SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[ ] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
HILB, ROGAL AND HAMILTON COMPANY
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(Name of Registrant as Specified in Its Charter)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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[LOGO]
April 7, 2003
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, May 6, 2003, at 10:00 a.m. at The Jefferson Hotel, 101 W. Franklin
Street, Richmond, Virginia. At the meeting, you will be asked to elect five
directors, four to the class of directors whose term of office expires in 2006
and one to the class of directors whose term of office expires in 2004. In
addition, you will be asked to approve our Amended and Restated Articles of
Incorporation and to approve an amendment and restatement of our 2000 Stock
Incentive Plan. On the following pages, you will find the formal notice of
annual meeting and the proxy statement.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Therefore, you are urged to
complete, sign, date and mail your proxy card or voting instruction promptly in
the enclosed postage-paid envelope. Also, registered shareholders may vote by
telephone or over the Internet. Instructions for using these convenient services
are included on the proxy card. Beneficial owners of shares held in street name
should follow the voting instructions provided by their bank or broker.
We hope you will participate in the annual meeting, either in person or by
proxy.
Sincerely,
Andrew L. Rogal
Chairman and Chief Executive Officer
HILB, ROGAL AND HAMILTON COMPANY
4951 Lake Brook Drive, Suite 500
Glen Allen, Virginia 23060
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 2003
The Annual Meeting of Shareholders of Hilb, Rogal and Hamilton Company (the
Company) will be held on Tuesday, May 6, 2003, at 10:00 a.m. at The Jefferson
Hotel, 101 W. Franklin Street, Richmond, Virginia, for the following purposes:
1. To elect four directors to the class of directors whose term of office
expires in 2006 and to elect one director to the class of directors
whose term of office expires in 2004;
2. To approve the Company's Amended and Restated Articles of
Incorporation;
3. To approve an amendment and restatement of the Company's 2000 Stock
Incentive Plan; and
4. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on March 14, 2003, the
record date fixed by the Board of Directors of the Company, are entitled to
notice of, and to vote at, the meeting.
By Order of The Board of Directors
Walter L. Smith
Senior Vice President, General Counsel and
Corporate Secretary
April 7, 2003
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of Directors for
the Annual Meeting of Shareholders to be held on May 6, 2003, and any duly
reconvened meeting after adjournment thereof (the Meeting). Any shareholder who
executes a proxy has the power to revoke it at any time by written notice to the
Secretary of the Company, by executing a proxy dated as of a later date or by
voting in person at the Meeting. It is expected that this proxy statement and
the enclosed proxy card will be mailed on or about April 7, 2003, to all
shareholders entitled to vote at the Meeting.
Shareholders and participants in plans holding shares of the Company's
Common Stock are urged to complete, sign and date the enclosed proxy or voting
instruction and return it as promptly as possible in the postage-paid envelope
enclosed for that purpose. Registered shareholders can also deliver proxies by
calling a toll-free telephone number or by using the Internet. The telephone and
Internet voting procedures are designed to authenticate shareholders'
identities, to allow shareholders to give their voting instructions and to
confirm that such instructions have been recorded properly. Instructions for
voting by telephone or over the Internet are set forth on the enclosed proxy
card. If your shares are held in street name with your bank or broker, please
vote in the manner provided by the voting instruction enclosed with this Proxy
Statement.
The Company will pay all of the costs associated with this proxy
solicitation. In addition, certain officers and employees of the Company or its
subsidiaries, without additional compensation, may use their personal efforts,
by telephone or otherwise, to obtain proxies. The Company will also reimburse
banks, brokerage firms and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in forwarding proxy materials to the
beneficial owners of the shares.
On the record date of March 14, 2003, the date for determining shareholders
entitled to notice of, and to vote at, the Meeting, there were 33,855,731 shares
of Common Stock issued and outstanding. Each share of Common Stock is entitled
to one vote on each matter to be acted upon at the Meeting. A majority of the
shares entitled to vote, represented in person or by proxy, will constitute a
quorum for the transaction of business at the Meeting. Shares held in street
name (Broker Shares) that are not voted on any matter at the Meeting will not be
included in determining the number of shares present or represented at the
Meeting.
The management and directors are not aware of any matters to be presented
for action at the Meeting other than the matters stated in the notice of the
Meeting. If any such matter requiring a vote of the shareholders should properly
come before the Meeting, unless otherwise instructed, it is the intention of the
persons named in the proxy card to vote such proxy in accordance with their best
judgment.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2003, certain information
with respect to (a) the beneficial ownership of the Company's Common Stock by
(i) each director and nominee; (ii) the Chief Executive Officer, Andrew L.
Rogal, and each of the Company's four other most highly paid executive officers,
Martin L. Vaughan, III, Timothy J. Korman, John P. McGrath and Steven C. Deal
(collectively, the Named Executive Officers); and (iii) all directors and
executive officers as a group and (b) the amount of Deferred Stock Units held by
each such person and group.
