather than the headings, shall control. XXIII. Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of the successors and assigns of the Company and the heirs, executors and legal representatives of the Executive. XXIV. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter contained herein and supersedes all prior agreements, arrangements and understandings relating to the subject matter and may only be amended by a written agreement signed by the parties hereto or their duly authorized representatives. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WITNESS: __/s Timothy J. Korman ______/s Andrew L. Rogal____________ Andrew L. Rogal ATTEST: HILB, ROGAL and HAMILTON COMPANY _/s Dianne F. Fox___ By:___/s Philip J. Faccenda_________ Its: Chairman of the Compensation Committee of the Board of Directors 0341685.02 EX-10 4 EXHIBIT 10.3 - - 16 - HILB, ROGAL AND HAMILTON COMPANY 1989 STOCK PLAN (As Amended August 5, 1997) I. PURPOSE This 1989 Stock Plan is intended to assist Hilb, Rogal and Hamilton Company (the "Company") in recruiting, retaining and motivating capable individuals as key employees and Directors by enabling those individuals who contribute significantly to the Company to participate in its future success and to associate their interests with those of the Company through equity participation or equity-based rewards. This Plan is also intended to assist affiliated corporations in recruiting, retaining and motivating capable individuals as key employees by enabling such employees who contribute significantly to the affiliated corporation and, thereby the Company, to participate in the Company's future success and to associate their interests with those of the Company through equity participation or equity- based rewards. The proceeds received by the Company from the sale of Common Stock pursuant to this Plan shall be used for general corporate purposes. II. DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: (a) Affiliate means any "subsidiary" or "parent" corporation (within the meaning of Section 424 of the Code) of the Company. (b) Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an Option, SAR or Restricted Stock award granted to such Participant. (c) Board means the Board of Directors of the Company. (d) Change of Control means and shall be deemed to have taken place if: (i) any individual, entity or "group" (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) becomes the beneficial owner of shares of the Company having 25 percent or more of the total number of votes that may be cast for the election of directors of the Company, other than (a) as a result of any acquisition directly from the Company, or (b) as a result of any acquisition by any employee benefit plans (or related trusts) sponsored or maintained by the Company or its Subsidiaries; or (ii) there is a change in the composition of the Board such that the individuals who, as of August 5, 1997, constitute the Board (the Board as of August 5, 1997 shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to August 5, 1997 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii) if at any time, (w) the Company shall consolidate with, or merge with, any other Person and the Company shall not be the continuing or surviving corporation, (x) any Person shall consolidate with, or merge with, the Company, and the Company shall be the continuing or surviving corporation and in connection therewith, all or part of the outstanding Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (y) the Company shall be a party to a statutory share exchange with any other Person after which the Company is a Subsidiary of any other Person, or (z) the Company shall sell or otherwise transfer 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons. (e) Change of Control Date is the date of the occurrence of an event described in (i), (ii) or (iii) of the definition of "Change of Control" above. (f) Code means the Internal Revenue Code of 1986, and any amendments thereto. (g) Committee means the Compensation Committee which shall be appointed from time to time by the Board but shall always consist of three individuals, all of whom shall be Directors of the Company who are not employees of the Company. (h) Common Stock means the common stock of the Company. (i) Director means a member of the Board. (j) Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. (k) Fair Market Value means, for any given date, the closing price per share of Common Stock as reported on the New York Stock Exchange composite tape on that day or, if the Common Stock was not traded on such day, then the next preceding day that the Common Stock was traded on such exchange, all as reported by such source as the Committee may select. (l) Initial Value means with respect to any SAR, the Fair Market Value on the date of the grant of the SAR as set forth in the applicable Agreement. (m) Option means a stock option, not otherwise specifically qualified for favorable tax treatment under a section of the Code, that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement under the terms of this Plan. (n) Participant means an employee of the Company or an Affiliate or a member of the Board of Directors of the Company, whether or not an employee of the Company, who satisfies the requirements of Section IV of the Plan and who either is selected by the Committee to receive an Option, SAR or award of Restricted Stock or receives a grant of an Option pursuant to Section VII. (o) Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (p) Plan means the Hilb, Rogal and Hamilton Company 1989 Stock Plan. (q) 1986 Plan means the