Hilb, Rogal and Hamilton Company

-----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, CdijmsHZJeaB26IIEKBBFx0QtKKRfYsorWFx1XlLI888LnXXynPPtK5gxQZw35qi qxSOixOS8du6slD6qdsI8A== 0001002105-03-000148.txt : 20030814 0001002105-03-000148.hdr.sgml : 20030814 20030813153231 ACCESSION NUMBER: 0001002105-03-000148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030813 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: 03841038 BUSINESS ADDRESS: STREET 1: THE HILB, ROGAL AND HAMILTON BUILDING STREET 2: 4951 LAKE BROOK DRIVE, SUITE 500 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 hrh10q63003v4.htm FORM 10-Q Hilb, Rogal and Hamilton Company

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2003

Commission file number 0-15981

HILB, ROGAL AND HAMILTON COMPANY

(Exact name of registrant as specified in its charter)

Virginia

(State or other jurisdiction of

incorporation or organization)

4951 Lake Brook Drive, Suite 500

Glen Allen, Virginia

(Address of principal executive offices)

54-1194795

(I.R.S. Employer

Identification No.)

23060

(Zip Code)

(804) 747-6500

(Registrant's telephone number, including area code)

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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

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

Common Stock, no par value

Outstanding at July 31, 2003

34,034,342

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, 2003 and 2002

Consolidated Balance Sheet

June 30, 2003 and December 31, 2002

Statement of Consolidated Shareholders'

Equity for the six months ended

June 30, 2003 and 2002

Statement of Consolidated Cash Flows

for the six months ended

June 30, 2003 and 2002

Notes to Consolidated Financial

Statements

7-12

Item 2.

Management's Discussion and Analysis

of Financial Condition and

Results of Operations

13-17

Item 3.

Quantitative and Qualitative Disclosures

About Market Risk

Item 4. Controls and Procedures

Part II.

OTHER INFORMATION

Item 4.

Submission of Matters to a Vote of Security

Holders

Item 6. Exhibits and Reports on Form 8-K

19-20

Signatures

PART I -- FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

STATEMENT OF CONSOLIDATED INCOME

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

(UNAUDITED)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
(in thousands, except per share amounts)	2003	2002	2003	2002
Revenues
Commissions and fees	$137,868	$ 94,739	$278,367	$193,387
Investment income	820	460	1,479	974
Other	846	518	1,679	1,210
	139,534	95,717	281,525	195,571
Operating expenses
Compensation and employee benefits	75,846	52,795	151,659	106,054
Other operating expenses	24,275	17,717	47,431	34,555
Depreciation	2,292	1,730	4,580	3,440
Amortization of intangibles	2,203	563	4,356	1,085
Interest expense	2,746	1,819	5,539	3,703
Retirement benefit	-	-	5,195	-
	107,362	74,624	218,760	148,837
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE	32,172	21,093	62,765	46,734
Income taxes	13,107	8,591	25,602	19,048
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	19,065	12,502	37,163	27,686
Cumulative effect of accounting change, net of tax	-	-	-	3,944
NET INCOME	$ 19,065	$ 12,502	$ 37,163	$ 31,630

Net Income Per Share – Basic:
Income before cumulative effect of accounting change	$0.56	$0.44	$1.10	$0.98
Cumulative effect of accounting change, net of tax	-	-	-	0.14
Net income	$0.56	$0.44	$1.10	$1.12

Net Income Per Share – Assuming Dilution:
Income before cumulative effect of accounting change	$0.52	$0.40	$1.03	$0.88
Cumulative effect of accounting change, net of tax	-	-	-	0.12
Net income	$0.52	$0.40	$1.03	$1.00

See notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEET

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

	June 30,	December 31,
(in thousands)	2003	2002
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$171,578	$134,692
Receivables:
Premiums and commissions, less allowance for doubtful accounts of $5,720 and $5,567, respectively	200,128	175,948
Other	31,587	25,416
	231,715	201,364
Prepaid expenses and other current assets	14,167	21,509
TOTAL CURRENT ASSETS	417,460	357,565

PROPERTY AND EQUIPMENT, NET	21,234	20,386

GOODWILL	445,227	414,237
OTHER INTANGIBLE ASSETS	92,666	83,283
Less accumulated amortization	59,903	55,547
	477,990	441,973

OTHER ASSETS	12,096	13,100
	$928,780	$833,024

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies	$287,529	$235,057
Accounts payable	12,720	10,115
Accrued expenses	25,446	39,142
Premium deposits and credits due customers	34,507	33,998
Current portion of long-term debt	20,491	5,733
TOTAL CURRENT LIABILITIES	380,693	324,045

LONG-TERM DEBT	161,123	177,151

OTHER LONG-TERM LIABILITIES	29,873	21,180
SHAREHOLDERS’ EQUITY
Common Stock, no par value; authorized 100,000 and 50,000 shares, respectively; outstanding 34,032 and 33,484 shares, respectively	183,233	168,558
Retained earnings	173,977	143,005
Accumulated other comprehensive income (loss):
Unrealized loss on interest rate swaps, net of deferred tax
benefit of $696 and $977, respectively	(1,044)	(1,465)
Other	925	550
	357,091	310,648
	$928,780	$833,024

See notes to consolidated financial statements.

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

(UNAUDITED)

			Accumulated
			Other
	Common	Retained	Comprehensive
(in thousands, except per share amounts)	Stock	Earnings	Income (Loss)

Balance at January 1, 2003	$168,558	$143,005	$ (915)
Issuance of 548 shares of Common Stock	10,108
Income tax benefit from exercise of stock options	3,661
Payment of dividends ($.1825 per share)		(6,191)
Net income		37,163
Derivative gain, net of tax			421
Retirement benefit	906
Other			375
Balance at June 30, 2003	$183,233	$173,977	$ (119)

Balance at January 1, 2002	$ 55,542	$ 88,604	$ (1,344)
Issuance of 281 shares of Common Stock	2,542
Payment of dividends ($.1775 per share)		(5,063)
Net income		31,630
Derivative gain, net of tax			62
Other			190
Balance at June 30, 2002	$ 58,084	$115,171	$ (1,092)

See notes to consolidated financial statements.

STATEMENT OF CONSOLIDATED CASH FLOWS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

(UNAUDITED)

	Six Months Ended June 30,
	Six Months Ended June 30,
(in thousands)	2003	2002
OPERATING ACTIVITIES
Net income	$ 37,163	$ 31,630
Adjustments to reconcile net income to net cash
provided by operating activities:
Retirement benefit	5,195	-
Cumulative effect of accounting change, net of tax	-	(3,944)
Depreciation	4,580	3,440
Amortization of intangible assets	4,356	1,085
Net income plus retirement benefit, depreciation,
amortization, and cumulative effect of accounting
change, net of tax	51,294	32,211
Provision for losses on receivables	555	584
Provision for deferred income taxes	2,536	1,914
Loss on sale of assets	131	209
Income tax benefit from exercise of stock options	3,661	-
Changes in operating assets and liabilities
net of effects from retirement benefit and insurance
agency acquisitions and dispositions:
Increase in accounts receivable	(24,924)	(1,973)
(Increase) decrease in prepaid expenses	7,585	(274)
Increase in premiums payable to
insurance companies	37,651	1,377
Increase in premium deposits and credits due customers	509	7,174
Increase in accounts payable	297	357
Decrease in accrued expenses	(15,759)	(2,621)
Other operating activities	4,022	(2,598)
Net Cash Provided by Operating Activities	67,558	36,360

INVESTING ACTIVITIES
Purchase of held-to-maturity investments	(70)	(590)
Proceeds from maturities of held-to-maturity
investments	57	1,879
Purchase of property and equipment	(5,079)	(2,314)
Purchase of insurance agencies, net of cash acquired	(8,248)	(11,891)
Proceeds from sale of assets	135	475
Other investing activities	87	193
Net Cash Used in Investing Activities	(13,118)	(12,248)

FINANCING ACTIVITIES
Proceeds from long-term debt	5,000	-
Principal payments on long-term debt	(15,403)	(12,851)
Proceeds from Common Stock, net of tax payments for option exercises	(960)	1,361
Dividends	(6,191)	(5,063)
Net Cash Used in Financing Activities	(17,554)	(16,553)
Increase in Cash and Cash Equivalents	36,886	7,559
Cash and cash equivalents at beginning of period	134,692	51,580
Cash and Cash Equivalents at End of Period	$171,578	$59,139

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE A—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Hilb, Rogal and Hamilton Company have been prepared in accordance with accounting principles generally accepted in the United States 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, 2003, are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. 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, 2002.

Certain amounts for the prior period have been reclassified to conform to current year presentation.

NOTE B—ACCOUNTING FOR STOCK-BASED COMPENSATION

The company has three stock-based compensation plans. The company continues to account for its stock options using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (Statement 123), as amended by Statement of Financial Accounting Standards No. 148, establishes accounting and disclosure requirements using a fair value based method of accounting for stock options.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE B—ACCOUNTING FOR STOCK-BASED COMPENSATION – Continued

The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of Statement 123 to stock-based compensation.

	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except per share amounts)	2003	2002	2003	2002

Net income - as reported	$19,065	$12,502	$37,163	$31,630
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects	(1,539)	(891)	(2,993)	(1,387)
Pro forma net income	$17,526	$11,611	$34,170	$30,243

Net income per share:
Basic - as reported	$0.56	$0.44	$1.10	$1.12
Basic - pro forma	$0.52	$0.41	$1.01	$1.07

Assuming dilution - as reported	$0.52	$0.40	$1.03	$1.00
Assuming dilution - pro forma	$0.48	$0.37	$0.95	$0.95

NOTE C—INCOME TAXES

Deferred taxes result from temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The company’s effective rate varies from the statutory rate primarily due to state income taxes.

NOTE D—ACQUISITIONS

On July 1, 2002, the company acquired all of the issued and outstanding membership interest units of Hobbs Group, LLC (Hobbs) other than those owned by Hobbs IRA Corp. (HIRAC), and all of the issued and outstanding capital stock of HIRAC, pursuant to a purchase agreement dated May 10, 2002, by and among the company, Hobbs, the members of Hobbs (other than HIRAC) and the shareholders of HIRAC. The company’s financial statements include the results of Hobbs operations since the closing date of the acquisition.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE D—ACQUISITIONS – Continued

Hobbs is an insurance broker serving top-tier clients and provides property and casualty insurance brokerage, risk management and executive and employee benefits services. This acquisition allows the company to expand its capabilities in the top-tier market. In addition, Hobbs will provide the company with additional market presence and expertise in the employee benefits services area and an increased presence in executive benefits. Hobbs will also bring increased depth to the geographic reach of the company’s existing national platform.

The amount the company paid in connection with the acquisition consisted of approximately $116.5 million in cash, which included acquisition costs of $2.3 million and the company’s assumption and retirement of certain debt of Hobbs, and the issuance to the members of Hobbs (other than HIRAC) and the shareholders of HIRAC of an aggregate of 719,729 shares of the company’s common stock valued at $31.6 million. The value of the 719,729 shares issued was determined based on the average market price of the company’s stock over the period including two days before and after the date at which the number of shares to be issued in accordance with the purchase agreement became fixed.

In addition, the company will pay contingent consideration in August 2003 consisting of approximately $38.4 million in cash and the issuance of 1,751,747 shares of the company’s common stock.