Beneficial Ownership
--------------------------
Number of Deferred
Common Exercisable Stock
Name Shares (1)(2) Options (3) Units (4)
---- ------------- ----------- ---------
Theodore L. Chandler, Jr.......................... 26,277 70,000 15,175
Norwood H. Davis, Jr.............................. 91,525 66,000 3,808
Steven C. Deal.................................... 41,592 34,125 7,148
Robert W. Fiondella (5)........................... 10,000 40,000 7,353
J. S. M. French................................... 68,600 70,000 12,811
Thomas A. Golub................................... 39,405 -- --
Robert H. Hilb.................................... 179,830 50,000 11,320
Timothy J. Korman................................. 130,173 110,000 --
Anthony F. Markel................................. 24,772 50,000 1,434
John P. McGrath................................... 68,661 108,000 --
Thomas H. O'Brien ................................ 42,103 50,000 --
Andrew L. Rogal................................... 503,600 252,500 --
Julious P. Smith, Jr.............................. 3,505 20,000 2,998
Robert S. Ukrop................................... 83,921 30,000 12,093
Martin L. Vaughan, III............................ 302,039 36,000 10,369
All directors and executive officers as a group
(27 persons, including those named above)......... 1,972,090 1,518,300 131,129
(1) The number of shares of Common Stock shown in the table includes (i)
114,842 shares held for certain executive officers in the Company's
Retirement Savings Plan as of March 1, 2003, (ii) 207,575 shares of
Restricted Stock granted to executive officers under the Company's 1989
Stock Plan and 2000 Stock Incentive Plan, and (iii) 447,861 shares of
Common Stock held by immediate family members and controlled entities and
in various fiduciary capacities. Such shares may be deemed to be
beneficially owned by the rules of the Securities and Exchange Commission,
but inclusion of the shares in the table does not constitute admission of
beneficial ownership.
(2) On March 1, 2003, the Company had 33,849,203 shares of Common Stock issued
and outstanding. Each of the individuals listed in the table is the
beneficial owner of less than one percent of the issued and outstanding
shares of Common Stock on that date, except for Andrew L. Rogal, who
beneficially owned 2.22% of the issued and outstanding shares as determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. As a group, the directors and executive officers beneficially
owned 9.87% of the issued and outstanding shares of Common Stock on that
date.
(3) The amounts reported in this column represent shares which may be acquired
through the exercise of stock options within sixty days after March 1,
2003, under the Company's 1989 Stock Plan, 2000 Stock Incentive Plan and
Non-Employee Directors Stock Incentive Plan.
(4) The amounts reported in this column are Deferred Stock Units held by a
trustee for (i) non-employee directors under the Company's Amended and
Restated Outside Directors Deferral Plan (see "Director's Compensation")
and (ii) executive officers under the Company's Executive Voluntary
Deferral Plan, a deferred compensation plan, as of March 1, 2003. Each
Deferred Stock Unit represents a hypothetical share of the Company's Common
Stock, fluctuates in value with the market price of such stock and is
payable only in shares of Common Stock.
(5) The number of shares listed for Mr. Fiondella does not include 3,895,120
shares of Common Stock owned by The Phoenix Companies, Inc. and Phoenix
Life Insurance Company, beneficial ownership of which is disclaimed by him.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person or group known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock of the Company. In
preparing the table below, the Company has relied, without further
investigation, on information contained in the filings by each reporting person
with the Securities and Exchange Commission (the Commission) under the
Securities Exchange Act of 1934, as amended.
Number of Percent of
Name and Address of Beneficial Owner Shares Class (1)
------------------------------------ ------- ---------
The Phoenix Companies, Inc. (2)............................................ 3,895,120 11.5%
Phoenix Life Insurance Company
PM Holdings, Inc.
One American Row
Hartford, Connecticut 06102
Westport Asset Management, Inc. (3)........................................ 3,309,870 9.8%
Westport Advisers LLC
253 Riverside Avenue
Westport, Connecticut 06880
Capital Research and Management Company (4)................................ 1,835,000 5.4%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
--------
(1) Based on 33,849,203 shares of Common Stock issued and outstanding on March
1, 2003.
(2) The Phoenix Companies, Inc., Phoenix Life Insurance Company and PM
Holdings, Inc. filed a Schedule 13D/A with the Commission on December 3,
2002. In the Schedule 13D/A, such parties reported that The Phoenix
Companies, Inc. had sole voting and dispositive power as to 3,622,500
shares of Common Stock, that The Phoenix Companies, Inc. and Phoenix Life
Insurance Company had shared voting and dispositive power as to 266,770
shares of Common Stock and that all three parties (and PHL Variable
Insurance Company) had shared voting and dispositive power as to 5,850
shares of Common Stock. All such voting power is subject to the terms of an
Amended and Restated Voting and Standstill Agreement, effective as of
November 13, 2002, between all three parties and the Company. In addition,
The Phoenix Companies, Inc. has pledged the 3,622,500 shares of Common
Stock as to which it has sole voting and dispositive power for delivery to
the holders of purchase contracts that it issued on November 13, 2002. Such
shares represent the maximum number of shares that it could be required to
deliver under such contracts, which are expected to settle on November 13,
2005.
(3) Westport Asset Management, Inc. filed a Schedule 13G/A with the Commission
on February 14, 2003, reporting that as of December 31, 2002, it had sole
and shared dispositive power as to 3,309,870 shares of Common Stock. The
Schedule 13G/A states that Westport Asset Management, Inc., an investment
advisor, owns 50% of Westport Advisors LLC, which is an investment advisor
for a series of public mutual funds.
(4) Capital Research and Management Company and SMALLCAP World Fund, Inc. filed
a joint Schedule 13G/A with the Commission on February 13, 2003, reporting
that as of December 31, 2002, Capital Research and Management Company had
sole dispositive power as to 1,835,000 shares of Common Stock and SMALLCAP
World Fund, Inc. had sole voting power as to 1,705,000 shares of Common
Stock. Capital Research and Management Company is an investment adviser to
various investment companies, including SMALLCAP World Fund, Inc.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Four directors are to be elected at the Meeting to serve for terms of three
years expiring on the date of the Annual Meeting in 2006 and until their
successors are elected, and one director is to be elected at the Meeting to
serve for a term of one year expiring on the date of the Annual Meeting in 2004
and until his successor is elected. Thomas A. Golub was appointed to the Board
of Directors in July 2002 and is standing for election for the first time.
