-----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, Upp07kd5gn2TujGXLFcVjl+9nvbOHUIjS9UeoNRARqywUZDeFTScpvAv832K6own DGwrdopBvh2467vSf9Wskw== 0000814898-98-000005.txt : 19980810 0000814898-98-000005.hdr.sgml : 19980810 ACCESSION NUMBER: 0000814898-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 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: SEC FILE NUMBER: 000-15981 FILM NUMBER: 98679231 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, 1998 Commission file number 0-15981 HILB, ROGAL AND HAMILTON COMPANY (Exact name of registrant as specified in its charter) Virginia 54-1194795 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 1220, Glen Allen, VA 23060-1220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 747-6500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1998 Common stock, no par value 12,216,237 (This document contains 12 pages) HILB, ROGAL AND HAMILTON COMPANY INDEX Page Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statement of Consolidated Income for the three months and six months ended June 30,1998 and 1997 3 Consolidated Balance Sheet, June 30, 1998 and December 31, 1997 4 Statement of Consolidated Shareholders' Equity for the six months ended June 30, 1998 and 1997 5 Statement of Consolidated Cash Flows for the six months ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 STATEMENT OF CONSOLIDATED INCOME HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997 -------------------------------------------------------------------- Revenues Commissions and fees $43,054,132 $41,687,098 $91,031,861 $88,952,127 Investment income 440,664 408,187 816,469 786,589 Other 2,428,765 2,227,834 2,773,145 2,497,239 ----------- ----------- ----------- ----------- 45,923,561 44,323,119 94,621,475 92,235,955 Operating expenses Compensation and employee benefits 24,490,568 23,898,152 49,287,468 48,867,525 Other operating expenses 11,404,623 11,708,930 22,735,267 22,920,709 Amortization of intangibles 1,959,477 2,095,691 3,896,708 4,225,710 Interest expense 535,312 514,452 1,099,061 1,032,170 ----------- ----------- ----------- ----------- 38,389,980 38,217,225 77,018,504 77,046,114 INCOME BEFORE INCOME TAXES 7,533,581 6,105,894 17,602,971 15,189,841 Income taxes 3,087,984 2,568,823 7,211,833 6,246,054 ----------- ----------- ----------- ----------- NET INCOME $ 4,445,597 $ 3,537,071 $10,391,138 $ 8,943,787 =========== =========== =========== =========== NET INCOME PER COMMON SHARE: Basic $0.35 $0.27 $0.82 $0.67 ===== ===== ===== ===== Dilutive $0.35 $0.27 $0.80 $0.67 ===== ===== ===== =====
See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) JUNE 30, DECEMBER 31, 1998 1997 --------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 28,144,592 $ 22,314,860 Investments 2,509,086 3,892,533 Receivables: Premiums, less allowance for doubtful accounts of $2,363,000 and $2,299,000, respectively 40,656,327 41,292,489 Other 6,204,389 5,720,513 ------------ ------------ 46,860,716 47,013,002 Prepaid expenses and other current assets 2,449,990 3,612,523 ------------ ------------ TOTAL CURRENT ASSETS 79,964,384 76,832,918 INVESTMENTS 4,491,383 5,030,000 PROPERTY AND EQUIPMENT (NET) 11,303,758 11,762,080 INTANGIBLE ASSETS Expiration rights 77,315,801 75,193,075 Goodwill 35,029,516 33,411,145 Noncompetition agreements 12,067,594 11,636,847 ------------ ------------ 124,412,911 120,241,067 Less accumulated amortization 41,772,790 38,071,304 ------------ ------------ 82,640,121 82,169,763 OTHER ASSETS 5,419,956 5,811,797 ------------ ------------ $183,819,602 $181,606,558 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Premiums payable to insurance companies $ 68,349,289 $ 67,520,370 Accounts payable and accrued expenses 13,774,682 10,925,646 Premium deposits and credits due customers 7,379,501 7,752,502 Current portion of long-term debt 2,125,332 2,074,788 ------------ ------------ TOTAL CURRENT LIABILITIES 91,628,804 88,273,306 LONG-TERM DEBT 31,598,133 32,457,882 OTHER LONG-TERM LIABILITIES 10,032,807 9,536,771 SHAREHOLDERS' EQUITY Common Stock, no par value; authorized 50,000,000 shares; outstanding 12,434,137 and 12,813,023 shares, respectively 9,352,650 16,540,461 Retained earnings 41,207,208 34,798,138 ------------ ------------ 50,559,858 51,338,599 ------------ ------------ $183,819,602 $181,606,558 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED) Common Stock Retained Earnings ------------ ----------------- Balance at January 1, 1998 $16,540,461 $34,798,138 Issuance of 98,014 shares of Common Stock 1,251,975 Purchase of 476,900 shares of Common Stock (8,270,524) Payment of dividends ($.315 per share) (3,982,068) Other (169,262) Net income 10,391,138 ------------ ------------ Balance at June 30, 1998 $ 9,352,650 $41,207,208 ============ ============ Balance at January 1, 1997 $25,266,279 $30,031,992 Issuance of 29,796 shares of Common Stock 354,941 Purchase of 349,564 shares of Common