Hilb, Rogal and Hamilton Company 1986 Incentive Stock Option Plan. (r) Restricted Stock means shares of Common Stock awarded to a Participant under Section X of this Plan. Shares of Common Stock shall cease to be Restricted Stock when, in accordance with the terms of the applicable Agreement, they become freely transferable and free of substantial risk of forfeiture. (s) SAR means a stock appreciation right entitling the holder to receive, with respect to each share of Common Stock encompassed by the exercise of such SAR, the excess of the Fair Market Value over the Initial Value of the SAR. (t) Subsidiary means, with respect to any corporation, a subsidiary of that corporation within the meaning of Code Section 424(f). III. ADMINISTRATION This Plan shall be administered by the Committee. Employees of the Company and its Affiliates and Directors, whether or not employees of the Company or an Affiliate, shall be eligible to participate in this Plan; provided, however, that non-employee Directors shall only receive awards of Options under Section VII below and no other awards or grants hereunder except for adjustments pursuant to Section XI. The Committee shall have authority to grant Options, Restricted Stock awards, or SARs or any combination thereof to any individual eligible to be a Participant other than a non-employee Director, upon such terms (not inconsistent with the provisions of this Plan) as it may consider appropriate. The terms upon which each Option, Restricted Stock award or SAR is granted by the Committee may include conditions (in addition to those contained in this Plan) established by the Committee upon the exercisability of all or any part of the Option or SAR (including the terms of exercise, Option price, time of vesting, transferability and forfeitability) and the price, transferability or forfeitability of Restricted Stock. Notwithstanding any such conditions, the Committee may, in its discretion, accelerate the time at which any Option or SAR which has been granted by the Committee may be exercised or at which Restricted Stock becomes freely transferable and free of risk of forfeiture. The Committee, in its discretion, may establish guidelines supplementing this Plan regarding the selection of Participants, other than non-employee Directors, and the amounts, times and terms for grants by the Committee of Options, Restricted Stock awards and SARs. In addition, the Committee shall have complete authority to interpret all provisions of this Plan, to adopt, amend, and rescind rules and regulations pertaining to the administration of this Plan, and to make all other determinations necessary or advisable for the administration of this Plan. The Committee shall prescribe the form of Agreements, consistent with the Plan, to set forth terms and conditions for Options, SARs and Restricted Stock awards granted to individual Participants. Any decision made, or action taken, by the Committee in connection with the administration of this Plan shall be final and conclusive. No member of the Committee shall be liable for any act done in good faith with respect to this Plan or any Agreement or Common Stock or stock right granted under its terms. All expenses associated with the administration of this Plan shall be borne by the Company. IV. ELIGIBILITY (1) General. Any employee of the Company, or any employee of an Affiliate, who, in the judgment of the Committee, has contributed or may be expected to contribute to the profits or growth of the Company or an Affiliate, as the case may be, may be granted one or more Options, SARs or awards of Restricted Stock by the Committee. Non-employee Directors shall receive Options only under the terms of Sections VII below. (2) Grants. The Committee will designate employees to whom Options, SARs or awards of Restricted Stock are to be granted and will specify the number of shares of Common Stock subject to each grant. An Option may be granted to an employee with a related SAR and an SAR may be granted to an employee with a related Option or each may be granted independently. All Options, SARs and awards of Restricted Stock granted under this Plan shall be evidenced by Agreements which shall be subject to applicable provisions of this Plan and, with respect to grants of Options, SARs and awards of Restricted Stock to employees, to such other terms and provisions as the Committee may adopt. V. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN Upon the proper exercise of any Option, independent SAR or award of Restricted Stock, and payment therefor, the Company may deliver to the Participant authorized but previously unissued Common Stock. The maximum aggregate number of shares of Common Stock that may be issued pursuant to both this Plan and the 1986 Plan is 625,000, inclusive of all shares issued pursuant to the 1986 Plan prior to the adoption of this Plan, (the "Maximum Issuable Shares"). The Maximum Issuable Shares shall be increased, or decreased, at the end of each fiscal year by 13.39% of the increase, or decrease, in the number of shares of Common Stock issued and outstanding between the first and last days of the fiscal year (other than increases from the issuance of Common Stock under this Plan or the 1986 Plan); provided, however, that the Maximum Issuable Shares shall not be reduced below the number that is the sum of those already issued and those that are the subject of outstanding options under the 1986 Plan or this Plan at the end of the fiscal year. This annual adjustment shall first be made as of the last day of the Company's fiscal year that begins on January 1, 1989. If an