The company has further agreed to assume and satisfy certain existing contingent earn-out and deferred compensation obligations of Hobbs from Hobbs’ prior acquisitions estimated to approximate a net present value of $30 million as of the date of acquisition. The assumed existing earn-outs will be recorded when their respective contingencies are resolved and consideration is paid.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE D—ACQUISITIONS – Continued

The following unaudited pro forma results of operations of the company give effect to the acquisition of Hobbs as though the transaction had occurred on January 1, 2002:

	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except per share amounts)	2003	2002	2003	2002

Total Revenues	$139,534	$121,864	$281,525	$246,450

Income before cumulative effect of accounting
change and extraordinary item	$ 19,065	$ 13,537	$ 37,163	$ 30,546

Net Income	$ 19,065	$ 13,126	$ 37,163	$ 34,079

Income per share before cumulative effect of
accounting change and extraordinary item:
Basic	$0.56	$0.47	$1.10	$1.06
Assuming Dilution	$0.52	$0.42	$1.03	$0.94
Net Income Per Share:
Basic	$0.56	$0.45	$1.10	$1.18
Assuming Dilution	$0.52	$0.41	$1.03	$1.05

The pro forma net income results for the six months ended June 30, 2002 include a cumulative effect of accounting change of $3.9 million ($0.12 per share) related to the company’s change in revenue recognition policy (see Note H) and for the three months and six months ended June 30, 2002 include an extraordinary loss of $0.5 million ($0.01 per share) related to Hobbs’ debt extinguishment.

During the first six months of 2003, the company also acquired certain assets and liabilities of six insurance agencies and other accounts for approximately $27.0 million ($8.0 million in cash, $8.0 million in guaranteed future payments and 294,761 shares of common stock). The purchase price may be increased based on agency profitability per the contracts. These acquisitions are not material to the consolidated financial statements individually or in aggregate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE E—SALE OF ASSETS AND OTHER GAINS

During the six months ended June 30, 2003 and 2002, the company sold certain insurance accounts and other assets resulting in losses of $131 thousand and $209 thousand, respectively. Revenues, expenses and assets related to these dispositions were not material to the consolidated financial statements.

NOTE F—NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share.

	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands, except per share amounts)	2003	2002	2003	2002
Numerator for basic net income
per share – net income	$19,065	$12,502	$37,163	$31,630
Effect of dilutive securities:
5.25% Convertible Subordinated Debentures	-	273	-	545
Numerator for dilutive net income per share – net income
available after assumed conversions	$19,065	$12,775	$37,163	$32,175

Denominator
Weighted average shares	33,753	28,229	33,628	28,189
Effect of guaranteed future shares to be issued in connection
with agency acquisitions	158	26	168	32
Denominator for basic net income per share	33,911	28,255	33,796	28,221
Effect of dilutive securities:
Employee stock options	738	1,060	781	1,045
Employee non-vested stock	105	166	114	159
Contingent stock – acquisitions	1,801	38	1,333	30
5.25% Convertible Subordinated Debentures	-	2,813	-	2,813
Dilutive potential common shares	2,644	4,077	2,228	4,047
Denominator for diluted net income per share -
adjusted weighted average shares and
assumed conversions	36,555	32,332	36,024	32,268

Net Income Per Share:
Basic	$0.56	$0.44	$1.10	$1.12
Assuming Dilution	$0.52	$0.40	$1.03	$1.00

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

June 30, 2003

(UNAUDITED)

NOTE G—RETIREMENT BENEFIT

In March 2003, Andrew L. Rogal, the company’s chairman and chief executive officer, announced his decision to retire for personal reasons following the company’s annual meeting of shareholders on May 6, 2003. The company recorded a one-time retirement benefit charge, net of tax, of $3.2 million, or $0.09 per share, for the three months ended March 31, 2003, representing a contractual retirement benefit for Mr. Rogal. The charge consists primarily of compensation and the accelerated vesting of stock options and non-vested stock. The company’s board of directors elected Martin L. (Mell) Vaughan, III to succeed Mr. Rogal as chairman and chief executive officer.

NOTE H—CHANGES IN METHOD OF ACCOUNTING

Effective January 1, 2002, the company changed its method of accounting for commissions on premiums billed and collected directly by insurance carriers on its middle-market property and casualty business. Prior to 2002, this revenue was recognized when received. Beginning January 1, 2002, this revenue is recorded on the later of the billing date or the effective date, consistent with the revenue recognition policy for agency billed business. This is the predominant practice followed in the industry. Management believes that this new methodology is preferable and that it better matches the income with the related expenses. For the three months ended June 30, 2002, the effect of this change was to increase net income by $0.9 million ($0.03 per share). For the six months ended June 30, 2002, the effect of this change was to increase net income by $5.5 million ($0.17 per share), which included the cumulative effect adjustment of $3.9 million ($0.12 per share), net of income taxes of $2.6 million.

NOTE I—SUBSEQUENT EVENT

Subsequent to June 30, 2003, the company amended the bank credit facility increasing the available revolving credit portion of the facility to $130.0 million and extending the revolving credit maturity to December 31, 2006. In addition, the company modified certain covenants and repaid $12.9 million of the term loans outstanding under the bank credit facility at June 30, 2003. The company has classified this $12.9 million as current debt on the June 30, 2003 balance sheet.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

On July 1, 2002, the company acquired all of the issued and outstanding membership interest units of Hobbs Group, LLC (Hobbs) other than those owned by Hobbs IRA Corp. (HIRAC), and all of the issued and outstanding capital stock of HIRAC, pursuant to a purchase agreement dated May 10, 2002, by and among the company, Hobbs, the members of Hobbs (other than HIRAC) and the shareholders of HIRAC. The assets and liabilities of Hobbs have been revalued to their respective fair market values. The financial statements of the company reflect the combined operations of the company and Hobbs from the closing date of the acquisition.

Results of Operations:

Three Months Ended June 30, 2003

Net income for the three months ended June 30, 2003 was $19.1 million, or $0.52 per share, compared with $12.5 million, or $0.40 per share, for the comparable period last year. In addition, non-operating losses, net of tax, were $32 thousand and $122 thousand for the three months ended June 30, 2003 and 2002, respectively. Non-operating gains and losses relate to the sale of insurance accounts and other assets. In calculating the per share amount, the dilutive shares for the quarter increased 13.1%, reflecting shares issuable for acquisition-related contingent payments--primarily Hobbs--and shares issued over the past twelve months for acquisitions and a public offering.

Commissions and fees were $137.9 million, an increase of 45.5%, from commissions and fees of $94.7 million during the comparable period of the prior year. Approximately $38.1 million of commissions were derived from acquisitions of new insurance agencies in 2003 and 2002. This increase was offset by decreases of approximately $0.5 million from the sale of certain offices and accounts in 2003 and 2002. Excluding the effect of acquisitions and divestitures, commissions and fees from operations owned during both periods increased 5.9%. This increase principally reflects new business production and a continued positive rate environment.

Expenses for the quarter increased $32.7 million or 43.9%. Compensation and benefits, other operating expenses and depreciation expense increased $23.1 million, $6.6 million and $0.6 million, respectively. Compensation and benefits increased primarily due to acquisitions of insurance agencies and increased revenue production. Other operating expenses increased mainly due to acquisitions and increased revenue production. Depreciation expense increased principally due to acquisitions of new insurance agencies. Amortization of intangibles increased approximately $1.6 million due primarily to intangible assets acquired in 2003 and 2002 acquisitions, mainly Hobbs. Interest expense increased $0.9 million due to increased borrowings related to acquisitions slightly offset by lower rates.

The company’s overall tax rate for the three months ended June 30, 2003 was 40.7% and was comparable to 40.7% for the same period of the prior year.

Six Months Ended June 30, 2003

Net income for the six months ended June 30, 2003 increased to $37.2 million, or $1.03 per share, from $31.6 million, or $1.00 per share, for the prior year period. Net income for the first six months of 2003 included a one-time retirement benefit charge, net of tax, of $3.2 million, or $0.09 per share. For the 2002 six-month period, net income reflected a one-time addition, net of tax, of $3.9 million, or $0.12 per share, for a cumulative effect of an accounting change relating to revenue recognition. The per share amount for the six months is based on a 11.6% higher dilutive share count than the prior year due to similar factors as noted above for the three-month period. In addition, non-operating losses, net of tax, were $78 thousand and $124 thousand for the six months ended June 30, 2003 and 2002, respectively.

Commissions and fees for the first six months of 2003 increased 43.9% to $278.4 million from $193.4 million during the prior year period. Acquisitions of new insurance agencies in 2003 and 2002 contributed commissions of approximately $69.8 million. This increase was offset by decreases of approximately $1.4 million from the sale of certain offices and accounts in 2003 and 2002. Excluding the effect of acquisitions and divestitures, commissions and fees from operations owned during both periods increased 8.6%. This increase principally reflects the same trends identified above for the three-month period, in addition to higher contingent and override commissions, which are heavily weighted in the first quarter.

Expenses for the six months ended June 30, 2003 increased $69.9 million or 47.0% from the prior year period. For the 2003 six-month period, expenses include a one-time retirement benefit charge, before tax, of $5.2 million. Other increases from the prior year were $45.6 million in compensation and benefits, $12.9 million in other operating expenses and $1.1 million in depreciation expense. Compensation and benefits increased primarily due to acquisitions of insurance agencies and increased revenue production. Other operating expenses increased mainly due to acquisitions, higher insurance costs and increased revenue production. Depreciation expense increased principally due to acquisitions of new insurance agencies. Amortization of intangibles increased approximately $3.3 million due primarily to intangible assets acquired in 2003 and 2002 acquisitions, mainly Hobbs. Interest expense increased $1.8 million due to increased borrowings related to acquisitions slightly offset by lower rates.

The company’s overall tax rate for the six months ended June 30, 2003 was 40.8% and was comparable to 40.8% for the same period of the prior year.

Other

For the three months ended June 30, 2003, net income as a percentage of revenues did not vary significantly from the three months ended March 31, 2003. Commission income was higher during the three months ended March 31, 2003 due to higher contingent commissions, the majority of which are historically received during the first quarter. In addition, net income for the three months ended March 31, 2003 included a one-time retirement benefit charge, net of tax, of $3.2 million.

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, 2003 should not be considered indicative of the results that may be expected for the entire year ending December 31, 2003.

Liquidity and Capital Resources:

Net cash provided by operations totaled $67.6 million and $36.4 million for the six months ended June 30, 2003 and 2002, 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 $5.1 million and $2.3 million for the six months ended June 30, 2003 and 2002, 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 utilized cash of $8.2 million and $11.9 million in the six months ended June 30, 2003 and 2002, 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 the company’s common stock and/or deferred cash and common stock payments. The company did not have any material capital expenditure commitments as of June 30, 2003.

Financing activities utilized cash of $17.6 million and $16.6 million in the six months ended June 30, 2003 and 2002, respectively, as the company made dividend and scheduled debt payments. The company has annually increased its dividend rate and anticipates the continuance of its dividend policy. The company did not repurchase any shares during the six months ended June 30, 2003 or 2002. The company is currently authorized to purchase up to $50.0 million of its common stock in 2003 and $20.0 million annually in subsequent years subject to market conditions and other factors. As of June 30, 2003, the company had a bank credit facility of $268.0 million under which loans are due in various amounts through 2007, including $149.6 million due in 2007. At June 30, 2003, there were loans of $168.0 million outstanding under the bank agreement, with $100.0 million available under the revolving portion of the facility for future borrowings.

Subsequent to June 30, 2003, the company amended the bank credit facility increasing the available revolving credit portion of the facility to $130.0 million and extending the revolving credit maturity to December 31, 2006. In addition, the company modified certain covenants of the bank credit facility and repaid $12.9 million of the term loans outstanding under the bank credit facility at June 30, 2003. The company has classified this $12.9 million balance as current debt on the June 30, 2003 balance sheet.