Andrew L. Rogal, the Company's Chairman and Chief Executive Officer, has
announced that he will retire from the Company effective as of May 6, 2003 and
is not standing for re-election.
It is intended that votes represented by proxies, unless otherwise
specified, will be cast for the election as directors of the nominees listed
below, all of whom are now directors of the Company. The election of each
nominee for director requires a plurality of the votes cast by shares of Common
Stock entitled to vote in the election of directors. Votes that are withheld and
Broker Shares that are not voted in the election of directors will not be
included in determining the number of votes cast. Each nominee has consented to
being named in this Proxy Statement and has agreed to serve if elected.
If, at the time of the Meeting, any nominee should be unable to serve as a
director, votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Board of Directors. As of the date
of this proxy statement, the Board of Directors has no reason to believe that
any of the nominees will be unable or unwilling to serve.
BIOGRAPHICAL INFORMATION
The following information is furnished with respect to each nominee and
each director whose term of office will continue after the Meeting.
Nominees for Terms Expiring in 2006
Robert W. Fiondella, 60, was Chairman and a director of The Phoenix
Companies, Inc., a company providing insurance services throughout the
Northeast, and Chairman of its affiliate, Phoenix Life Insurance Company, until
March 2003. He was also Chief Executive Officer of both companies until December
2002. Mr. Fiondella had served in those positions for The Phoenix Companies,
Inc. since 2000 and for Phoenix Life Insurance Company since 1994. He also
served as President of Phoenix Life Insurance Company from 1987 until 2000. He
has been a director of Phoenix Life Insurance Company since 1987. Mr. Fiondella
is also a director of PXRE Group, Ltd. He is a member of the Compensation
Committee, Corporate Affairs Committee and Executive Committee. He has been a
director of the Company since 1999.
Robert H. Hilb, 75, has been Chairman Emeritus since 2000. He was Chairman
of the Company from 1991 until 1999 and was Chief Executive Officer of the
Company from 1991 to 1997. Mr. Hilb is a member of the Compensation Committee,
Corporate Affairs Committee and Executive Committee. He has been a director of
the Company since 1982.
Julious P. Smith, Jr., 59, has been Chairman and Chief Executive Officer
and a member of the law firm of Williams Mullen since 1999. Prior to that time,
he was previously President and Chief Executive Officer and a member of that law
firm, positions that he held for more than five years. Williams Mullen has
represented the Company as legal counsel since the Company's formation in 1982.
Mr. Smith is a director of LandAmerica Financial Group, Inc. He is a member of
the Audit Committee and Corporate Governance Committee. He has been a director
of the Company since 2001.
Martin L. Vaughan, III, 56, has been President of the Company since 2000
and has been Chief Operating Officer of the Company since 1999. He was President
and Chief Executive Officer of American Phoenix Corporation from 1990 to 1999.
He has been a director of the Company since 1999.
4
Nominee For Term Expiring in 2004
Thomas A. Golub, 45, has been Executive Vice President since July 2002. He
has also been President and Chief Executive Officer of Hobbs Group, LLC, a
subsidiary of the Company, since 1994. He has been a director of the Company
since 2002.
The Board of Directors recommends that the shareholders vote FOR the five
nominees set forth above.
Incumbent Directors Whose Terms Expire at the 2004 Annual Meeting
J.S.M. French, 62, has been President of Dunn Investment Company, a
construction materials and construction investment company in Birmingham,
Alabama, since 1978. He is a director of Regions Financial Corporation, Energen
Corporation and Protective Life Corporation. Mr. French is a member of the Audit
Committee, Corporate Governance Committee and Corporate Affairs Committee. He
has been a director of the Company since 1984.
Anthony F. Markel, 61, has been President and Chief Operating Officer of
Markel Corporation, an insurance company headquartered in Richmond, Virginia and
comprised of five operating units underwriting specialty insurance products and
programs to a variety of niche markets, since 1992. He is a director of Markel
Corporation. Mr. Markel is a member of the Audit Committee, Compensation
Committee and Executive Committee. He has been a director of the Company since
1998.
Robert S. Ukrop, 56, has been President and Chief Executive Officer of
Ukrop's Super Markets, Inc., a company owning 27 retail food stores and three
food manufacturing facilities in central Virginia, since 1994. He is a first
cousin of Timothy J. Korman, Executive Vice President, Finance and
Administration, of the Company. Mr. Ukrop is Chairman of the Corporate Affairs
Committee and a member of the Corporate Governance Committee. He has been a
director of the Company since 1989.
Incumbent Directors Whose Terms Expire at the 2005 Annual Meeting
Theodore L. Chandler, Jr., 50, has been Chief Operating Officer of
LandAmerica Financial Group, Inc., a company providing title insurance and real
estate transaction services through its underwriting and other subsidiaries,
since July 2002. He was Senior Executive Vice President of LandAmerica Financial
Group, Inc. from 2000 to July 2002. He had been a principal in the law firm of
Williams Mullen in Richmond, Virginia from 1982 to 2000. Williams Mullen has
represented the Company as legal counsel since the Company's formation in 1982.
Mr. Chandler is a director of LandAmerica Financial Group, Inc. and Mutual
Assurance Society of Virginia. Mr. Chandler is Chairman of the Audit Committee
and a member of the Corporate Affairs Committee and Corporate Governance
Committee. He has been a director of the Company since 1986.