Stock (5,217,649) Payment of dividends ($.31 per share) (4,032,337) Other (46,778) Net income 8,943,787 ------------ ------------ Balance at June 30, 1997 $20,356,793 $34,943,442 ============ ============ See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 JUNE 30, 1997 ------------------------------------ OPERATING ACTIVITIES Net income $10,391,138 $ 8,943,787 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,730,591 1,806,860 Amortization of intangible 3,896,708 4,225,709 ___________ ____________ Net income plus amortization and depreciation 16,018,437 14,976,356 Provision for losses on accounts receivable 244,181 392,271 Gain on sale of assets (2,321,176) (2,078,405) Changes in operating assets and liabilities net of effects from insurance agency acquisitions and dispositions: (Increase) decrease in accounts receivable (89,333) 2,011,244 Decrease in prepaid expenses 1,351,435 1,475,525 Increase in premiums payable to insurance companies 828,919 2,890,969 Increase (decrease) in premium deposits and credits (373,001) 1,546,610 Increase (decrease) in accounts payable and accrued expenses 1,376,447 (168,433) Other operating activities 313,528 (137,076) ___________ ____________ NET CASH PROVIDED BY OPERATING ACTIVITIES 17,349,437 20,909,061 INVESTING ACTIVITIES Proceeds from maturities of held-to-maturity investments 2,230,206 2,283,930 Purchase of investments (308,141) (2,389,131) Purchase of property and equipment (1,645,065) (1,180,969) Purchase of insurance agencies, net of cash acquired (4,248,804) (5,445,618) Proceeds from sale of assets 4,241,526 2,106,300 Other investing activities 20,396 113,879 ___________ ____________ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 290,118 (4,511,609) FINANCING ACTIVITIES Proceeds from long-term debt -- 1,000,000 Principal payments on long-term debt (809,205) (714,454) Proceeds from issuance of Common Stock 1,251,975 54,941 Repurchase of Common Stock (8,270,524) (5,217,649) Dividends (3,982,069) (4,032,337) ___________ ____________ NET CASH USED IN FINANCING ACTIVITIES (11,809,823) (8,909,499) ___________ ____________ INCREASE IN CASH AND CASH EQUIVALENTS 5,829,732 7,487,953 Cash and cash equivalents at beginning of period 22,314,860 19,774,374 ___________ ____________ CASH AND CASH EQUIVLENTS AT END OF PERIOD $28,144,592 $ 27,262,327 =========== ============
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 1998 (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 1997. NOTE B--INCOME TAXES The Company (except for its Canadian subsidiary) files a consolidated federal income tax return. Deferred taxes result from temporary differences between the reporting for income tax and financial statement purposes primarily related to bad debt expense, depreciation expense, basis differences in intangible assets, deferred compensation arrangements and the recognition of net operating loss carryforwards from pooled entities. NOTE C--ACQUISITIONS During the first six months of 1998, the Company acquired certain assets and liabilities of one insurance agency for $700,000 in a purchase accounting transaction. Proforma revenues and net income are not material to the consolidated financial statements. NOTE D--SALE OF ASSETS During the six months ended June 30, 1998 and 1997, the Company sold certain insurance accounts and other assets resulting in gains of approximately $2,321,000 and $2,078,000, respectively, including $2,173,000 and $1,990,000 in the second quarters of 1998 and 1997, respectively. These amounts are included in other revenues in the statement of consolidated income. Revenues, expenses and assets of these operations were not material to the consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES June 30, 1998 (UNAUDITED) NOTE E-NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share.
THREE MONTHS ENDED SIX MONTHS ENDED June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 ------------------------------------------------------------- Numerator for basic and dilutive net income per share - net income $ 4,445,597 $ 3,537,071 $10,391,138 $ 8,943,787 =========== =========== =========== =========== Denominator Weighted average shares 12,651,328 13,166,333 12,710,292 13,239,878 Effect of guaranteed future shares to be issued in connection with an agency acquisition 12,000 22,059 11,051 24,791 ___________ ____________ ___________ ____________ Denominator for basic net income per share 12,663,328 13,188,392 12,721,343 13,264,669 Effect of dilutive securities Employee stock options 156,873 44,061 181,807 33,323 Contingent stock - acquisitions 17,320 970 8,660 485 ___________ ____________ ___________ ____________ Dilutive potential common shares 174,193 45,031 190,467 33,808 ___________ ____________ ___________ ____________ Denominator for diluted net income per share - adjusted weighted average shares and assumed conversions 12,837,521 13,233,423 12,911,810 13,298,477 =========== ============ =========== ============ Net Income per Common Share: Basic $0.35 $0.27 $0.82 $0.67 ===== ===== ===== ===== Diluted $0.35 $0.27 $0.80 $0.67 ===== ===== ===== ===== HILB, ROGAL AND HAMILTON COMPANY (THE "COMPANY") MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: For the three months ended June 30, 1998 commissions and fees were $43.1 million, an increase of 3.3% from commissions and fees of $41.7 million during the comparable period of the prior year. Approximately $1.6 million of core commissions were derived from purchase acquisitions of new insurance agencies. This increase was offset by decreases of approximately $1.7 million from the sale of certain offices and accounts in 1998 and 1997. Excluding the effect of acquisitions and dispositions, commissions and fees from operations owned during both periods increased 3.7%. Investment income was comparable to the same period of the prior year. Other income increased $0.2 million or 9.0% from the prior year primarily due to $2.2 million in gains from divestitures, including the sale of substantially all of the assets of the Fort Lauderdale, Florida office during June 1998, compared with net gains of $2.0 million a year earlier, including gains on the sale of substantially all of the assets of the Orange County, California and Charlottesville, Virginia offices. Expenses increased by $0.2 million or 0.5%. Increases include $0.6 million in compensation and benefits primarily related to purchase acquisitions of new insurance agencies and increased earnings, offset in part by decrease from the sale of certain offices and accounts in 1998 and 1997. Other operating expenses and amortization of intangibles decreased approximately $0.3 million and $0.1 million, respectively, primarily due to the impact of dispositions in 1997 and consulting fees totaling $550,000 in 1997, associated with the Company's strategic plan. The Company's overall tax rate for the three months ended June 30, 1998 was 41.0%, relatively comparable to the rate of 42.1% for the same period of the prior year. For the six months ended June 30, 1998, commissions and fees were $91.0 million, an increase of 2.3% from commissions and fees of $89.0 million during the comparable period of the prior year. Approximately $2.7 million of core commissions were derived from purchase acquisitions of new insurance agencies. This increase was offset by decreases of approximately $4.1 million from the sale of certain offices and accounts in 1997 and 1998. Commissions and fees, excluding the effect of acquisitions and dispositions, from operations owned during both periods increased 4.2%. Investment and other income increased $0.3 million or 9.3% from the prior year primarily due to the net impact of nonrecurring gains from the sale of assets. Expenses remained relatively level with the prior year. Decreases relate to the impact of certain offices sold in 1997 and consulting fees of $850,000 in 1997 related to the Company's strategic plan were offset by the impact of acquisitions. The Company's overall tax rate of 41.0% for the six months ended June 30, 1998, was relatively comparable to the rate of 41.1% for the same period of the prior year. The timing of contingent commissions, policy renewals and acquisitions may cause revenues, expenses and net income to vary significantly from quarter to quarter. As a result of the factors described above, operating results for the six months ended June 30, 1998 should not be considered indicative of the results that may be expected for the entire year ending December 31, 1998. Liquidity and Capital Resources: Net cash provided by operations totaled $17.3 million and $20.9 million for the six months ended June 30, 1998 and 1997, respectively, and is primarily dependent upon the timing of the collection of insurance premiums from clients and payment of those premiums to the appropriate insurance underwriters. The Company has historically generated sufficient funds internally to finance capital expenditures for property and equipment. Cash expenditures for the acquisition of property and equipment were $1.6 million and $1.2 million for the six months ended June 30, 1998 and 1997, respectively. The timing and extent of the purchase and sale of investments is dependent upon cash needs and yields on alternate investments and cash equivalents. The purchase of insurance agencies accounted for under the purchase method of accounting utilized cash of $4.2 million and $5.4 million in the six months ended June 30, 1998 and 1997, respectively. Cash expenditures for such insurance agency acquisitions have been primarily funded through operations and long-term borrowings. In addition, a portion of the purchase price in such acquisitions may be paid through Common Stock and deferred cash payments. Cash proceeds from the sale of accounts and other assets amounted to $4.2 million and $2.1 million in