The company had a current ratio (current assets to current liabilities) of 1.10 to 1.00 as of June 30, 2003. Shareholders' equity of $357.1 million at June 30, 2003, improved from $310.6 million at December 31, 2002. The debt to equity ratio at June 30, 2003 of 0.45 to 1.00 is decreased from the ratio at December 31, 2002 of 0.57 to 1.00 due to net income, the issuance of common stock, decreased debt and the accelerated vesting portion of the retirement benefit (see “Note G – Retirement Benefit” of Notes to Consolidated Financial Statements).

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.

Business Acquisition

On July 1, 2002, the company acquired Hobbs pursuant to a purchase agreement dated May 10, 2002. Hobbs is one of the nation’s premier insurance brokers serving top-tier clients and provides property and casualty insurance brokerage, risk management and executive and employee benefits services. The amount the company paid in connection with the acquisition consisted of $116.5 million in cash and the issuance of 719,729 shares of the company’s common stock. In addition, the company will pay contingent consideration in August 2003 consisting of $38.4 million in cash and the issuance of 1,751,747 shares of the company’s common stock.

Under the contingent consideration provisions of the purchase agreement, the company had the right to substitute cash for a portion of the shares earned. The diluted weighted average share count for the second quarter of 2003, as reported in the company’s July 21, 2003 press release, reflected the maximum number of shares issuable under the contingent consideration provisions. Based upon the payment components disclosed above, the diluted weighted average share counts disclosed in this report decreased 325,145 shares and 162,572 shares for the three-month and six-month periods ended June 30, 2003, respectively.

Market Risk

The company has certain investments and utilizes derivative financial instruments (on a limited basis) which are subject to market risk; however, the company believes that exposure to market risk associated with these instruments is not material.

Change in Accounting Principle

Forward-Looking Statements

The company cautions readers that the foregoing discussion and analysis includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by that Act. These forward-looking statements are believed by the company to be reasonable based upon management’s current knowledge and assumptions about future events, but are subject to the uncertainties generally inherent in any such forward-looking statement, including factors discussed above as well as other factors that may generally affect the company’s business, financial condition or operating results. Reference is made to the discussion of “Forward-Looking Statements” contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 regarding important risk factors and uncertainties that could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied in any forward-looking statement made by or on behalf of the company.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company believes that its exposure to market risk associated with transactions using certain investments and derivative financial instruments is not material.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report on Form 10-Q, the company’s management, including the chief executive officer and the chief financial officer, performed an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the company’s management, including the chief executive officer and chief financial officer, concluded that the company’s disclosure controls and procedures were effective as of that evaluation date. There have been no significant changes in the company’s internal control over financial reporting during the three months ended June 30, 2003, that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of shareholders (the “Meeting”) of the company was held on Tuesday, May 6, 2003.

The shareholders voted for the election of four (4) directors to serve for terms of three (3) years expiring on the date of the annual meeting in 2006 and until their successors are elected and one (1) director to serve for a term of one (1) year expiring on the date of the annual meeting in 2004 and until his successor is elected. The results of the voting in these elections are set forth below.

	Votes For	Votes Withheld	Non-Votes

Robert W. Fiondella (three year term)	24,710,061	7,297,983	1,847,687
Thomas A. Golub (one year term)	28,284,869	3,723,175	1,847,687
Robert H. Hilb (three year term)	24,983,807	7,024,237	1,847,687
Julious P. Smith, Jr. (three year term)	27,691,794	4,316,250	1,847,687
Martin L. Vaughan, III (three year term)	31,061,501	946,543	1,847,687

In addition, the shareholders voted to approve the company’s Amended and Restated Articles of Incorporation and to approve an amendment and restatement of the company’s 2000 Stock Incentive Plan. The results of the voting are set forth below.

	Votes For	Votes Against	Votes Withheld	Non-Votes

Amended and Restated Articles
of Incorporation	26,265,377	1,782,134	3,960,533	1,847,687
2000 Stock Incentive Plan	24,424,332	3,350,810	4,232,902	1,847,687

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

Exhibits

Exhibit No.

Document

3.1	Amended and Restated Articles of Incorporation of Hilb, Rogal and Hamilton Company (incorporated by reference to Exhibit 3.1 to the company’s Form 8-K dated August 11, 2003, File No. 0-15981)
3.2	Bylaws of Hilb, Rogal and Hamilton Company (Amended and Restated May 6, 2003)(incorporated by reference to Exhibit 3.2 to the company’s Form 8-K dated August 11, 2003, File No. 0-15981)
10.1	First Amendment to Amended and Restated Consulting Agreement between the company and Robert H. Hilb
10.2	Revolver Increase and Extension Agreement, dated as of July 18, 2003, among the company, as Borrower; the revolving lenders named therein; and Wachovia Bank, National Association, as administrative agent
10.3	First Amendment to Credit Agreement, dated as of July 16, 2003, among the company, as Borrower; and Wachovia Bank, National Association, as administrative agent
10.4	Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement between the company and Martin L. Vaughan, III dated May 6, 2003
10.5	Hilb, Rogal and Hamilton Company 2003 Restricted Stock Agreement between the company and Martin L. Vaughan, III dated May 6, 2003
10.6	Severance Agreement by and between the company and Thomas A. Golub dated August 5, 2003
31.1	Certification Statement of Chief Executive Officer pursuant to Rule 13a – 14(a)/15d – 14(a)
31.2	Certification Statement of Chief Financial Officer pursuant to Rule 13a – 14(a)/15d – 14(a)
32.1	Certification Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2	Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

Reports on Form 8-K

(i)

The company filed a Current Report on Form 8-K with the Securities and Exchange Commission on April 16, 2003. The Form 8-K reported items 7 and 12 (under item 9) and attached as an exhibit and incorporated by reference a press release that reported the company’s financial results for the quarter ended March 31, 2003.

(ii)

The company filed a Current Report on Form 8-K with the Securities and Exchange Commission on July 22, 2003. The Form 8-K reported items 7 and 12 (under item 9) and attached as an exhibit and incorporated by reference a press release that reported the company’s financial results for the quarter ended June 30, 2003.

(iii)

The company filed a Current Report on Form 8-K with the Securities and Exchange Commission on August 11, 2003. The Form 8-K reported items 5 and 7 and attached as exhibits amended and restated articles of incorporation and amended and restated bylaws of the company.

SIGNATURES

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 13, 2003

By: /s/ Martin L. Vaughan, III___

Martin L. Vaughan, III

Chairman and Chief Executive

Officer

(Principal Executive Officer)

Date August 13, 2003

By: /s/ Carolyn Jones__________

Carolyn Jones

Senior Vice President, Chief

Financial Officer and

Treasurer

(Principal Financial Officer)

Date August 13, 2003

By: /s/ Robert W. Blanton, Jr.___

Robert W. Blanton, Jr.

Vice President and Controller

(Chief Accounting Officer)

HILB, ROGAL AND HAMILTON COMPANY

EXHIBIT INDEX

Exhibit No.

Document

	3.1		Amended and Restated Articles of Incorporation of Hilb, Rogal and Hamilton Company (incorporated by reference to Exhibit 3.1 to the company’s Form 8-K dated August 11, 2003, File No. 0-15981)
	3.2		Bylaws of Hilb, Rogal and Hamilton Company (Amended and Restated May 6, 2003)(incorporated by reference to Exhibit 3.2 to the company’s Form 8-K dated August 11, 2003, File No. 0-15981)
	10.1		First Amendment to Amended and Restated Consulting Agreement between the company and Robert H. Hilb
	10.2		Revolver Increase and Extension Agreement, dated as of July 18, 2003, among the company, as Borrower; the revolving lenders named therein; and Wachovia Bank, National Association, as administrative agent
	10.3		First Amendment to Credit Agreement, dated as of July 16, 2003, among the company, as Borrower; and Wachovia Bank, National Association, as administrative agent
	10.4		Hilb, Rogal and Hamilton Company Employee Non-Qualified Stock Option Agreement between the company and Martin L. Vaughan, III dated May 6, 2003
	10.5		Hilb, Rogal and Hamilton Company 2003 Restricted Stock Agreement between the company and Martin L. Vaughan, III dated May 6, 2003
	10.6		Severance Agreement by and between the company and Thomas A. Golub dated August 5, 2003
	31.1		Certification Statement of Chief Executive Officer pursuant to Rule 13a – 14(a)/15d – 14(a)
	31.2		Certification Statement of Chief Financial Officer pursuant to Rule 13a – 14(a)/15d – 14(a)
	32.1		Certification Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
	32.2		Certification Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

EX-10 3 ex10-1.htm EXHIBIT 10.1 Exhibit 10.1

Exhibit 10.1

FIRST AMENDMENT TO AMENDED AND RESTATED

CONSULTING AGREEMENT

WHEREAS, the Amended and Restated Consulting Agreement, attached hereto as Exhibit A (“Agreement”), was executed on July 15, 2002;

WHEREAS, the parties desire to amend the term and monthly payment, each as set forth below;

AGREED:

“August 31, 2006,” shall be substituted for “May 31, 2006” in paragraph 3 of the Agreement.

“EIGHT THOUSAND THREE HUNDRED SEVEN AND 69/100 DOLLARS ($8,307.69)” shall be substituted for “NINE THOUSAND DOLLARS ($9,000)” in paragraph 2 of the Agreement.

Except as amended above, the Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

HILB, ROGAL AND HAMILTON COMPANY

By /s/ Walter L. Smith

/s/ Robert H. Hilb

Walter L. Smith, Senior Vice President,

Robert H. Hilb

General Counsel and Secretary

Date: April 30, 2003

EXHIBIT A

AMENDED AND RESTATED

CONSULTING AGREEMENT

THIS AMENDED AND RESTATED CONSULTING AGREEMENT is made and entered into as of July 15, 2002, 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. Consultant was initially hired as a consultant on June 1, 1997, for a term of three (3) years.

C. Consultant's term was extended to May 31, 2003, by amendment on November 29, 1999.

D. 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 Seven Thousand Dollars ($7,000.00) per month payable on the first day of each month through May 2003, thereafter, during the Term of this Agreement Company shall pay Consultant Nine Thousand Dollars ($9,000.00) per month, payable on the first day of each month. 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 continue (unless sooner terminated by death) until May 31, 2006, 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 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.

-2-

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

-3-

EX-10 4 ex10-2.htm EXHIBIT 10.2 Exhibit 10.2

Exhibit 10.2

REVOLVER INCREASE AND EXTENSION AGREEMENT

THIS REVOLVER INCREASE AND EXTENSION AGREEMENT, dated as of the 18th day of July, 2003 (this “Agreement”), is made among HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation (the “Borrower”), the Revolving Lenders (as defined in the Credit Agreement described below), and WACHOVIA BANK, NATIONAL ASSOCIATION (the “Administrative Agent”).

RECITALS

The Borrower, the Administrative Agent and the Revolving Lenders are parties to a Second Amended and Restated Credit Agreement, dated as of July 1, 2002, as amended by a First Amendment to Credit Agreement, dated as of July 16, 2003 (as further amended, the “Credit Agreement”), providing for the availability of a credit facility to the Borrower upon the terms and conditions set forth therein. Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement.

The Borrower and its Subsidiaries desire to (i) increase the aggregate Revolving Credit Commitments from $100,000,000 to $130,000,000 and (ii) extend the Revolving Credit Maturity Date to December 31, 2006.

The Revolving Lenders are willing to effect such increase and extension upon the terms and subject to the conditions set forth herein.