Norwood H. Davis, Jr., 63, was Chairman Emeritus of the Board of Trigon
Healthcare, Inc., a company providing health care coverage and specialty health
services in Virginia, from 2001 to July 2002. He had been Chairman of that
company from 1981 to 2001, and Chief Executive Officer from 1981 to 1999. Mr.
Davis is Chairman of the Corporate Governance Committee and a member of the
Compensation Committee and Executive Committee. He has been a director of the
Company since 1994.
Timothy J. Korman, 50, has been Executive Vice President, Finance and
Administration, of the Company since 1997. He is a first cousin of Robert S.
Ukrop, a director. He has been a director of the Company since 1999.
Thomas H. O'Brien, 66, was the Chairman and Chief Executive Officer of The
PNC Financial Services Group, Inc., a multi-bank holding company engaged in
financial services activities in Pittsburgh, Pennsylvania, from 1985 to 2001. He
was Chairman of PNC Bank, N.A., a national banking institution in Pittsburgh,
Pennsylvania, from 1993 to 2001. He is a director of Verizon Communications,
BlackRock, Inc., Viasystems, Inc., USAirways Group, Inc. and The PNC Financial
Services Group, Inc. Mr. O'Brien is Chairman of the Compensation Committee and a
5
member of the Corporate Governance Committee and Executive Committee. He has
been a director of the Company since 1982.
CERTAIN NOMINATION AND VOTING ARRANGEMENTS
On May 3, 1999, the Company acquired from PM Holdings, Inc. (Holdings), a
subsidiary of Phoenix Life Insurance Company (Phoenix Life), and Martin L.
Vaughan, III all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation (APC), resulting in APC becoming a wholly owned
subsidiary of the Company. In connection with the acquisition, the Company,
Holdings and Holdings' parent, Phoenix Life, entered into a Voting and
Standstill Agreement (the Voting Agreement). The Voting Agreement provided for,
among other things, the nomination and recommendation for election of Robert W.
Fiondella and a person designated by Holdings to serve on the Board of Directors
of the Company. David V. Searfoss was the designee of Holdings. The Voting
Agreement was amended and restated effective as of November 13, 2002. As amended
and restated, the Voting Agreement eliminated the requirement that the Company
nominate and recommend for election Mr. Fiondella and the Holdings designee and
further required the Holdings designee to resign from the Board of Directors on
or before December 31, 2002. Mr. Searfoss resigned from the Board of Directors
on December 31, 2002.
Pursuant to the Voting Agreement, as amended and restated, The Phoenix
Companies, Inc. and Phoenix Life and Holdings have agreed to vote the shares of
Common Stock owned by them or their affiliates in accordance with the
recommendation of the Board of Directors on matters relating to (i) the election
of directors nominated by the Board of Directors or a nominating committee
thereof, (ii) certain tender or exchange offers, election contests and other
attempts to acquire control of the Company or the Board of Directors and (iii)
until May 3, 2004, business combination and similar transactions for which
shareholder approval is sought. Unless terminated earlier by written agreement
of the parties, the Voting Agreement will remain in effect until May 3, 2009.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Compensation Committee, the Corporate
Affairs Committee and the Corporate Governance Committee. The Executive
Committee, which is subject to the supervision and control of the Board of
Directors, has been delegated substantially all of the powers of the Board of
Directors in order for the Executive Committee to act between meetings of the
Board. As more fully discussed below under "Compensation Committee Report on
Executive Compensation," the Compensation Committee establishes the compensation
of all executive officers of the Company and administers the Company's stock
incentive plans, the Outside Directors Deferral Plan, the Executive Voluntary
Deferral Plan and the Supplemental Executive Retirement Plan. The Corporate
Affairs Committee is responsible for monitoring the Company's external relations
in its communities. The Corporate Governance Committee is responsible for
recommending to the Board of Directors persons to be nominated for election as
directors of the Company and other matters related to corporate governance and
procedures.
The responsibilities of the Audit Committee include the review of the scope
and the results of the work of the independent auditors and internal auditors,
the review of internal accounting controls and the recommendation of the
independent auditors to be designated for the ensuing year. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is on file with the Commission as an exhibit to the Company's proxy statement
for the 2001 Annual Meeting of Shareholders. The Audit Committee is composed of
four members, each of whom is independent as that term is defined in the listing
standards of the New York Stock Exchange.
In 2002, there were seven meetings of the Board of Directors, six meetings
of the Audit Committee, four meetings of the Compensation Committee, four
meetings of the Corporate Governance Committee and one meeting of the Corporate
Affairs Committee. The Executive Committee did not meet in 2002. Each member of
the Board of Directors, except for Messrs. Fiondella and Markel, attended at
least 75% of the aggregate total number of meetings of the Board and the
committees on which he served.
6
DIRECTORS' COMPENSATION
Each director who was not an employee of the Company received an annual
retainer of $20,000, a fee of $2,000 for each Board meeting attended and a fee
of $1,000 for each committee meeting attended. Additionally, the chair of every
committee receives an annual retainer of $2,000. Under the Non-Employee
Directors Stock Incentive Plan, a director may elect to receive his retainers
and fees in shares of Common Stock. If a director elects to receive 100% of his
total compensation in Common Stock, he will be entitled to receive additional
compensation in shares of Common Stock equal to 30% of his total compensation.
Directors who are also employees of the Company receive no compensation for
their services as directors.