Option is terminated, in whole or in part, for any reason other than its exercise, the number of shares of Common Stock allocated to the Option or portion thereof may be reallocated to other Options to be granted under this Plan or options under the 1986 Plan. Any shares of Restricted Stock that are forfeited by a Participant may be reallocated to other awards of Restricted Stock under this Plan. Upon the exercise of an SAR granted independently of an Option, the Company may deliver to the Participant authorized but previously unissued Common Stock, cash, or a combination thereof as provided in Section IX(3). If such an SAR is terminated, in whole or in part, for any reason other than its exercise, the number of shares of Common Stock allocated to that SAR, or portion thereof, respectively, may be reallocated to other Options under this Plan or options under the 1986 Plan or SARs which may be granted independently of Options under this Plan. VI. OPTION PRICE The price per share for Common Stock which may be purchased by the exercise of any Option granted by the Committee under this Plan shall be set by the Committee. Such Option price may differ between Options and may be less than Fair Market Value at the time of grant in the discretion of the Committee. VII. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS Each Director of the Company who is not an employee of the Company at the time of the grant shall receive a grant of an Option for the purchase of 2,000 shares of Common Stock on the first business day following the 1993, 1994, 1995, 1996 and 1997 Annual Meetings of the Shareholders of the Company. Each such Option granted to a non-employee Director shall be for a purchase price equal to the Fair Market Value of the Common Stock at the time of the grant and shall be evidenced by an Agreement. Such Agreement shall contain terms and provisions consistent with the applicable provisions of this Plan. VIII. EXERCISE OF OPTIONS AND SARS (1) Maximum Option or SAR Period. Options and SARs granted to employees may be exercisable immediately or become exercisable after any term of months or years and may remain exercisable for any term of months or years as set by the Committee in its discretion at the time of granting. The date upon which any Option or SAR granted by the Committee becomes exercisable may be accelerated by the Committee in its discretion. The term of exercisability for any Option or SAR granted by the Committee may be extended by the Committee and may be made contingent upon the continued employment of the Participant by the Company or Affiliate. The terms of any Option or SAR granted by the Committee may provide that the Option or SAR is exercisable in whole or in part from time to time over such period of time as the Committee shall consider appropriate. (2) Nontransferability. Any Option or SAR granted under this Plan shall be nontransferable except, in the case of the death of the Participant, by will or by the laws of descent and distribution. In the event of any such transfer upon the death of the Participant, the Option and any related SAR must be transferred to the same person or persons, trust or estate and may not be separated. During the lifetime of the Participant to whom an Option or SAR is granted, the Option or SAR may be exercised only by the Participant. No right or interest of a Participant in any Option or SAR shall be liable for, or subject to, any obligation, lien, or liability of such Participant. (3) Employee Status. In the event that the terms of any Option or SAR granted to an employee of the Company provide that the Option or SAR may be exercised only during the employment of the Participant or within a specified period of time after the termination of his employment, the Committee may decide in each case whether and the extent to which leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall be deemed interruptions of continuous employment. IX. METHODS OF EXERCISE (1) Exercise. Subject to the provisions of Sections VIII, XI and XIII, an Option or SAR granted by the Committee may be exercised in whole at any time or in part from time to time at such times and in compliance with the applicable Agreement and such other requirements as the Committee shall determine. An Option granted under Section VII hereof may be exercised in whole at any time or in part from time to time at such times and in compliance with the applicable Agreement. A partial exercise of an Option or SAR shall not affect the right to exercise the Option or SAR from time to time in accordance with this Plan with respect to remaining shares subject to the Option or SAR, except that the exercise of an Option shall result in the termination of any related SAR to the extent of the number of shares with respect to which the Option is exercised. (2) Payment for Option Exercises. Unless otherwise provided by the Agreement (or permitted by the Committee for non- qualified Options granted by the Committee), payment of the Option price shall be made in cash (in United States dollars) or a cash equivalent acceptable to the Committee. If the Agreement so provides (or the Committee so permits), payment of all or a part of the Option price for a non-qualified Option may be effected by a "cashless exercise" thereof (i) by the Participant surrendering shares of Common Stock to the Company, or (ii) by the Participant delivering to a broker instructions to sell a sufficient number of the shares of Common Stock being acquired upon exercise of the Option to cover the Option price and any additional costs and expenses associated with the cashless