STATEMENT OF AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

EXTENSION OF REVOLVING CREDIT MATURITY DATE

Pursuant to Section 2.1(c)(ii) of the Credit Agreement, the Revolving Credit Maturity Date is hereby extended to December 31, 2006. The Administrative Agent and the Revolving Lenders hereby waive any applicable notice provisions set forth in Section 2.1(c)(ii) of the Credit Agreement and agree that such extension shall be effective pursuant to the terms thereof.

ARTICLE II

REVOLVER INCREASE

2.1

Revolver Increase. Pursuant to Section 2.20 of the Credit Agreement, the Borrower and the Revolving Lenders agree to effect a Revolver Increase to $130,000,000.

2.2

Application of Revolver Increase. The Revolver Increase shall be applied to increase the Revolving Credit Commitments of (i) Wachovia Bank, National Association (which Revolving Credit Commitment shall be increased from $20,123,109.35 to $29,000,000), (ii) Bank of America, N.A. (which Revolving Credit Commitment shall be increased from $20,123,109.35 to $29,000,000), (iii) PNC Bank, National Association (which Revolving Credit Commitment shall be increased from $20,123,109.35 to $29,000,000), (iv) SunTrust Bank (which Revolving Credit Commitment shall be increased from $15,625,000 to $24,250,000), and (v) Branch Banking and Trust Company (which Revolving Credit Commitment shall be increased from $6,250,000 to $12,500,000). The Revolving Credit Commitment of Comerica Bank shall remain unchanged at $6,250,000. The Revolving Credit Commitment of Fleet National Bank (the “Withdrawing Revolving Lender”) shall be reduced from $11,505,671.95 to $0.

2.3

Execution of Notes. The Borrower shall execute and deliver to each Revolving Lender (other than the Withdrawing Revolving Lender) a new Revolving Note evidencing such Revolving Lender’s new Revolving Credit Commitment, as described in Section 2.2 above.

2.4

Release; Representations. On the effective date of this Agreement, the Withdrawing Revolving Lender shall relinquish its rights as a Revolving Lender under the Credit Agreement and the other Credit Documents (other than such rights relating to indemnification to the extent such rights relate to the time prior to the reduction of its Revolving Credit Commitment), and be released from its obligations as a Revolving Lender under the Credit Agreement and the other Credit Documents. The Withdrawing Revolving Lender hereby (i) represents and warrants to the Administrative Agent and the other Revolving Lenders that it is the legal and beneficial owner, free and clear of any adverse claim, of the Revolving Credit Commitments purported to be held by it prior to the effectiveness of this Agreement, and (ii) acknowledges that it shall receive no other fees or expenses relating to its Revolving Credit Commitment other than those actually received by such Revolving Lender prior to the date hereof.

ARTICLE III

EFFECTIVENESS

This Agreement shall become effective on the date when the last of the following conditions shall have been satisfied:

(a)

The Administrative Agent shall have received counterparts of this Agreement, duly executed by the Borrower, the Subsidiary Guarantors and the Revolving Lenders;

(b)

The First Amendment to Credit Agreement shall have become effective;

(c)

The Borrower shall have made a voluntary prepayment equal to the amount of the outstanding principal and interest with respect to the Tranche A Term Loans and such prepayment shall have been applied to satisfy the Tranche A Term Loans in full;

(d)

The Borrower shall have paid to the Administrative Agent, for the account of each Revolving Lender, a fee equal to 0.25% of the Revolving Credit Commitment of such Revolving Lender after giving effect to this Agreement; and

(e)

The Borrower shall have paid all fees due under the Fee Letter, dated as of July 11, 2003, from the Administrative Agent and Wachovia Capital Markets, LLC to the Borrower.

ARTICLE IV

ACKNOWLEDGMENT

The Subsidiary Guarantors hereby acknowledge that the Borrower, the Administrative Agent and the Revolving Lenders have agreed, as provided herein, to extend the Revolving Credit Maturity Date and increase the Revolving Credit Commitments as provided herein. Each Subsidiary Guarantor hereby approves and consents to the transactions contemplated by this Amendment and agree that its obligations under the Subsidiary Guaranty and the other Credit Documents to which it is a party shall not be diminished as a result of the execution of this Agreement. This acknowledgement by the Subsidiary Guarantors is made and delivered to induce the Administrative Agent and the Lenders to enter into this Agreement, and the Subsidiary Guarantors acknowledge that the Administrative Agent and the Revolving Lenders would not enter into this Agreement in the absence of the acknowledgements contained herein.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

5.1

Representations and Warranties. After giving effect to this Agreement, each of the representations and warranties of the Borrower contained in the Credit Agreement and in the other Credit Documents is true and correct in all material respects on and as of the date hereof, with the same effect as if made on and as of the date hereof (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty is true and correct in all material respects as of such date).

5.2

No Default. After giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.

ARTICLE VI

MISCELLANEOUS

6.1

Effect of Agreement. From and after the effective date of this Agreement, all references to the Credit Agreement set forth in any other Credit Document or other agreement or

instrument shall, unless otherwise specifically provided, be references to the Credit Agreement as amended by this Agreement and as may be further amended, modified, restated or supplemented from time to time. This Agreement is limited as specified and shall not constitute or be deemed to constitute an amendment, modification or waiver of any provision of the Credit Agreement except as expressly set forth herein. Except as expressly amended hereby, the Credit Agreement shall remain in full force and effect in accordance with its terms.

6.2

Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York (without regard to the conflicts of law provisions thereof).

6.3

Expenses. The Borrower agrees to pay upon demand all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and expenses of counsel to the Administrative Agent) in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Credit Documents delivered in connection herewith.

6.4

Severability. To the extent any provision of this Agreement is prohibited by or invalid under the applicable law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in any such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.

6.5

Successors and Assigns. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto.

6.6

Construction. The headings of the various sections and subsections of this Agreement have been inserted for convenience only and shall not in any way affect the meaning or construction of any of the provisions hereof.

6.7

Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

[the remainder of this page left blank intentionally]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first above written.

HILB, ROGAL AND HAMILTON COMPANY

By:

/s/ Carolyn Jones

Title:

Senior Vice President, Chief Financial Officer and Treasurer

WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender

By:

/s/ William R. Goley

Title:

Director

S-1

For purposes of Article IV only:

HILB, ROGAL AND HAMILTON INVESTMENT COMPANY

HILB, ROGAL AND HAMILTON REALTY COMPANY

HILB, ROGAL AND HAMILTON SERVICES COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF ALABAMA, INC.

BEIERSDOERFER, MEADOWS & GOULD, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ARIZONA

HRH INSURANCE SERVICES OF THE COACHELLAVALLEY, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES

OF CENTRAL CALIFORNIA, INC.

MORGAN & FRANZ INSURANCE AGENCY OF ORANGE COUNTY

HRH OF NORTHERN CALIFORNIA INSURANCE SERVICES, INC.

PROFESSIONAL PRACTICE INSURANCE BROKERS, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES

OF SAN DIEGO, INC.

ARIS/B&W INSURANCE SERVICES, INC.

SUMMIT RISK MANAGEMENT & INSURANCE SERVICES, INC.

HILB, ROGAL AND HAMILTON COMPANY OF DENVER

HILB, ROGAL AND HAMILTON COMPANY OF CONNECTICUT, LLC

THE MANAGING AGENCY GROUP, INC.

PREMIUM FUNDING ASSOCIATES, INC.

THOMAS M. MURPHY & ASSOCIATES, INC.

HILB, ROGAL AND HAMILTON COMPANY

OF GAINESVILLE, FLORIDA, INC.

HUNT INSURANCE GROUP, INC.

INSURANCE CONSULTANTS & ANALYSTS, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ORLANDO

HILB, ROGAL AND HAMILTON COMPANY OF SARASOTA

HILB, ROGAL AND HAMILTON COMPANY OF SOUTH FLORIDA

HILB, ROGAL AND HAMILTON COMPANY OF TAMPA BAY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ATLANTA

HILB, ROGAL AND HAMILTON COMPANY OF GAINESVILLE, GEORGIA

HILB, ROGAL AND HAMILTON COMPANY OF SAVANNAH, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ILLINOIS

DULANEY, JOHNSTON & PRIEST, INC.

THE DUNLAP CORPORATION

THE DUNLAP AGENCY

THE DUNLAP CORPORATION OF NEW HAMPSHIRE

HILB, ROGAL AND HAMILTON COMPANY OF BALTIMORE

HILB, ROGAL AND HAMILTON COMPANY OF

METROPOLITAN WASHINGTON

HILB, ROGAL AND HAMILTON INSURANCE

AGENCY OF MASSACHUSETTS, LLC

S-2

HILB, ROGAL AND HAMILTON COMPANY OF GRAND RAPIDS

HILB, ROGAL AND HAMILTON COMPANY OF PORT HURON

HRH INSURANCE SERVICES OF NEVADA, INC.

ASHURST PROCESSING AGENCY, INC.

GIACONIA LIFE ASSOCIATES, LLC

HILB, ROGAL AND HAMILTON COMPANY

OF NORTHERN NEW JERSEY, LLC

HRH CONSULTING GROUP, LLC

HILB, ROGAL AND HAMILTON COMPANY OF NEW YORK, LLC

KAMMSAC INTERNATIONAL, LLC

KALVIN-MILLER HOLDINGS, LLC

PROPERTY OWNERS & MANAGERS PURCHASING GROUP, INC.

HILB, ROGAL AND HAMILTON COMPANY OF

UPSTATE NEW YORK, LLC

PROFESSIONAL PRACTICES INSURANCE BROKERS, INC. (SOUTHEAST)

BOAHC, INC. D/B/A BERWANGER OVERMYER ASSOCIATES

BOAEB AGENCY, INC.

BOAFS AGENCY, INC.

MIDWEST PENSION SERVICES, INC.

BOAPC AGENCY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF OKLAHOMA

HILB, ROGAL AND HAMILTON COMPANY OF OREGON

HILB, ROGAL AND HAMILTON COMPANY OF PHILADELPHIA, LLC

HILB, ROGAL AND HAMILTON COMPANY OF PITTSBURGH, LLC

HRH MERGER COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF SAN ANTONIO

HILB, ROGAL AND HAMILTON COMPANY OF TEXAS

HILB, ROGAL AND HAMILTON COMPANY OF VIRGINIA

TIMOTHY S. MILLS INSURANCE SERVICES, INC.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

TLC HOBBS, LLC

WESTPORT FINANCIAL SERVICES, LLC

WESTPORT INSURANCE AGENCY, LLC

WESTPORT WORLDWIDE, LLC

WESTPORT INSURANCE BROKERAGE, LLC

STAFFING RISK SOLUTIONS, LLC

BAY TECHNOLOGY GROUP, LLC

HOBBS GROUP, INC. (OH)

HOBBS GROUP, INC. (MD)

HOBBS GROUP, INC. (MA)

HOBBS GROUP INVESTMENT ADVISORS, LLC

HOBBS GROUP LIMITED LIABILITY COMPANY

HOBBS GROUP, LLC

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HOBBS IRA CORP.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

HOBBS GROUP INSURANCE BROKERS, LLC

HOBBS/OFJ ACQUISITION CORP.

O’NEILL, FINNEGAN & JORDAN INSURANCE AGENCY, INC.

HOBBS GROUP (NY), LLC

KIRKLIN & COMPANY, LLC

HOBBS GROUP, INC. (TX)

HRH OF COLORADO MERGER COMPANY

FREBERG & COMPANY OF WYOMING, INC.

DOMINION SPECIALTY GROUP, INC.