The Company has an Amended and Restated Outside Directors Deferral Plan
(the Amended and Restated Plan) which permits a non-employee director to defer
all or a portion of his compensation. Under the Amended and Restated Plan,
directors of the Company who are not employees of the Company may elect to defer
all or part of their annual retainer fees and meeting fees in Deferred Stock
Units that represent a hypothetical share of the Company's Common Stock.
Retainer fees are credited to a director's account quarterly and meeting fees
are credited on the date such retainer fees are earned at the closing price of
the Common Stock on the applicable date. A participant's Deferred Stock Unit
Account is increased by phantom dividends equal to the dividends paid by the
Company on the Common Stock. Those directors who elect to defer 100% of their
total compensation into Deferred Stock Units for a given year are entitled to
receive additional compensation in the form of Deferred Stock Units equal to 30%
of their total compensation. Any amounts deferred under the former Outside
Directors Deferral Plan and held in a Deferred Cash Account in the Amended and
Restated Plan are credited with interest annually at the rate of return set
forth in the Amended and Restated Plan, which is currently 9%, and are paid out
in cash. Deferred Stock Units credited to a director's account under the Amended
and Restated Plan are paid out in shares of Common Stock on the basis of one
share of Common Stock for each Deferred Stock Unit in the director's account.
Payment of amounts accrued to a director are made either in installments or in a
lump sum pursuant to the director's irrevocable election or otherwise in
accordance with the terms of the Amended and Restated Plan.
Prior to 2002, each non-employee director received, under the Non-Employee
Directors Stock Incentive Plan, a grant of an option to purchase 10,000 shares
of the Common Stock on the first business day following each Annual Meeting of
Shareholders. Grants in 2002 were made under the 2000 Stock Incentive Plan. On
May 8, 2002, each non-employee director received an option to purchase 10,000
shares of the Common Stock of the Company. The exercise price of all options
granted to each non-employee director is the fair market value of the Common
Stock on the date of grant. All of the options granted in 2002 became
exercisable six months after the date of grant and expire seven years from the
date of grant.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of ownership
and reports of changes in ownership of Common Stock with the Commission. Such
persons are required by Commission regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, the Company believes that applicable Section 16(a) filing
requirements were satisfied for transactions that occurred in 2002, except that
J.S.M. French filed one late Form 4 reporting the sale of 1,000 shares of Common
Stock in July 2002 and Andrew L. Rogal filed one late Form 4 reporting the
contribution to a trust of which Mr. Rogal is a trustee of 287,362 shares of
Common Stock in August 2000.
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, the Company is required to
provide certain information with respect to the compensation and benefits
provided to the Company's Chief Executive Officer, Andrew L. Rogal, and the
other Named Executive Officers. The following report of the Compensation
Committee of the Board of Directors addresses the Company's compensation
policies in effect during 2002.
Role of Compensation Committee
Decisions on compensation of certain executive officers of the Company are
made by the Compensation Committee of the Board of Directors. The Compensation
Committee has authority from the Board of Directors to review and determine the
salaries of all of the Company's executive officers with the title of Vice
President and above. In addition to determining salaries, the Compensation
Committee reviews and approves management incentive programs and other benefits
for executive officers. The Compensation Committee also administers the
Company's stock incentive plans. Finally, the Committee recommends to the Board
of Directors such other forms of remuneration as the Committee deems
appropriate. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reported to the full Board
of Directors.
Executive Compensation Policies
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals, recognize individual
initiative and achievement and assist the Company in attracting and retaining
highly qualified executives. They provide for competitive base salaries which
reflect individual performance and level of responsibility, annual bonuses
payable in cash on the basis of Company financial success, individual merit and
achievement in obtaining annual performance goals and long-term stock-based
incentive opportunities which strengthen the mutuality of interests between
senior management and the Company's shareholders.
To further this mutuality of interests, the Insider Stock Ownership Plan
was adopted in 1998 to align the interests of senior management with the
shareholders by requiring senior management to attain certain stock ownership
levels and therefore maintain a vested interest in the equity performance of the
Company. Over a five year period, measured from the later of adoption of the
plan or admittance into the executive group, the executives covered by such plan
are expected to reach a prescribed ownership level, which is expressed as a
multiple of the executive's base salary and which ranges from five times base
salary to one times base salary depending on the executive's position. By
December 31, 2002, all Named Executive Officers had achieved their prorated
goals for the five year implementation period.
In furtherance of its responsibility to determine executive compensation,
the Compensation Committee annually, or more frequently, reviews the Company's
executive compensation program. The Compensation Committee evaluates the
salaries and compensation structures of executive officers of peer companies in
the industry and other financial services public companies in order to establish
general parameters within which it may fix competitive compensation for its
executive officers. The peer group used for compensation analysis for 2002 is
the same as the peer group reflected in the performance graph included in this
proxy statement. The Committee believes that the Company's compensation of its
executive officers is comparable to its peer companies and provides proper
incentives to the executive officer group.
The Compensation Committee then determines the appropriate salary and
management incentive opportunity for each executive officer using a number of
factors, including the executive officer's individual duties and
responsibilities in the Company, tenure, his or her relative importance to the
overall success of the Company's short and long-term goals and attainment of
individual performance goals, if appropriate. It is the philosophy of the
Compensation Committee that incentive compensation should be a very substantial
component of total compensation in order to implement the Company's aggressive
pay-for-performance policy.