the six months ended June 30, 1998 and 1997, respectively. The Company did not have any material capital expenditure commitments as of June 30, 1998. Financing activities utilized cash of $11.8 million and $8.9 million in the six months ended June 30, 1998 and 1997, respectively. The Company has consistently made scheduled debt payments and annually increased its dividend rate. In addition, during the six months ended June 30, 1998 and 1997, the Company repurchased 476,900 and 349,564, respectively, shares of its Common Stock under a stock repurchase program. The Company is currently authorized to purchase an additional 241,180 shares and expects to continue to repurchase shares during the remainder of 1998. The Company anticipates the continuance of its dividend policy. The Company has a bank credit agreement for $30.0 million under loans due through 2001. At June 30, 1998, there were loans of $30.0 million outstanding under the agreement. The Company had a current ratio (current assets to current liabilities) of 0.87 to 1.00 as of June 30, 1998. Shareholders' equity of $50.6 million at June 30, 1998, is decreased from $51.3 million at December 31, 1997. The debt to equity ratio of 0.62 to 1.00 is decreased from the ratio at December 31, 1997 of 0.63 to 1.00 due to net income offset by the impact of the aforementioned purchase of Common Stock of the Company. The Company believes that cash generated from operations, together with proceeds from borrowings, will provide sufficient funds to meet the Company's short and long-term funding needs. PART II - OTHER INFORMATION Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The Annual Meeting of Shareholders (the "Meeting") of Hilb, Rogal and Hamilton Company (the "Company") was held on Tuesday, May 5, 1998. c) The Shareholders voted for the election of the following persons to serve as directors of the Company for the terms of three (3) years expiring on the date of the Annual Meeting in 2001. The results of the voting in these elections are set forth below. Votes Votes Votes Non- For Against Withheld Votes J. S. M. French 10,746,128 0 668,215 1,268,680 Robert S. Ukrop 10,797,717 0 616,626 1,268,680 Anthony F. Markel 11,204,730 0 209,613 1,268,680 At the Meeting, the shareholders voted for the appointment of Ernst & Young, LLP as the independent auditors for the Company for the fiscal year ending December 31, 1998. The results of the voting of this proposal are set forth below. Votes Votes Votes Non- For Against Abstained Votes 11,355,128 56,335 2,880 1,268,680 At the Meeting, the shareholders voted for the approval of the Non-employee Directors Stock Incentive Plan, which had previously been adopted by the Board. The results of the voting of this proposal are set forth below: Votes Votes Votes Non- For Against Abstained Votes 10,413,346 469,486 531,511 1,268,680 No other matters were voted upon at the Meeting or during the quarter for which this report is filed. Item 6. EXHIBITS AND REPORTS ON FORM 8-K The following exhibits are included herein: a) Exhibit - 10.1 Non-employee Directors Stock Incentive Plan b) No reports on Form 8-K have been filed during the six months ended June 30, 1998. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hilb,Rogal and Hamilton Company (Registrant) Date August 7, 1998 By: /s/ Andrew L. Rogal President and Chief Executive Officer (Principal Executive Officer) Date August 7, 1998 By: /s/ Carolyn Jones Senior Vice President-Finance (Principal Financial Officer) Date August 7, 1998 By: /s/ Robert W. Blanton, Jr. Vice President and Controller (Chief Accounting Officer)
EX-10 2 EXHIBIT 10.1 HILB, ROGAL AND HAMILTON COMPANY NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN 1. Purpose. The purpose of the Hilb, Rogal and Hamilton Company Non-employee Directors Stock Incentive Plan (the "Plan") is to encourage ownership in the Company by non-employee members of the Board, to promote long-term shareholder value and to provide non-employee members of the Board with an incentive to continue as directors of the Company. 2. Definitions. As used in the Plan, the following terms have the meanings indicated: (a) "Act" means the Securities Exchange Act of 1934, as amended. (b) "Agreement" means a written agreement (including any amendment or supplement thereto) between the Company and an Eligible Director specifying the terms and conditions of an Option granted to such Eligible Director. (c) "Annual Meeting" means the annual meeting of shareholders at which members of the Board are routinely elected. (d) "Board" means the Board of Directors of the Company. (e) "Change of Control" means and shall be deemed to have taken place if: (i) any individual, entity or "group" (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Act) (a "Person") becomes the beneficial owner of shares of the Company having 25 percent or more of the total number of votes that may be cast for the