By:

/s/ Walter L. Smith

Title:

Senior Vice President, General Counsel and Secretary

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PNC BANK, NATIONAL ASSOCIATION

By: /s/ Ronald L. Bovill

Title: Senior Vice President

BANK OF AMERICA, N.A.

By: /s/ Elizabeth Shore

Title: Senior Vice President

FLEET NATIONAL BANK

By: /s/ Stephen E. Burse

Title: Vice President

SUNTRUST BANK

By: /s/ Deborah S. Armstrong

Title: Managing Director

BRANCH BANKING AND TRUST COMPANY

By: /s/ J. Charles Link

Title: Senior Vice President

COMERICA BANK

By: /s/ Martin G. Ellis

Title: Vice President

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EX-10 5 ex10-3.htm EXHIBIT 10.3 Exhibit 10.3

Exhibit 10.3

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of the 16th day of July, 2003 (this “Amendment”), is made among HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation (the “Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION (the “Administrative Agent”) on behalf of the Required Lenders (as defined in the Credit Agreement described below).

RECITALS

The Borrower, the Administrative Agent and the banks and financial institutions listed on the signature pages thereof or that became parties thereto after the date thereof (collectively the “Lenders”) are parties to a Second Amended and Restated Credit Agreement, dated as of July 1, 2002 (the “Credit Agreement”), providing for the availability of a credit facility to the Borrower upon the terms and conditions set forth therein. Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement.

The Borrower desires to make a voluntary prepayment of the Term Loans and has requested that such prepayment be applied solely to reduce the outstanding principal amount of the Tranche A Term Loans (and not pro rata among the Tranche A Term Loans and Tranche B Term Loans). The Borrower has requested that the Agent and the Lenders (i) amend the Credit Agreement to permit such a prepayment and (ii) make certain other amendments as set forth herein. The Administrative Agent and the Lenders have agreed to effect such amendments on the terms and subject to the conditions set forth herein.

STATEMENT OF AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

AMENDMENTS

1.1

New Definition. Section 1.1 of the Credit Agreement is hereby amended by adding the following definition of “First Amendment” in appropriate alphabetical order:

“First Amendment” shall mean the First Amendment to Credit Agreement, dated as of July 16, 2003, between the Borrower, the Administrative Agent and the Lenders.

1.2

Existing Definitions. Section 1.1 of the Credit Agreement is hereby amended as follows:

(a)

The matrix set forth in the definition of “Applicable Margin Percentage” is amended by deleting and replacing it in its entirety with the following:

Leverage Ratio	Applicable Margin Percentage for Base Rate Revolving/ Tranche A Term Loans	Applicable Margin Percentage for LIBOR Revolving/ Tranche A Loans	Applicable Margin Percentage for Base Rate Tranche B Term Loans	Applicable Margin Percentage for LIBOR Tranche B Term Loans	Applicable Margin Percentage for Commitment Fee
Greater than or equal to 2.0 to 1.0	1.000%	2.000%	2.000%	2.750%	0.400%
Greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0	0.750%	1.750%	2.000%	2.750%	0.375%
Less than 1.0 to 1.0	0.500%	1.500%	2.000%	2.750%	0.350%

(b)

The definition of “Consolidated Fixed Charges” is amended by deleting the period at the end thereof and replacing it with the following “; provided, however, that Consolidated Fixed Charges shall not include the first $30,000,000 expended after the date of the First Amendment with respect to Capital Stock repurchases or earnout payments under subsections (d) or (e) above.”

1.3

Voluntary Prepayments. Section 2.7(b) is hereby amended by inserting the following immediately after the first sentence thereof:

Notwithstanding anything in this Section 2.7(b) to the contrary, the Borrower may, at its option, direct that one voluntary prepayment, made on or before July 31, 2003, be applied solely to the remaining scheduled principal payments on the Tranche A Term Loans (and not pro rata among the Tranche A Term Loans and the Tranche B Term Loans).

1.4

Permitted Acquisitions. Section 5.8(a) is hereby amended by:

(a)

deleting the reference to “$100,000,000” in clause (iii) and replacing it with “$125,000,000”.

(b)

deleting the reference to “$75,000,000” in clause (iv) and replacing it with “$100,000,000; provided that, for any period of four consecutive fiscal quarters that includes the

fiscal quarter ending September 30, 2003, such amount shall be (x) $130,000,000 less (y) the amount by which Capital Stock repurchases during the fiscal year ending December 31, 2003 exceeds $20,000,000”.

(c)

amending and restating clause (v) as follows: “(v) the Acquisition Amount (without regard to the issuance of Capital Stock of the Borrower) with respect to such Acquisition (but specifically excluding, if applicable, any Acquisition consummated on or prior to the Closing Date) paid, incurred or assumed by the Borrower and its Subsidiaries during any period of four consecutive fiscal quarters shall not exceed $35,000,000; and”.

(d)

deleting the reference to “$375,000,000” in clause (vi) and replacing it with “$400,000,000”.

1.5

Indebtedness. Section 7.2 is hereby amended by:

(a)

amending and restating clause (ix) as follows:

(ix)

cash earnout and contingent obligations due and owing by the Borrower or its Subsidiaries in connection with Permitted Acquisitions or Acquisitions that (a) are paid by the Borrower or one of its Subsidiaries within five (5) Business Days of becoming due, or (b) otherwise do not exceed $30,000,000 in aggregate amount at any time;

(b)

amending and restating clause (xi) as follows:

(xi)

reimbursement obligations with respect to secured letters of credit issued to insurance companies in an aggregate amount not to exceed $5,000,000 at any time;

1.6

Restricted Payments. Section 7.6(a) is hereby amended by:

(a)

deleting the reference to “$20,000,000” in clause (ii) and replacing it with “$30,000,000”.

(b)

amending and restating clause (iii) as follows:

(iii)

the Borrower may purchase, redeem, retire or otherwise acquire shares of its Capital Stock (A) in order to fund its Deferred Compensation Plans and (B) in addition thereto, in an aggregate amount not to exceed (I) during the fiscal year ending December 31, 2003, (x) $50,000,000 less (y) the amount by which the cash Acquisition Amount described in Section 5.8(a)(iv) and paid during such fiscal year exceeds $100,000,000 and (II) during any fiscal year thereafter, $20,000,000, provided that, in each case, immediately after giving effect thereto, no Default or Event of Default would exist; and

ARTICLE II

EFFECTIVENESS

This Agreement shall become effective on the date when the last of the following conditions shall have been satisfied:

(a)

The Administrative Agent shall have received counterparts of this Amendment, duly executed by the Borrower and the Subsidiary Guarantors;

(b)

The Administrative Agent shall have received the approval of this Amendment from the Required Lenders (and, in addition to the foregoing, with respect to the amendment contemplated by Section 1.3 the approval of Lenders holding more than fifty-one percent (51%) of the aggregate outstanding principal amount of Tranche B Term Loans); provided that nothing in this ARTICLE II shall prevent the amendments contemplated hereby, other than the amendment contemplated by Section 1.3 hereof, from becoming effective upon the approval of the Borrower and the Required Lenders; and

(c)

The Borrower shall have paid to the Administrative Agent, for the account of each Tranche B Lender executing this Amendment, a fee equal to 0.075% of the Tranche B Term Loans held by such Tranche B Lender as of the date hereof.

ARTICLE III

ACKNOWLEDGEMENT

The Subsidiary Guarantors hereby acknowledge that the Borrower, the Administrative Agent and the Required Lenders have agreed, as provided herein, to amend the Credit Agreement as provided herein. Each Subsidiary Guarantor hereby approves and consents to the transactions contemplated by this Amendment and agrees that its obligations under the Subsidiary Guaranty and the other Credit Documents to which it is a party shall not be diminished as a result of the execution of this Amendment. This acknowledgement by the Subsidiary Guarantors is made and delivered to induce the Administrative Agent and the Lenders to enter into this Amendment, and the Subsidiary Guarantors acknowledge that the Administrative Agent and the Lenders would not enter into this Amendment in the absence of the acknowledgements contained herein.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

4.1

Representations and Warranties. After giving effect to this Amendment, each of the representations and warranties of the Borrower contained in the Credit Agreement and in the other Credit Documents is true and correct in all material respects on and as of the date hereof, with the same effect as if made on and as of the date hereof (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty is true and correct in all material respects as of such date).

4.2

No Default. After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.

ARTICLE V

MISCELLANEOUS

5.1

Effect of Amendment. From and after the effective date of the amendments to the Credit Agreement set forth herein, all references to the Credit Agreement set forth in any other Credit Document or other agreement or instrument shall, unless otherwise specifically provided, be references to the Credit Agreement as amended by this Amendment and as may be further amended, modified, restated or supplemented from time to time. This Amendment is limited as specified and shall not constitute or be deemed to constitute an amendment, modification or waiver of any provision of the Credit Agreement except as expressly set forth herein. Except as expressly amended hereby, the Credit Agreement shall remain in full force and effect in accordance with its terms.

5.2

Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York (without regard to the conflicts of law provisions thereof).

5.3

Expenses. The Borrower agrees to pay upon demand all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and expenses of counsel to the Administrative Agent) in connection with the preparation, negotiation, execution and delivery of this Amendment and the other Credit Documents delivered in connection herewith.

5.4

Severability. To the extent any provision of this Amendment is prohibited by or invalid under the applicable law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in any such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Amendment in any jurisdiction.

5.5

Successors and Assigns. This Amendment shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto.

5.6

Construction. The headings of the various sections and subsections of this Amendment have been inserted for convenience only and shall not in any way affect the meaning or construction of any of the provisions hereof.

5.7

Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

[the remainder of this page left blank intentionally]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the date first above written.

HILB, ROGAL AND HAMILTON COMPANY

By:

/s/ Carolyn Jones

Title:

Senior Vice President, Chief Financial Officer and Treasurer

WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent on behalf of the Required Lenders

By:

/s/ William R. Goley

Title:

Director

S-1

For purposes of Article III only:

HILB, ROGAL AND HAMILTON INVESTMENT COMPANY

HILB, ROGAL AND HAMILTON REALTY COMPANY

HILB, ROGAL AND HAMILTON SERVICES COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF ALABAMA, INC.

BEIERSDOERFER, MEADOWS & GOULD, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ARIZONA

HRH INSURANCE SERVICES OF THE COACHELLAVALLEY, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES

OF CENTRAL CALIFORNIA, INC.

MORGAN & FRANZ INSURANCE AGENCY OF ORANGE COUNTY

HRH OF NORTHERN CALIFORNIA INSURANCE SERVICES, INC.

PROFESSIONAL PRACTICE INSURANCE BROKERS, INC.

HILB, ROGAL AND HAMILTON INSURANCE SERVICES

OF SAN DIEGO, INC.

ARIS/B&W INSURANCE SERVICES, INC.

SUMMIT RISK MANAGEMENT & INSURANCE SERVICES, INC.

HILB, ROGAL AND HAMILTON COMPANY OF DENVER

HILB, ROGAL AND HAMILTON COMPANY OF CONNECTICUT, LLC

THE MANAGING AGENCY GROUP, INC.

PREMIUM FUNDING ASSOCIATES, INC.

THOMAS M. MURPHY & ASSOCIATES, INC.

HILB, ROGAL AND HAMILTON COMPANY

OF GAINESVILLE, FLORIDA, INC.

HUNT INSURANCE GROUP, INC.