8
2002 Base Salaries and Annual Incentives
On December 1, 2001, the Company entered into an employment agreement with
Andrew L. Rogal to serve as Chief Executive Officer of the Company. Pursuant to
the terms of the employment agreement, Mr. Rogal's annual base salary was fixed
at $490,000, subject to an annual review by the Committee to consider
appropriate increases. In March 2002, Mr. Rogal's base annual salary was
increased to $513,000. This annual base salary was set based on Mr. Rogal's
individual duties and responsibilities, his tenure and a review of salaries paid
to the chief executive officers of the Company's peer group companies. In
addition, Mr. Rogal is entitled to receive an annual incentive bonus as
established and modified from time to time by the Committee. In awarding the
annual incentive bonus to Mr. Rogal for 2002, the Committee considered his
individual merit and achievement in attaining annual performance goals, the
Company's financial success and Mr. Rogal's leadership in strategically focusing
the Company. Mr. Rogal is also eligible to receive stock option awards and other
long-term equity incentives, as determined by the Committee. In 2002, Mr. Rogal
was awarded 10,000 shares of Restricted Stock and a Nonqualified Stock Option
for 50,000 shares of Common Stock.
The Company's other executive officers are also eligible for an annual
management incentive award in the form of a cash bonus. On February 11, 2002,
the Committee approved the 2002 Corporate Incentive Plan for certain key
executives of the Company. The purpose of the program is to more closely align
the interests of the senior executives with the shareholders and further
strengthen the Company's pay-for-performance policy by providing a pool based on
increased operating earnings per share. Under the Plan, those individuals
responsible for overseeing and implementing the strategic initiatives of the
Company and for the overall earnings per share of the Company are eligible to
participate in the executive bonus pool. The available dollar pool is based on
improved operating earnings per share. On February 10, 2003, using the
aforementioned factors, the Committee awarded Mr. Rogal an incentive bonus of
$800,000 out of the pool for his 2002 performance.
Tax Considerations
The Omnibus Budget Reconciliation Act of 1993 established certain criteria
for the tax deductibility of compensation in excess of $1.0 million paid to the
Company's executive officers. The Company believes it is not in danger of losing
deductions under the law. The Committee will carefully consider any plan or
compensation arrangement that would result in the disallowance of compensation
deductions. The Committee will use its best judgment in such cases, taking all
factors into account, including the materiality of any deductions that may be
lost. To date, the Committee has not adopted a policy that dictates its decision
in such a situation.
The tables which follow this report, and accompanying narrative and
footnotes, reflect the decisions covered by the above discussion.
COMPENSATION COMMITTEE
Thomas H. O'Brien, Chairman
Norwood H. Davis, Jr.
Robert W. Fiondella
Robert H. Hilb
Anthony F. Markel
Compensation Committee Interlocks and Insider Participation
Robert H. Hilb, a member of the Company's Compensation Committee, is the
former Chairman and Chief Executive Officer of the Company and currently holds
the position of Chairman Emeritus.
9
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term compensation paid
by the Company to each of the Named Executive Officers for the fiscal years
ended December 31, 2002, 2001 and 2000.
Long-Term
Compensation
Annual Compensation Awards
------------------------------------ ----------------------
Other Annual Restricted Securities All Other
Bonus Compensation Stock Underlying Compensation
Name and Principal Position Year Salary($) ($)(1) ($)(2) Awards ($)(3) Options (#) ($)(4)
--------------------------- ------ --------- ------- ------ ------------- ----------- ------------
Andrew L. Rogal................ 2002 $501,728 $800,000 -- $374,500 50,000 $42,018
Chairman and Chief 2001 490,008 488,800 -- 150,040 32,000 140,558
Executive Officer 2000 460,832 362,300 -- 369,720 32,000 137,405
Martin L. Vaughan, III......... 2002 407,266 650,000 -- 224,700 24,000 13,726
President and Chief 2001 385,008 361,300 -- 112,530 24,000 62,705
Operating Officer 2000 366,676 264,100 -- 258,804 24,000 17,778
Timothy J. Korman.............. 2002 298,345 500,000 -- 149,800 16,000 30,937
Executive Vice President, 2001 286,008 286,000 -- 75,020 16,000 56,810
Finance and Administration 2000 269,180 210,200 -- 244,584 16,000 54,667
John P. McGrath................ 2002 348,889 425,000 -- 149,800 16,000 12,353
Senior Vice President- 2001 331,992 236,400 -- 75,020 16,000 37,676
Business and Product 2000 317,660 210,200 -- 244,584 16,000 36,826
Development
Steven C. Deal................. 2002 265,660 425,000 -- 131,075 14,500 8,570
Vice President, 2001 238,827 130,500 -- 60,016 13,000 55,613
Mid-Atlantic Regional 2000 225,445 78,900 -- 73,944 8,000 31,958
Director
---------
(1) Bonuses reported in the table reflect the amount earned by the Named
Executive Officer for each year shown. Payment of such bonuses occurred in
the year following the year in which such bonuses were earned.
(2) The dollar value of perquisites and other personal benefits received by
each of the Named Executive Officers did not exceed the lesser of $50,000
or 10 percent of the total amount of annual salary and bonus reported for
any named individual.
(3) The 2002 amounts in this column are the dollar values, based on the $37.45
closing price of a share of Common Stock on February 11, 2002, as reported
on the New York Stock Exchange, of the following number of shares of
Restricted Stock awarded on such date to the Named Executive Officers: Mr.