election of directors of the Company, other than (a) as a result of any acquisition directly from the Company, or (b) as a result of any acquisition by any employee benefit plans (or related trusts) sponsored or maintained by the Company or its Subsidiaries; or (ii) there is a change in the composition of the Board such that the individuals who, as of the date hereof, constitute the Board (the Board as of such date shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii) if at any time, (a) the Company shall consolidate with, or merge with, any other Person and the Company shall not be the continuing or surviving corporation, (b) any Person shall consolidate with, or merge with, the Company, and the Company shall be the continuing or surviving corporation and in connection therewith, all or part of the outstanding Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (c) the Company shall be a party to a statutory share exchange with any other Person after which the Company is a Subsidiary of any other Person, or (d) the Company shall sell or otherwise transfer 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons. (f) "Company" means Hilb, Rogal and Hamilton Company. (g) "Committee" means the Compensation Committee of the Board. . (h) "Common Stock" means the Common Stock of the Company. In the event of a change in the capital structure of the Company (as provided in Section 13), the shares resulting from such a change shall be deemed to be the Common Stock within the meaning of the Plan. (i) "Date of Grant" means the date as of which a director is automatically awarded an Option pursuant to Section 6. (j) "Effective Date" means the date the Plan is adopted by shareholders of the Company. (k) "Eligible Director" means a member of the Board who is not an employee of the Company or any Subsidiary. (l) "Fair Market Value" means, on any given date, the closing price per share of Common Stock, as reported on the New York Stock Exchange composite tape on that day or, if the Common Stock was not traded on such day, then on the next preceding day that the Common Stock was traded on such exchange, all as reported by such source as the Committee may select. (m) "Fees" means all amounts payable to an Eligible Director for services rendered as a director, including retainer fees, meeting fees and committee fees, but excluding travel and other out of pocket expense reimbursements. (n) "Option" means a stock option, not otherwise specifically qualified for favorable tax treatment under a section of the Internal Revenue Code, that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement under the terms of this Plan, at a price determined in accordance with the Plan. (o) "Plan Year" means the period beginning on the date of an Annual Meeting and ending on the day before the next Annual Meeting. (p) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations in the unbroken chain (other than the last corporation) owns stock possessing at least 50% of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. Participation in the Plan. Each Eligible Director who is not an employee of the Company or Subsidiary shall be eligible to receive Options under Section 6. Each Eligible Director shall be eligible to elect to receive Common Stock in lieu of Fees under Section 7. 4. Stock Subject to the Plan. The maximum number of shares of Common Stock that may be issued upon exercise of Options granted pursuant to the Plan shall be 200,000, subject to adjustment as provided in Section 13. 5. Non-Standing Stock Options. All Options granted under the Plan shall be non-statutory in nature and shall not be entitled to special tax treatment under Internal Revenue Code Section 422. 6. Award, Terms, Conditions and Form of Options. Each Option shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which Agreement shall comply with and be subject to the following terms and conditions: (a) Each Eligible Director shall receive a grant of an Option for the purchase of 5,000 shares of Common Stock on the first business day following the Annual Meeting. If at any time under the Plan there are not sufficient shares of Common Stock available to permit fully the Option grants described in this Section 6(a), the Option grants shall be reduced pro rata (to zero, if necessary) so as not to exceed the number of shares of Common Stock available. (b) The Option exercise price shall be the Fair Market Value of the Common Stock on the Date of Grant. (c) Subject to Section 6(e) below, all Options shall become exercisable immediately or after any term of months or years and may remain exercisable for any term of months or years as set by the Committee in its discretion at the time of granting. Further, the date upon which any Option granted becomes exercisable may be accelerated by the Committee in its discretion and the term of exercisability for any Option granted may be extended by the Committee. The terms of any Option granted by the Committee may provide that the Option is exercisable in whole or in part from time to time over such period of time as the Committee shall consider appropriate. (d) An Option may be exercised in whole at any time or in part from time to time at such times and in compliance with the applicable Agreement. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan with respect to remaining shares subject to the Option. (e) Unless otherwise provided by the Agreement, payment of the Option price shall be made in cash (in United States dollars) or a cash equivalent acceptable to the Committee. If the Agreement so provides, payment of all or a part of the Option price for a non-statutory Option may be effected by a "cashless exercise" thereof (i) by the Eligible Director surrendering shares of Common Stock to the Company, or (ii) by the Eligible Director delivering to a broker instructions to sell a sufficient number of the shares of Common Stock being acquired upon exercise of the Option to cover the Option price and any additional costs and expenses associated with the cashless exercise. If Common Stock is surrendered to pay all or part of the Option price, the shares surrendered must have a Fair Market Value (determined as of the date of exercise of the Option) that is not less than such Option price or part thereof. (f) Options shall become fully exercisable upon a Change of Control. 7. Receipt of Fees in Stock. (a) An Eligible Director may elect to receive up to 100 percent of his or her Fees in shares of Common Stock (a "Stock Election"). A Stock Election must be in writing and shall be delivered to the Corporate Secretary of the Company prior to the Annual Meeting for the Plan Year to which the Stock Election pertains. Except as provided in Section 7(c), a Stock Election may be revoked prior to the last day of any calendar quarter for all calendar quarters beginning after the revocation. A Stock Election must specify the applicable percentage of the Fees that the Eligible Director wishes to receive in shares of Common Stock (the "Designated Percentage"). (b) If a Stock Election is made, the amount of Fees to be paid to an Eligible Director during each calendar quarter shall be determined on the last day of the quarter. The number of shares of Common Stock to be issued in lieu of the Fees shall be determined by multiplying the Designated Percentage times the Fees otherwise payable for the quarter and dividing that product by the Fair Market Value of the Common Stock on the last day of the quarter. If this formula produces a fractional share, the number of shares shall be rounded down to the next whole share. (c) If the Designated Percentage in a Stock Election is 100 percent, the number of shares of Company Stock as determined under Section 7(b) shall be increased by 30 percent, rounded down to the next whole share. To receive the increased amount of Common Stock, the Stock Election must be irrevocable in respect to the Plan Year to which it pertains. 8. Withholding. In the case of the exercise of an Option, the Eligible Director shall pay to the Company in cash the full amount of all federal and state income and employment taxes required to be withheld by the Company in respect of the taxable income of the Eligible Director from such exercise. If the Agreement so provides, payment of all or a part of such taxes may be made by the Eligible Director surrendering shares of Common Stock to the Company, provided the shares have a Fair Market Value (determined as of the date of exercise of the Option) that is not less than the amount of such taxes or part thereof, or by the sale of shares of Common Stock upon the cashless exercise of an Option through a broker. 9. Transferability. An Option shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him; provided that an Eligible Director may transfer any Option to members of the Eligible Director's immediate family or trusts or family partnerships for the benefit of such persons, subject to such terms and conditions as may be established by the Committee. Except as specifically provided in the Agreement, no Option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during his or her lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process. 10. Administration. The Plan shall be administered by the Committee. The Committee shall have all powers necessary to administer the Plan, including, without limitation, the authority (within the limitations described herein) to construe the Plan, to determine all questions arising under the Plan and to adopt and amend rules and regulations for the administration of the Plan as it may deem desirable. Any decision of the Committee in the administration of the Plan shall be final and conclusive. The Committee may act only by a majority of its members in office, except that members thereof may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for anything done or omitted to be done by him or any other member of the Committee in connection with the Plan, except for his or hers own willful misconduct or as expressly provided by statute. 