INSURANCE CONSULTANTS & ANALYSTS, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ORLANDO

HILB, ROGAL AND HAMILTON COMPANY OF SARASOTA

HILB, ROGAL AND HAMILTON COMPANY OF SOUTH FLORIDA

HILB, ROGAL AND HAMILTON COMPANY OF TAMPA BAY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ATLANTA

HILB, ROGAL AND HAMILTON COMPANY OF GAINESVILLE, GEORGIA

HILB, ROGAL AND HAMILTON COMPANY OF SAVANNAH, INC.

HILB, ROGAL AND HAMILTON COMPANY OF ILLINOIS

DULANEY, JOHNSTON & PRIEST, INC.

THE DUNLAP CORPORATION

THE DUNLAP AGENCY

THE DUNLAP CORPORATION OF NEW HAMPSHIRE

HILB, ROGAL AND HAMILTON COMPANY OF BALTIMORE

HILB, ROGAL AND HAMILTON COMPANY OF

METROPOLITAN WASHINGTON

HILB, ROGAL AND HAMILTON INSURANCE

AGENCY OF MASSACHUSETTS, LLC

HILB, ROGAL AND HAMILTON COMPANY OF GRAND RAPIDS

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HILB, ROGAL AND HAMILTON COMPANY OF PORT HURON

HRH INSURANCE SERVICES OF NEVADA, INC.

ASHURST PROCESSING AGENCY, INC.

GIACONIA LIFE ASSOCIATES, LLC

HILB, ROGAL AND HAMILTON COMPANY

OF NORTHERN NEW JERSEY, LLC

HRH CONSULTING GROUP, LLC

HILB, ROGAL AND HAMILTON COMPANY OF NEW YORK, LLC

KAMMSAC INTERNATIONAL, LLC

KALVIN-MILLER HOLDINGS, LLC

PROPERTY OWNERS & MANAGERS PURCHASING GROUP, INC.

HILB, ROGAL AND HAMILTON COMPANY OF

UPSTATE NEW YORK, LLC

PROFESSIONAL PRACTICES INSURANCE BROKERS, INC. (SOUTHEAST)

BOAHC, INC. D/B/A BERWANGER OVERMYER ASSOCIATES

BOAEB AGENCY, INC.

BOAFS AGENCY, INC.

MIDWEST PENSION SERVICES, INC.

BOAPC AGENCY, INC.

HILB, ROGAL AND HAMILTON COMPANY OF OKLAHOMA

HILB, ROGAL AND HAMILTON COMPANY OF OREGON

HILB, ROGAL AND HAMILTON COMPANY OF PHILADELPHIA, LLC

HILB, ROGAL AND HAMILTON COMPANY OF PITTSBURGH, LLC

HRH MERGER COMPANY

HILB, ROGAL AND HAMILTON COMPANY OF SAN ANTONIO

HILB, ROGAL AND HAMILTON COMPANY OF TEXAS

HILB, ROGAL AND HAMILTON COMPANY OF VIRGINIA

TIMOTHY S. MILLS INSURANCE SERVICES, INC.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

TLC HOBBS, LLC

WESTPORT FINANCIAL SERVICES, LLC

WESTPORT INSURANCE AGENCY, LLC

WESTPORT WORLDWIDE, LLC

WESTPORT INSURANCE BROKERAGE, LLC

STAFFING RISK SOLUTIONS, LLC

BAY TECHNOLOGY GROUP, LLC

HOBBS GROUP, INC. (OH)

HOBBS GROUP, INC. (MD)

HOBBS GROUP, INC. (MA)

HOBBS GROUP INVESTMENT ADVISORS, LLC

HOBBS GROUP LIMITED LIABILITY COMPANY

HOBBS GROUP, LLC

HOBBS IRA CORP.

INTEGRATED RISK SOLUTIONS INSURANCE SERVICES, LLC

HOBBS GROUP INSURANCE BROKERS, LLC

S-3

HOBBS/OFJ ACQUISITION CORP.

O’NEILL, FINNEGAN & JORDAN INSURANCE AGENCY, INC.

HOBBS GROUP (NY), LLC

KIRKLIN & COMPANY, LLC

HOBBS GROUP, INC. (TX)

HRH OF COLORADO MERGER COMPANY

FREBERG & COMPANY OF WYOMING, INC.

DOMINION SPECIALTY GROUP, INC.

By:

/s/ Walter L. Smith

Title:

Senior Vice President, General Counsel and Secretary

S-4

EX-10 6 ex10-4.htm EXHIBIT 10.4 Exhibit 10.4

Exhibit 10.4

HILB, ROGAL AND HAMILTON COMPANY

EMPLOYEE

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT dated as of the 6th day of May, 2003, between Hilb, Rogal and Hamilton Company, a Virginia corporation (the “Company”), and Martin L. Vaughan, III (“Optionee”), is made pursuant and subject to the provisions of the Company’s 2000 Stock Incentive Plan, as amended (the “Plan”), a copy of which is attached. All terms used herein that are defined in the Plan shall have the same meaning given them in the Plan.

Grant of Option. Pursuant to the Plan, the Company, on May 6, 2003, granted to Optionee, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Company all or any part of an aggregate of 26,000 shares of the common stock of the Company (“Common Stock”) at the Option price of $36.35 per share. Such Option will be exercisable as hereinafter provided.

Terms and Conditions. This Option is subject to the following terms and conditions:

(a)

Expiration Date. The “Expiration Date” of this Option is May 6, 2010.

(b)

Exercise of Option. Except as provided in paragraphs 3, 4, 5 and 10, this Option shall be exercisable with respect to twenty-five percent (25%) of the aggregate number of shares covered by this Option for each one (1) full year, up to a total of four (4) full years, that Optionee continues to be employed by the Company after the date of this Agreement. Once this Option has become exercisable with respect to any portion of the total number of shares in accordance

with the preceding sentence, it shall continue to be exercisable with respect to such shares until the termination of Optionee’s rights hereunder pursuant to paragraphs 3, 4 or 5, or until the Expiration Date. A partial exercise of this Option shall not affect Optionee’s right to exercise subsequently this Option with respect to the remaining shares that are exercisable, subject to the conditions of the Plan and this Agreement.

(c)

Method of Exercising and Payment for Shares. This Option may be exercised only by written notice delivered to the attention of the Company’s Secretary at the Company’s principal office in Glen Allen, Virginia. The written notice shall specify the number of shares being acquired pursuant to the exercise of the Option when such Option is being exercised in part in accordance with subparagraph 2(b) hereof. The exercise date shall be the date such notice is received by the Company. Such notice shall be accompanied by payment of the Option price in full for each share (a) in cash (United States dollars) or by cash equivalent acceptable to the Company, or (b) by a cashless exercise pursuant to Section IX(2) of the Plan.

(d)

Nontransferability. This Option is nontransferable except, in the event of the Optionee’s death, by will or by the laws of descent and distribution subject to the terms hereof. During Optionee’s lifetime, this Option may be exercised only by Optionee.

Exercise in the Event of Death. This Option shall be exercisable in full in the event that Optionee dies while employed by the Company or an Affiliate and prior to the Expiration Date of this Option. In that event, this Option may be exercised by Optionee’s estate, or the person or persons to whom his rights under this Option shall pass by will or the laws of descent and distribution. Optionee’s estate or such persons must exercise this Option, if at all, within one year of the date of Optionee’s death or during the remainder of the period preceding

the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

Exercise in the Event of Permanent and Total Disability. This Option shall be exercisable in full if Optionee becomes permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code) while employed by the Company or an Affiliate and prior to the Expiration Date of this Option. In that event, Optionee must exercise this Option, if at all, within one year of the date he becomes disabled or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

Exercise After Termination of Employment. In the event that the Optionee retires from employment with the Company after attaining age 62 and serving at least 10 consecutive years with the Company or an Affiliate or predecessor thereof, then this Option shall be exercisable in full but must be exercised by the Optionee, if at all, within one year following his retirement date or during the remainder of the period preceding the Expiration Date, whichever is shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option. In all events other than those events addressed in paragraphs 3 or 4 or the foregoing sentence of this paragraph 5, in which Optionee ceases to be employed by the Company: (a) Optionee may exercise the Option in whole or in part with respect to that number of shares which are exercisable by him under paragraph 2(b) above on the date his employment terminated, and (b) this Option must be exercised by Optionee, if at all, within ninety (90) days following the date upon which he ceases to be employed by the Company or during the remainder of the period preceding the Expiration Date, whichever is

shorter, but in no event may the Option be exercised prior to the expiration of six (6) months from the date of the grant of the Option.

Fractional Shares. Fractional shares shall not be issuable hereunder, and when any provision hereof may entitle Optionee to a fractional share such fraction shall be disregarded.

No Right to Continued Employment. This Option does not confer upon Optionee any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate his employment at any time.

Investment Representation. Optionee agrees that, unless such shares previously have been registered under the Securities Act of 1933, as amended (the “Securities Act”): (i) any shares purchased by him hereunder will be purchased for investment and not with a view to distribution or resale and (ii) until such registration, certificates representing such shares may bear an appropriate legend to assure compliance with the Securities Act. This investment representation shall terminate when such shares have been registered under the Securities Act.

Change in Capital Structure. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by this Option, and the price per share thereof, shall be proportionately adjusted by the Company for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from any stock dividend (but only on the Common Stock), stock split, combination, reclassification, recapitalization or 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 such

shares outstanding effected without receipt of cash or property or labor or services by the Company, or any spin-off or other 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 a 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.

The grant of this Option 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.

10.

Change of Control. Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control, the provisions of Section XIII(3) of the Plan shall apply to this Option.

11.

Forfeiture of Certain Gains.

(a)

Termination for Cause. If Optionee’s employment is terminated for “Cause” within one year of any exercise of this Option, in whole or in part, the Optionee shall pay to the Company an amount equal to the gain realized by Optionee from such exercise represented by the excess of the Fair Market Value on the date of exercise over the Option price multiplied by the number of shares purchased, without regard to any subsequent market price increase or decrease (“Option Gain”). For purposes of this paragraph, “Cause” shall have the meaning ascribed to it in any employment agreement between the Optionee and the Company that is in effect at the time of termination and, if no such agreement exists, it shall mean:

(i)

the willful and continued failure of the Optionee to perform substantially the Optionee's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Optionee by the Company which specifically identifies the manner in which the Company believes that the Optionee has not substantially performed the Optionee's duties, or

(ii)

the willful engaging by the Optionee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

(b)

Forfeiture if Optionee Engages in Certain Activities. If Optionee engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including but not limited to (i) accepting employment with or serving as a consultant advisor or in any other capacity to an employer that is in competition with or acting against the interests of the Company, (ii) disclosing or misusing any confidential information or material concerning the Company or (iii) participating in any hostile takeover attempt, then (1) this Option shall terminate effective the date on which Optionee enters into such activity, unless terminated sooner by operation of another term on condition of this Agreement or the Plan, and (2) the Optionee shall pay to the Company an amount equal to the Option Gain realized by Optionee from any exercise of this Option, in whole or i n part, within one year of the date such activity began.

(c)

Right of Set-off. Optionee hereby consents to a deduction from any amounts owed by the Company to Optionee from time to time (including amounts owed as wages or other compensation, fringe benefits or vacation pay, to the extent of any amounts Optionee owes the Company under paragraphs 11(a) and (b). Whether or not the Company elects to make any set-off in whole or in part, if Company does not recover by means of set-off the full amount owed by

Optionee under paragraphs 10(a) and (b), Optionee agrees to immediately pay the unpaid balance to the Company.

12.

Governing Law. This Agreement 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.

13.

Conflicts. In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof.

14.

Optionee Bound by Plan. Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

15.

Binding Effect. Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributes, and personal representatives of Optionee and the successors of the Company.

16.