Rogal, 10,000 shares; Mr. Vaughan, 6,000 shares; Mr. Korman, 4,000 shares;
Mr. McGrath, 4,000 shares; and Mr. Deal, 3,500 shares. The Restricted Stock
vests 25% per year on each of four successive anniversary dates commencing
two years after the date of the award, provided the Named Executive Officer
is employed full time by the Company on the applicable vesting date, and
provided further that, with respect to the 2002 grants, the Company's
operating earnings must have increased by at least ten percent on a year
over year basis in at least one of the two calendar years preceding each
vesting date. As provided in a retirement agreement between Mr. Rogal and
the Company, all awards of Restricted Stock to him shall vest in full
effective at the conclusion of the Meeting (see "Employment Agreements").
The aggregate number of shares of Restricted Stock held by each of the
Named Executive Officers on December 31, 2002, and the dollar value of such
shares on such date based on the $40.90 closing price of a share of Common
Stock on December 31, 2002, as reported on the New York Stock Exchange,
were as follows: Mr. Rogal, 37,500 shares, $1,533,750; Mr. Vaughan, 25,650
shares, $1,049,085; Mr. Korman, 20,900 shares, $854,810; Mr. McGrath,
20,900 shares, $854,810; and Mr. Deal, 10,600 shares, $433,540. Dividends
will be paid on the shares of Restricted Stock awarded to the Named
Executive Officers.
10
(4) The amount shown for each Named Executive Officer for 2002 includes (a) the
Company's profit sharing and 401(k) matching contributions as follows: Mr.
Rogal, $6,000; Mr. Vaughan, $6,000; Mr. Korman, $6,000; Mr. McGrath, $6,000
and Mr. Deal, $6,000; and (b) the Company's expense to the Supplemental
Executive Retirement Plan as follows: Mr. Rogal, $36,018 ($10,183
contribution and $25,835 interest accrual); Mr. Vaughan, $7,726 ($6,000
contribution and $1,726 interest accrual); Mr. Korman, $24,937 ($5,953
contribution and $18,984 interest accrual); Mr. McGrath, $6,353 ($4,410
contribution and $1,943 interest accrual); and Mr. Deal, $2,570 ($2,095
contribution and $475 interest accrual). Amounts for 2001 and 2000 include
the Company's profit sharing and 401(k) matching contributions and the
Company's expense to the Supplemental Retirement Plan and, in addition, the
amount of premiums paid on term and split-dollar life insurance, which the
Company did not pay in 2002.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning grants of stock options
to each of the Named Executive Officers during the fiscal year ended December
31, 2002. No stock appreciation rights (SARs) were granted during fiscal year
2002 and there are no outstanding SARs.
Individual Grants
------------------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base Grant Date
Options in Fiscal Price Expiration Present
Name Granted (1) Year ($/Sh) (2) Date (3) Value ($)(4)
---- ----------- ---- ---------- -------- ------------
Andrew L. Rogal..................... 50,000 3.97 $37.45 02/11/09 $618,500
Martin L. Vaughan, III.............. 24,000 1.90 37.45 02/11/09 296,880
Timothy J. Korman................... 16,000 1.27 37.45 02/11/09 197,920
John P. McGrath..................... 16,000 1.27 37.45 02/11/09 197,920
Steven C. Deal...................... 14,500 1.15 37.45 02/11/09 179,365
---------
(1) The options granted to the Named Executive Officers contain a provision
whereby the right to exercise such options vests at a rate of 25% of the
aggregate number of shares of Common Stock of the Company covered by such
options on each of the first four successive anniversary dates of the date
of grant. As provided in a retirement agreement between Mr. Rogal and the
Company, all of his outstanding stock options shall become immediately
exercisable effective at the conclusion of the Meeting (see "Employment
Agreements").
(2) The exercise price for the options listed in the table was the fair market
value on the date of grant. The exercise price may be paid in cash, in
shares of Common Stock of the Company valued at fair market value on the
date of exercise or pursuant to a cashless exercise procedure under which
the optionee provides irrevocable instructions to a brokerage firm to sell
the purchased shares and to remit to the Company, out of the sale proceeds,
an amount equal to the exercise price plus all required withholding and
other deductions.
(3) The options listed in the table expire seven years from the date of grant.
An earlier expiration date may apply in the event of the optionee's
termination of employment, retirement, death or disability.
(4) The Black-Scholes option pricing model was used to determine the "Grant
Date Present Value" of the options listed in the table. The model assumed a
volatility measure of .242, a risk free interest rate of 4.70% and a
dividend yield of 0.93%. The model also assumed an exercise date seven
years after its grant. Because the magnitude of any non-transferability
discount is extremely difficult to determine, none was applied in
determining the value of the reported options. The grant date present
values set forth in the table are only theoretical values and may not
accurately determine present value. The actual value, if any, an optionee
will realize will depend on the excess of market value of a share of the
Company's Common Stock over the exercise price on the date the option is
exercised.
11
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information concerning the exercise of options
during 2002 and the value of the outstanding options for the Named Executive
Officers on December 31, 2002.
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at Fiscal Year the-Money Options at
Shares Value End (#) Fiscal Year End ($) (2)
Acquired Realized -------------------------- -------------------------
Name on Exercise ($) (1) Exercisable/Unexercisable) Exercisable/Unexercisable
---- ------------- -------- -------------------------- -------------------------
Andrew L. Rogal (3)...... 40,000 $1,193,200 224,000 / 90,000 $7,160,916 / 1,130,876
Martin L. Vaughan, III... N/A N/A 18,000 / 54,000 453,042 / 801,582
Timothy J. Korman........ 20,000 590,000 98,000 / 36,000 3,109,484 / 534,388
John P. McGrath.......... 24,000 883,400 96,000 / 36,000 3,045,372 / 534,388
Steven C. Deal........... 28,000 929,500 25,250 / 28,250 755,703 / 372,663
---------
(1) The value realized represents the difference between the exercise price of
the option and the fair market value of the Company's stock on the date of
exercise.