exercise. If Common Stock is surrendered to pay all or part of the Option price, the shares surrendered must have a Fair Market Value (determined as of the date of exercise of the Option) that is not less than such Option price or part thereof. (3) Settlement of SARs. At the discretion of the Committee, the amount payable as a result of the exercise of an SAR may be settled in cash, Common Stock or a combination of cash and Common Stock. No fractional share shall be delivered upon the exercise of an SAR but cash shall be paid in lieu thereof. (4) Shareholder Rights. No Participant shall, as a result of receipt of any Option or SAR, have any rights as a shareholder until the date he exercises such Option or SAR. (5) Tax Withholding With Respect to Options. In the case of the exercise of an Option, the Participant shall pay to the Company in cash the full amount of all federal and state income and employment taxes required to be withheld by the Company in respect of the taxable income of the Participant from such exercise. If the Agreement so provides (or the Committee so permits for non-qualified Options granted by the Committee), payment of all or a part of such taxes may be made by the Participant surrendering shares of Common Stock to the Company, provided the shares surrendered have a Fair Market Value (determined as of the date of exercise of the Option) that is not less than the amount of such taxes or part thereof, or by the sale of shares of Common Stock upon the cashless exercise of an Option through a broker. X. RESTRICTED STOCK. (1) Award. In accordance with the provisions of Section IV, the Committee will designate employees to whom an award of Restricted Stock is to be made and will specify the number of shares of Restricted Stock to be awarded, and the purchase price per share to be paid by the Participant. (2) Vesting. The Committee, on the date of the award, may prescribe that the Participant's rights in the Restricted Stock shall be forfeitable or otherwise restricted in any manner in the discretion of the Committee for such period of time as is set forth in the Agreement. By way of example and not limitation, the restrictions may postpone transferability of the shares or may provide that the shares will be forfeited if the employment of the Participant by the Company or an Affiliate or the service of the Participant as a Director terminates before the expiration of a stated term. (3) Shareholder Rights. Prior to the forfeiture of shares in accordance with the terms of the Agreement and while the shares are Restricted Stock, a Participant will have all rights of a shareholder with respect to Restricted Stock, including the right to receive dividends and vote the shares; provided, however, that (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of Restricted Stock, (ii) the Company shall retain custody of the certificates evidencing shares of Restricted Stock, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each award of Restricted Stock. The limitations set forth in the preceding sentence shall not apply after the shares cease to be Restricted Stock. (4) Tax Withholding With Respect to Restricted Stock. The Participant shall pay or provide for the payment to the Company in cash of the full amount of all federal and state income and employment taxes required to be withheld by the Company with respect to the inclusion in the taxable income of the Participant of any amount pursuant to an award of Restricted Stock, including an election made pursuant to Section 83(b) of the Code or the lapse of any restriction with respect thereto. XI. CHANGES IN CAPITAL STRUCTURE Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or SAR, and the price per share thereof, and the number of shares of Restricted Stock awarded, shall be adjusted proportionately for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company by reason of any stock dividend, stock split, combination, reclassification, recapitalization, or the general issuance to holders of Common Stock of rights to purchase Common Stock at substantially below its then fair market value, or any change in the number of shares of Common Stock outstanding effected without receipt of cash, property, labor or services by the Company, or any spin-off or other type of distribution of assets to shareholders. In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all or part of its authorized shares without par value into the same number of shares with a par value, or any subsequent change into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. Except as expressly provided above in this Section XI or in Section XIII(3), a Participant shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Restricted Stock or of Common Stock subject to any Option or SAR. The grant of an Option, SAR or Restricted Stock award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. XII. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES No Option or SAR shall be exercisable, no Common Stock or Restricted Stock shall be issued, no certificates for shares of Common Stock or Restricted Stock shall be delivered, and no payment shall be made under this Plan (i) except in compliance with all applicable federal and state laws and regulations and rules of all domestic stock exchanges on which the Company's shares may be listed and (ii) until the Company has obtained such consent or approval as the Board or the Committee may deem advisable from regulatory bodies having jurisdiction over such matters and from the shareholders. The Company and the Committee shall have the right to rely on the opinion of counsel for either of them as to such compliance. Any share certificate issued to evidence Common Stock for which an Option or SAR is exercised or to evidence Restricted Stock may bear such legends and statements as the Board or the Committee may deem advisable to assure compliance with federal and state laws and regulations. XIII. GENERAL PROVISIONS (1) Effect on Employment. Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof) shall confer upon any employee any right to continue in the employ of the Company or an Affiliate or in any way affect any right and power of the Company or an Affiliate, as the case may be, to terminate the employment of any employee at any time with or without assigning a reason therefor. (2) Unfunded Plan. This Plan, insofar as it provides for grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by grants under the Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. (3) Change of Control. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control: (a) Any outstanding Option or SAR which is not presently exercisable or vested as of a Change of Control Date shall become fully exercisable and vested to the full extent of the original grant upon such Change of Control Date. (b) The restrictions applicable to any outstanding Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested, nonforfeitable and transferable to the full extent of the original grant. (4) Rules of Construction. Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law. XIV. AMENDMENTS The Board may amend or terminate this Plan from time to time; provided, however, that: (i) no amendment may become effective until the approval of the Company's shareholders is obtained if the amendment (a) increases the aggregate number of shares that may be issued hereunder or (b) changes the class of individuals eligible to become Participants and, (ii) the Board may amend Section VII hereof but only to provide for the granting of Options to non-employee Directors in a year or years after 1997 which Option grants must not cause this Plan to fail to qualify for exemption from Section 16(b) of the Securities Exchange Act of 1934 under the provisions of Rule 16b-3 or any successor rule and provided that such amendment to Section VII hereof must also be approved by a majority of the employee Directors then serving on the Board. No amendment shall, without a Participant's consent, adversely affect any rights of such Participant under any Option or SAR outstanding or Restricted Stock issued at the time such amendment is made unless required by law, regulation or rule of stock exchange. XV. EFFECTIVE DATE OF PLAN Options and SARs may be granted under this Plan, upon its adoption by the Board, provided that no Option or SAR will be effective unless and until this Plan is approved by the holders of a majority of the shares of the Company's outstanding voting stock present in person, or represented by proxy, and entitled to vote at a duly held meeting of the shareholders. No Option or SAR granted prior to such shareholder approval may be exercised before the requisite shareholder approval is obtained. XVI. GOVERNING LAW The Plan shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia, except to the extent that federal law shall be deemed to apply. 0290858.04 EX-11 5 HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Quarter Ended Six Months Ended June 30, June 30, ------------------------------------------------ 1997 1996 1997 1996 PRIMARY: ---- ---- ---- ---- Average shares outstanding 13,166,333 13,524,232 13,239,878 13,626,914 Net effect of dilutive stock options - -- based on the treasury stock method using average fair value 44,061 30,782 67,809 31,051 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 22,059 22,059 Net effect of future shares to be issued in connection with an agency acquisition contingent upon performance 88,235 88,235 ----------- ---------- --------- --------- Average number of shares as adjusted 13,320,688 13,555,014 13,417,981 13,657,965 =========== ========== ========== ========== Net income $3,537,071 $2,674,207 $8,943,787 $7,836,521 =========== ========== ========== ========== Per share amount $.27 $.20 $.67 $.57 ==== ==== ==== ==== FULLY DILUTED: Average shares outstanding 13,166,333 13,524,232 13,239,878 13,626,914 Net effect of dilutive stock options - -- based on the treasury stock method using the end of period value, if higher than average fair value 153,373 46,189 153,018 46,654 Net effect of guaranteed future shares to be issued in connection with an agency acquisition 22,059 22,059 Net effect of future shares to be issued in connection with an agency acquisition contingent upon performance 176,470 176,470 ----------- ---------- --------- --------- Average number of shares as adjusted 13,518,235 13,570,421 13,591,425 13,673,568 =========== ========== ========== ========== Net income $3,537,071 $2,674,207 $8,943,787 $7,836,521 =========== ========== ========== ========== Per share amount $.26 $.20 $.66 $.57 ==== ==== ==== ==== Note:The per share amounts for each period presented above do not necessarily support amounts in the statement of consolidated income because common stock equivalents are less than 3% dilutive. EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10Q FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JUN-30-1997 27,262,327 6,620,567 47,882,860 2,577,000 0 81,543,894 37,514,336 21,979,384 188,023,868 93,943,852 29,029,634 20,356,793 0 0 34,943,442 188,023,868 0 92,235,955 0 0 76,013,944 0 1,032,170 15,189,841 6,246,054 8,943,787 0 0 0 8,943,787 .68 .68
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