Gender. All pronouns used herein shall be deemed to refer to either the male or female as appropriate.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer, and Optionee has affixed his signature hereto.

OPTIONEE:

HILB, ROGAL AND HAMILTON COMPANY

/s/ Martin L. Vaughan, III

By: _/s/ Walter L. Smith_______ ______

Martin L. Vaughan, III

Title:

Senior Vice President, General Counsel

and Secretary

EX-10 7 ex10-5.htm EXHIBIT 10.5 Exhibit 10.5

Exhibit 10.5

HILB, ROGAL AND HAMILTON COMPANY

2003 RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT, dated as of this 6th day of May, 2003, between Hilb, Rogal and Hamilton Company, a Virginia corporation (“the Company”), and Martin L. Vaughan, III (the “Employee”), is made pursuant and subject to the provisions of the Company’s 2000 Stock Incentive Plan, as amended, which is incorporated herein by reference, and any future amendments thereto (the “Plan”), a copy of which is attached. All terms used herein that are defined in the Plan shall have the same meanings given them in the Plan.

Award of Restricted Stock. The Company hereby awards to the Employee, subject to the terms and conditions of the Plan and the provisions of this Agreement, 4,000 shares of Common Stock of the Company (the “Restricted Stock”).

Terms and Conditions. The award of Restricted Stock hereunder is subject to the following terms and conditions:

(a)

Contingent Vesting. The award of Restricted Stock to Employee is intended to encourage Employee to cause the operating earnings of Company to grow by at least 10% per calendar year. At each of the vesting dates set forth in paragraph 2(b), Restricted Stock will be eligible to vest only if the Company achieves a 10% annual growth in fully diluted earnings per share based on Operating Income in at least one of the two preceding calendar years. If the earnings growth requirement has not been met at any of the vesting dates set forth in paragraph 2(b), all of the Restricted Shares eligible for vesting on that date shall be cancelled.

(b)

Restricted Period. Except as provided in paragraphs 2(a) and 3, the Restricted Stock shall vest and become nonforfeitable in accordance with the schedule set forth below:

Date

10%

Earnings Growth
Requirement

Percent of

Award Vested

May 6, 2005

2004 vs. 2003

2003 vs. 2002

25%

May 6, 2006

2005 vs. 2004

2004 vs. 2003

50%

May 6, 2007

2006 vs. 2005

2005 vs. 2004

75%

May 6, 2008

2007 vs. 2006

2006 vs. 2005

100%

The period from the date hereof until the shares of Restricted Stock have become 100% vested shall be referred to as the “Restricted Period.”

(c)

Issuance of Certificates; Restrictive Legend. The stock certificate(s) evidencing the Restricted Stock shall be issued and registered on the Company’s books and records in the name of the Employee as soon as practicable following the date of this Agreement. The Company shall retain physical possession and custody of each stock certificate representing the Restricted Stock until such time as the Restricted Stock becomes vested in accordance with paragraph 2(b) above. The Employee will deliver to the Company a stock power, endorsed in blank, with respect to each award of Restricted Stock. Each stock certificate shall bear a restrictive legend in substantially the following form:

The shares represented by this certificate are restricted and may be transferred only in accordance with the Restricted Stock Agreement between Hilb, Rogal and Hamilton Company and Martin L. Vaughan, III, dated May 6, 2003.

Upon the written request of the Employee following the vesting of any portion of the shares of Restricted Stock prior to any event of forfeiture under paragraph 3, the Company will promptly issue a stock certificate, without such restrictive legend, with respect to the vested portion of the shares of the Restricted Stock registered on the Company’s books and records in the name of the Employee. Following the expiration of the Restricted Period, the Company will promptly issue a stock certificate, without such restrictive legend, for any shares of Restricted Stock that have vested prior to any event of forfeiture under paragraph 3 and have not been reissued without a restrictive legend as provided in the preceding sentence.

(d)

Transferability. During the Restricted Period, the Employee shall not sell, assign, transfer, pledge, exchange, hypothecate, or otherwise dispose of unvested Restricted Stock. Upon receipt by the Employee of stock certificate(s) representing vested shares without a restrictive legend pursuant to paragraph 2(c) above, the Employee may hold or dispose of the shares represented by such certificate(s), subject to compliance with (i) the terms and conditions of the Plan and this Agreement and (ii) applicable securities laws of the United States of America and the Commonwealth of Virginia.

(e)

Shareholder Rights. Prior to any forfeiture of the shares of Restricted Stock and while the shares are Restricted Stock, the Employee shall, subject to the terms of this Agreement and the restrictions of the Plan, have all rights of a shareholder with respect to the shares of Restricted Stock awarded hereunder, including the right to receive dividends and other distributions as and when declared by the Board of Directors of the Company and the right to vote the shares of Restricted Stock.

(f)

Tax Withholding. The Company shall have the right to retain and withhold from any award of the Restricted Stock, the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to such award. At its discretion, the Company may require the Employee receiving shares of Restricted Stock to pay or otherwise reimburse the Company in cash for any such taxes required to be withheld by the Company and withhold any distribution in whole or in part until the Company is so paid or reimbursed. In lieu thereof, the Company shall have the unrestricted right to withhold, from any other cash amounts due (or to become due) from the Company to the Employee, an amount equal to such taxes required to be withheld by the Company to reimburse the Company for any such taxes (or retain and withhold a number of shares of vested Restricted Stock, having a market value not less than the amount of such taxes, and cancel in whole or in part any such shares so withheld, in order to reimburse the Company for any such taxes).

Death; Disability; Retirement; Termination of Employment. The shares of Restricted Stock not yet vested shall become 100% vested and transferable in the event that the Employee dies or becomes permanently and total disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code) while employed by the Company or an Affiliate during the Restricted Period. Upon attaining age 62 with 10 consecutive years of service with the Company or an Affiliate, or in any other circumstance approved by the Committee in its sole discretion, the shares of Restricted Stock shall become 100% vested and transferable. In all events other than those previously addressed in this paragraph, if the Employee ceases to be an employee of the Company or an Affiliate, the Employee shall be vested only as to that percentage of shares of Restricted Stock which are vested at the time of the termination of his

employment and the Employee shall forfeit the right to the shares of Restricted Stock which are not yet vested on the termination date.

No Right to Continued Employment. This Agreement does not confer upon the Employee any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate his or her employment at any time.

Change of Control or Capital Structure. Subject to any required action by the shareholders of the Company, the number of shares of Restricted Stock covered by this award shall be proportionately adjusted and the terms of the restrictions on such shares shall be adjusted as the Committee shall determine to be equitably required for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from any stock dividend (but only on the Common Stock), stock split, subdivision, combination, reclassification, recapitalization or general issuance to the 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 for any spin-off or other distribution of assets to shareholders.

In the event of a Change of Control, this award of Restricted Stock shall immediately vest pursuant to the provisions of Section XIII(3) of the Plan. 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.

The award of Restricted Stock 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, sell or transfer all or any part of its business or assets.

Employee Bound by Plan. The Employee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

Binding Effect. Subject to the limitations stated herein and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of the Employee and the successors of the Company.

10.

Forfeiture of Certain Gains.

(a)

Termination for Cause. If Employee’s employment is terminated for “Cause” within one year of any vesting of Restricted Stock herein, the Employee shall pay to the Company an amount equal to the Fair Market Value of such Restricted Stock on the date of vesting without regard to any subsequent market price increase or decrease. For purposes of this paragraph, “Cause” shall have the meaning ascribed to it in any employment agreement between the Employee and the Company that is in effect at the time of termination and, if no such agreement exists, it shall mean:

(i)

the willful and continued failure of the Employee to perform substantially the Employee's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Employee by the Company which specifically identifies the manner in which the Company believes that the Employee has not substantially performed the Employee's duties, or

(ii)

the willful engaging by the Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

(b)

Forfeiture if Employee Engages in Certain Activities. If Employee engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including but not limited to (i) accepting employment with or serving as a consultant advisor or in any other capacity to an employer that is in competition with or acting against the interests of the Company, (ii) disclosing or misusing any confidential information or material concerning the Company or (iii) participating in any hostile takeover attempt, then (1) any unvested Restricted Stock shall be forfeited and cancelled and (2) the Employee shall pay to the Company an amount equal to the Fair Market Value on the date of vesting, without regard to any subsequent market price increase or decrease, of any Restricted Stock that vested within one year of the date such activity began.

(c)

Right of Set-off. Employee hereby consents to a deduction from any amounts owed by the Company to Employee from time to time (including amounts owed as wages or other compensation, fringe benefits or vacation pay, to the extent of any amounts Employee owes the Company under paragraph 10(a) and (b). Whether or not the Company elects to make any set-off in whole or in part, if Company does not recover by means of set-off the full amount owed by

Employee under paragraphs 10(a) and (b), Employee agrees to immediately pay the unpaid balance to the Company.

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized Employee, and the Employee has affixed his or her signature hereto.

HILB, ROGAL AND HAMILTON COMPANY

By:

/s/ Walter L. Smith ________

Title:

Senior Vice President, General Counsel

and Secretary

MARTIN L. VAUGHAN, III

/s/ Martin L. Vaughan, III

Signature

FOR VALUE RECEIVED I, Martin L. Vaughan, III, hereby sell, assign and transfer unto HILB, ROGAL AND HAMILTON COMPANY, _________ (___) shares of the Common Stock of Hilb, Rogal and Hamilton Company standing in my name on the books of said Corporation represented by Certificate No. 12164 herewith and do hereby irrevocably constitute and appoint WALTER L. SMITH, or his designee or successor, attorney to transfer the said stock on the books of the within named Company with full power of substitution in the premises.

Dated __________, 2003

/s/ Martin L. Vaughan, III

[Signature - exact name as it

appears on certificate(s)]

Martin L. Vaughan, III

EX-10 8 ex10-6.htm EXHIBIT 10.6 Exhibit 10.6

Exhibit 10.6

SEVERANCE AGREEMENT

This Severance Agreement (hereinafter the "Agreement") is made and entered into on August 5, 2003, (hereinafter the “Effective Date”), by and between THOMAS A. GOLUB, an individual residing in the City of Atlanta, Georgia (hereinafter the “Executive”) and HILB, ROGAL AND HAMILTON COMPANY, a Virginia corporation with its corporate offices located at 4951 Lake Brook Drive, Suite 500, Glen Allen, Virginia 23060 (hereinafter the "Company").

WHEREAS, the Company and the Executive entered into an Employment Agreement on or about May 10, 2002 (hereinafter the “Employment Agreement”), whereby the Executive was employed by the Company as an Executive Vice President of the Company and President and Chief Executive Officer of Hobbs Group, LLC, a Delaware limited liability company (hereinafter “Hobbs”); and

WHEREAS, the Executive and the Company, in lieu of any dispute concerning the terms of the Employment Agreement, have agreed that the Executive shall resign his positions with the Company and Hobbs, thereby terminating the Employment Agreement, and shall resign all of his positions as a member of the Board of Directors and officer for the Company, Hobbs and their subsidiaries and related or affiliated companies;

NOW, THEREFORE, in consideration of the promises and covenants contained herein, and intending to be legally bound hereby, the parties agree as follows:

Resignation of Employment.

The Executive agrees to and hereby resigns his positions as Executive Vice President for the Company and President and Chief Executive Officer of Hobbs effective August 5, 2003. Pursuant to Section I(B)(3) of the Employment Agreement, the Executive’s resignation of these positions shall terminate the term of the Employment Agreement as of the effective date of resignation. The Executive further agrees to and hereby resigns all of his positions as a member of the Board of Directors and officer of the Company, Hobbs and their subsidiaries and related or affiliated companies effective August 5, 2003. The Executive agrees to undertaken all actions necessary to effectuate such resignations.