11. Termination. The Plan shall terminate upon the earlier of: (a) the adoption of a resolution of the Board terminating the Plan; or (b) the date shares of Common Stock are no longer available under the Plan for the automatic award of Option shares; or (c) the tenth anniversary of the Effective Date. No termination of the Plan shall materially and adversely affect any of the rights or obligations of any Eligible Director under any Option previously granted by the Plan without such Eligible Director's consent. 12. Limitation of Rights. (a) Neither the Plan nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain any person as a director for any period of time. (b) An optionee shall have no rights as a shareholder with respect to shares of Common Stock covered by his or her Option until the date of exercise of the Option, and, except as provided in Section 13, no adjustment will be made for dividends or other rights for which the record date is prior to the date of such exercise. 13. Changes in Capital Structure. (a) Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option and the price per share thereof shall be adjusted proportionately for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company by reason of any stock dividend, stock split, combination, reclassification, recapitalization, or the general issuance to holders of Common Stock of rights to purchase Common Stock at substantially below its then fair market value, or any change in the number of shares of Common Stock outstanding effected without receipt of cash, property, labor or services by the Company, or any spin-off or other type of distribution of assets to shareholders. In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all or part of its authorized shares without par value into the same number of shares with a par value, or any subsequent change into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. (b) Except as expressly provided above in this Section 6(e) or Section 13, an Eligible Director shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to any Option. (c) The grant of an Option award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. 14. Amendment of the Plan. The Plan may be terminated or amended at any time by the Board, effective as of any date specified, except as required by applicable law. No amendment or termination shall decrease an Eligible Director's accrued benefit prior to the effective date of the amendment or termination. 15. Notice. All notices and other communications required or permitted to be given under this Plan shall be in writing and shall be deemed to have been duly given if delivered personally or mailed first class, postage prepaid, as follows: (a) if to the Company - at its principal business address to the attention of the Treasurer; (b) if to any Participant - to the Participant's address as reflected on the records of the Company. 16. Non-Assignability. Each Participant's rights under the Plan shall be non-assignable. 17. Responsibility for Legal Effect. Neither the Committee nor the Company makes any representations or warranties, express or implied, or assumes any responsibility concerning the legal, tax or other implications or effects of this Plan. 18. Successors, Acquisitions, Mergers, Consolidations. The terms and conditions of the Plan shall inure to the benefit of and bind the Company and the Participants, and their successors, assigns and personal representatives. 19. Controlling Law. The Plan shall be construed in accordance with the laws of the Commonwealth of Virginia to the extent not preempted by laws of the United States of America. 20. Gender and Number. In the construction of the Plan, the masculine shall include the feminine or neuter and the singular shall include the plural and vice-versa in all cases where such meanings would be appropriate. 21. Titles and Captions. Titles and captions and headings herein have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. IN WITNESS WHEREOF, the Corporation has caused the Plan to be signed on its behalf by its duly authorized officer effective this 5th day of May, 1998. Hilb, Rogal and Hamilton Company By: Carolyn Jones Its Senior Vice President, Chief Financial Officer and Treasurer EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR HILB, ROGAL AND HAMILTON COMPANY FOR THE QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JUN-30-1998 28,144,592 2,509,086 49,223,716 2,363,000 0 79,964,384 34,334,073 23,030,315 183,819,602 91,628,804 31,598,133 9,352,650 0 0 41,207,208 183,819,602 0 94,621,475 0 0 75,919,443 0 1,099,061 17,602,971 7,211,833 10,391,138 0 0 0 10,391,138 0.82 0.80
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