Compensation.

The Company agrees to pay and provide to the Executive the following compensation and benefits from August 1, 2003 until June 30, 2005 (hereinafter the “Agreement Term”):

(A)

Salary.

During the Agreement Term, the Company shall pay the Executive an annual base salary of $600,000, payable in semi-monthly installments on the 15^th and last business day of each calendar month.

(B)

Annual Incentive Bonus.

During the Agreement Term, in addition to the base salary to be paid to the Executive under Section 3(A), the Executive shall be paid an annualized incentive bonus of $500,000, payable as set forth below. The Executive will be paid an annual incentive bonus of $500,000 for fiscal years 2003 and 2004, payable in February, 2004 and 2005, respectively, and $250,000 for the first half of fiscal year 2005, payable in August 2005. Executive agrees that the $500,000 annualized incentive bonus for fiscal year 2003 paid hereunder shall satisfy the Company’s obligation to make payment for any portion of such bonus earned for the first half of fiscal year 2003 under the Employment Agreement and that the sole amount to which Executive will be entitled for any bonus or annualized incentive bonus for fiscal year 2003 is the annualized incentive bonus described herein.

(C)

Ancillary Benefits.

During the Agreement Term, the Company will provide and pay all premiums for health, dental, and vision insurance for the Executive which is the same as or substantially equivalent to that offered to employees of Hobbs and/or HRH at that time, subject to the terms and conditions of such insurance plans.

(D)

Stock Options and Vesting.

The Company granted to the Executive 125,000 nonqualified stock options under the Company’s 2000 Stock Incentive Plan pursuant to the Employment Agreement and 75,000 nonqualified stock options pursuant to a separate stock options agreement (hereinafter the “Stock Options Agreement”). As of the date of execution of this Agreement by the Executive and the Company, these 200,000 nonqualified stock options shall be fully vested, and the Executive shall have ninety (90) days from such date to exercise such options, pursuant to the Employment Agreement and Stock Options Agreement.

Announcement of Resignation.

The Company and the Executive have mutually agreed to the use of the document attached hereto as Exhibit A as an announcement for the resignation of the Executive’s positions with the Company and Hobbs, as described herein. The Company shall have the exclusive right to determine when the publication of Exhibit A or any other announcement of Executive’s resignation is made; provided that such announcement shall occur within sixty (60) days of the execution of this Agreement. The Company and the Executive further agree that any public communications regarding such resignation will be subject to the Executive’s reasonable approval prior to its public publication. This provision, however, shall not apply to any public filing required by law or the Company’s By-Laws regarding the Executive’s resignation, which the Company agrees shall not be materially inconsistent with the language set forth in Exhibit A. Executive shall comply with all reasonable requests regarding compliance with the law or Company By-Laws.

Confidentiality.

For purposes of this Agreement, “Confidential Information” shall mean any information of a proprietary or confidential nature and trade secrets of the Company, Hobbs and their affiliates relating to the business of the Company, Hobbs and their 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, Hobbs’ and their affiliates’ businesses that has been 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 any Confidential Information of the Company, Hobbs or their affiliates. 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. For the purpose of Sections 4 – 10 of this Agreement, references to the “Company” shall include, without limitation, Hobbs and its subsidiaries and affiliates, whether or not expressly stated.

Removal of Documents or Objects.

The Executive agrees not to remove from the premises of the Company, except as specifically permitted in writing by the Company, any document or object containing or reflecting any Confidential Information of the Company, Hobbs or their affiliates. 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, Hobbs or their affiliates, are the exclusive property of the Company. Notwithstanding anything in the foregoing, Executive and Company agree to arrange a mutually convenient date and time for the Executive to remove his personal belongings from the premises of the Company.

Nonpiracy Covenants.

(A)

For the purpose of this Agreement, the following terms shall have the following meanings:

(1)

“Customers” shall be limited to those customers of the Company (including Hobbs and its affiliates) 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 execution of this Agreement;

(2)

“Prohibited Services” shall mean services in the fields of insurance performed by the Company, Hobbs or their affiliates, their agents or employees in any other business engaged in or by the Company, Hobbs or their affiliates on the date of execution of this Agreement. “Fields of Insurance” does not include title insurance, but does include all lines of insurance sold by the Company or its affiliates, including property and casualty, life, group, accident, health, disability, and annuities;

(3)

“Restricted Period” shall mean the Agreement Term.

(B)

The Executive recognizes that over a period of many years the Company has developed, at considerable expense, relationships with, and knowledge about, Customers which constitute a major part of the value of the Company. During the course of his employment by the Company, the Executive has had substantial contact with and has obtained substantial knowledge about these Customers. In order to protect the value of the Company’s business, the Executive covenants and agrees that 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; or

(2)

accept an invitation from a Customer for the purpose of providing Prohibited Services to such Customer.

Subsections (1) and (2) are separate and divisible covenants; if for any reason one covenant is held to be illegal, invalid or unenforceable, in whole or in part, the remaining covenant 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 of 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.”

Nonraiding of Employees.

The Executive covenants that during the Restricted Period specified in Section 6 hereof, he will not solicit, induce or encourage for the purposes of employing or offering employment to any individuals who, as of the date of execution of this Agreement, are employees of the Company, Hobbs or their affiliates, nor will he directly or indirectly solicit, induce or encourage any of the Company’s, Hobbs’ or their affiliates’ employees to seek employment with any other business, whether or not the Executive is then affiliated with such business.

Notification of Former and New Employment.

During the Restricted Period specified in Section 6 hereof, the Executive covenants to notify any prospective employer or joint venturer, which is a competitor of the Company, Hobbs or their affiliates 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, Hobbs or their affiliates during the Restricted Period, then the Executive grants the Company the right to forward a copy of this Agreement to such competitor.

Liquidated Damages.

(A)

If the Executive breaches Sections 5 or 6 of this Agreement, the Company may, at its sole option, seek liquidated damages with respect to each Customer procured by or through the Executive, directly or indirectly, in violation of Sections 5 or 6 of this Agreement (with such Customers being hereafter referred to as “Lost Customers”). The Executive acknowledges that it would be difficult to calculate damages incurred by the Company in the event of such a 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 Executive also acknowledges that the Company, at its sole option, may or may not choose to exercise this liquidated damages provision as to some or all Lost Customers. Whether or not the Company seeks liquidated or actual damages, the Company shall retain the right to obtain injunctive relief with respect to any Lost Customer and with respect to any other actions by the Executive which breach this Agreement. 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 breach by the Executive, realized by the Company in the initial twelve (12) month period of such Customer being served by the Company.

(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.

(B)

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 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 6 of this Agreement and establishes a rebuttable presumption in favor of the Company that Section 6 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 that he can not accept its business until after the Restricted Period.

(C)

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.

10.

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 (but never more than what was contracted) and so that the Executive may not profit by his material breach. For example, if a violation of the Nonpiracy Covenants of Section 6 occurs and continues for 10 days, then the Restricted Period shall be that period of time necessary to get the bargained for period of compliance, excluding the 10 days of noncompliance.

11.

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:

4951 Lake Brook Drive, Suite 500

Glen Allen, Virginia 23060

Attn: Chairman of the Board

(B)

If to the Executive, to him at the following address:

1905 Sugarloaf Club Drive

Duluth, Ga, 30097

Attn: Thomas A. Golub

With a copy to:

Munger & Stone, LLP

2850 First Union Plaza,

999 Peachtree Street, NE

Atlanta, Georgia 30309

Attn: Benjamin A. Stone

or to such other place as either party shall have specified by notice I writing to the other. A copy of any notice or other communication given under this Agreement shall also be sent to the Secretary and Treasurer of the Company addressed to such officers at the then principal office of the Company.

12.

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.

13.

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.

14.

Indemnification by the Company.

The Company shall defend, indemnify and hold harmless the Executive to the fullest extent permitted by the laws of the Commonwealth of Virginia, against any and 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 during the term of his employment with the Company under the Employment Agreement and by reason of the fact that the Executive was a representative of the Company, was serving at the request of the Company, was acting within the scope of his employment under the Employment Agreement, or was acting 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.

15.

Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

16.

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 this Agreement as a whole or any part thereof, other than the specific portion declared to be invalid.

17.

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.

18.

Successor 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.

19.

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, including without limitation the Employment Agreement and any other employment or other agreement between the Executive and the Company, Hobbs, or any of their subsidiaries or affiliates. This Agreement, however, does not affect or limit in any manner the Executive’s right to payment or benefits to which the Executive may be entitled under the Purchase Agreement between the Company and Hobbs dated May 10, 2002. This Agreement may only be amended by a written agreement signed by the parties hereto or their duly authorized representatives.

HILB, ROGAL AND HAMILTON COMPANY,

By:

/s/ A. Brent King

A. Brent King

Title:

Vice President, Associate General Counsel

and Assistant Secretary

Date:

August 5, 2003

THOMAS A. GOLUB,

/s/ Thomas A. Golub

Date:

August 5, 2003

EXHIBIT A

After __ years with the Hobbs Group, LLC, and one year with the Hilb, Rogal and Hamilton Company, Tom Golub has informed the company of his decision to resign effective August 5, 2003 in order to pursue other personal and business interests. Tom has been an invaluable member of the Hobbs and HRH families, and his presence will be greatly missed. We wish Tom the best in his future endeavors.

EX-31 9 ex31-1.htm EXHIBIT 31.1 Exhibit 31.1

Exhibit 31.1

STATEMENT OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a – 14(a)/15d – 14(a)

I, Martin L. Vaughan, III, chief executive officer of Hilb, Rogal and Hamilton Company, certify that:

I have reviewed this report on Form 10-Q of Hilb, Rogal and Hamilton Company;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date August 11, 2003

/s/ Martin L. Vaughan, III

Martin L. Vaughan, III

Chief Executive Officer

EX-31 10 ex31-2.htm EXHIBIT 31.2 Exhibit 31.2

Exhibit 31.2

STATEMENT OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a – 14(a)/15d – 14(a)

I, Carolyn Jones, senior vice president, chief financial officer and treasurer of Hilb, Rogal and Hamilton Company, certify that:

I have reviewed this report on Form 10-Q of Hilb, Rogal and Hamilton Company;

(a)

(b)

(c)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date August 11, 2003

/s/ Carolyn Jones

Carolyn Jones

Senior Vice President, Chief

Financial Officer and Treasurer

EX-32 11 ex32-1.htm EXHIBIT 32.1 Exhibit 32.1

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Hilb, Rogal and Hamilton Company for the quarter ended June 30, 2003, I, Martin L. Vaughan, III, chief executive officer of Hilb, Rogal and Hamilton Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(a) such Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in such Form 10-Q for the quarter ended June 30, 2003 fairly presents, in all material respects, the consolidated financial condition and results of operations of Hilb, Rogal and Hamilton Company and its subsidiaries as of and for the periods presented in such Form 10-Q.

By: /s/ Martin L. Vaughan, III

Date:

August 11, 2003

Martin L. Vaughan, III

Chief Executive Officer

EX-32 12 ex32-2.htm EXHIBIT 32.2 Exhibit 32.1

Exhibit 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Form 10-Q of Hilb, Rogal and Hamilton Company for the quarter ended June 30, 2003, I, Carolyn Jones, senior vice president, chief financial officer and treasurer of Hilb, Rogal and Hamilton Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(a) such Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

By:

/s/ Carolyn Jones

Date:

August 11, 2003

Carolyn Jones

Senior Vice President, Chief

Financial Officer and Treasurer

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