(2) The value of in-the-money options at fiscal year end was calculated by
determining the difference between the closing price of $40.90 per share of
the Company's Common Stock on the New York Stock Exchange on December 31,
2002, the last trading day of the fiscal year, and the exercise price of
the options.
(3) As provided in a retirement agreement between Mr. Rogal and the Company,
all of his outstanding stock options shall become immediately exercisable
effective at the conclusion of the Meeting (see "Employment Agreements").
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2002, with
respect to compensation plans under which shares of the Company's Common Stock
are authorized for issuance.
Number of Securities
Number of Securities to Weighted Average Remaining Available
Be Issued upon Exercise Exercise Price of for Future Issuance
of Outstanding Options, Outstanding Options, Under Equity
Plan Category Warrants and Rights Warrants and Rights Compensation Plans (1)
------------- ------------------- ------------------- ----------------------
Equity Compensation Plans Approved
by Shareholders
1989 Stock Plan (2) 1,339,451 $9.39 0
Non-Employee Directors Stock
Incentive Plan 330,000 14.17 16,105
2000 Stock Incentive Plan (3) 1,694,700 35.48 774,382
Equity Compensation Plans Not
Approved by Shareholders (4) -- -- --
Total 3,364,151 $23.00 790,487
---------
(1) Amounts exclude any securities to be issued upon exercise of outstanding
options, warrants and rights.
(2) Amounts exclude prior awards of 133,550 shares of restricted Common Stock.
No shares are available for any future awards or grants under the 1989
Stock Plan.
(3) The 2000 Stock Incentive Plan replaced the 1989 Stock Plan and permits
grants of stock options and awards of Common Stock and/or restricted stock.
Amounts exclude prior awards of 118,675 shares of restricted Common Stock.
Amounts, however, include shares tendered or withheld in payment of all or
part of the exercise price of a stock option granted under the 1989 Stock
Plan or 2000 Stock Incentive Plan or in satisfaction of withholding tax
obligations, any shares forfeited or canceled in accordance with the terms
of a grant or award under the 1989
12
Stock Plan or 2000 Stock Incentive Plan and any shares that are not issued
under the 2000 Stock Incentive Plan because of a payment of cash in lieu
of shares. All of such shares are available for issuance under new grants
and awards under the 2000 Stock Incentive Plan.
(4) The Company does not have any equity compensation plans that have not been
approved by shareholders.
HRH RETIREMENT SAVINGS PLAN
The Company administers the HRH Retirement Savings Plan (the Retirement
Savings Plan) in which the Named Executive Officers are permitted to participate
on the same terms as other employees who meet the applicable eligibility
criteria. The Retirement Savings Plan's main component is a salary reduction
provision under Section 401(k) of the Internal Revenue Code. As of January 1,
2002, the Retirement Savings Plan was amended to allow participants age 50 or
over to make additional catch-up contributions to the Retirement Savings Plan
over and above the normal annual dollar limit for salary reduction
contributions. The maximum catch-up contribution for each eligible participant
for 2003 is $2,000. The Retirement Savings Plan also provides for a matching
contribution equal to 100% of the first 3% of a participant's salary reduction.
The profit sharing component of the Retirement Savings Plan is discretionary and
is not expected to be used except in exceptional circumstances. The Company
matching contribution for 2002 for Named Executive Officers was $30,000, and for
all executive officers as a group was $91,788, under the salary reduction
provision of the Retirement Savings Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Named Executive Officers participate in the Company's Supplemental
Executive Retirement Plan (the SERP), which as of January 1, 1998, was amended
and restated to convert the plan from a defined benefit arrangement to a cash
balance arrangement, to provide a contribution to participants equal to the
Company's profit sharing and matching contributions applied to the participant's
base salary in excess of the Internal Revenue Service (the IRS) maximum
allowable salary for qualified plans, which was $200,000 for 2002. The SERP was
further amended to allow all current and future employees earning in excess of
the IRS maximum allowable salary for qualified plans to become participants in
the plan, to grandfather the current participants and provide these individuals
with a contribution each year equal to the greater of a fixed 2% contribution of
their base salary or the calculation for regular participants, to convert the
vested benefit accrued for current participants to a cash balance as of December
31, 1997, and to add a provision wherein terminated or retired participants who
are employed by a competing entity of the Company will forfeit their remaining
account balance.
Contributions to the SERP for 2002 for each of the Named Executive Officers
were as follows: Mr. Rogal, $10,183; Mr. Vaughan, $6,000; Mr. Korman, $5,953;
Mr. McGrath, $4,410; and Mr. Deal, $2,095. For all executive officers as a
group, the 2002 contribution to the SERP was $47,145. Additionally, interest
accruals on their balances for 2002 were as follows: Mr. Rogal, $25,835; Mr.
Vaughan, $1,726; Mr. Korman, $18,984; Mr. McGrath, $1,943; and Mr. Deal, $475.
For all executive officers as a group, interest accruals on their balances for
2002 equaled $277,866.
EMPLOYMENT AGREEMENTS
Mr. Rogal entered into an employment agreement with the Company, effective
December 1, 2001, to serve as Chairman and Chief Executive Officer of the
Company until May 31, 2006. The employment agreement with Mr. Rogal was amended
by a retirement agreement between Mr. Rogal and the Company, effective March 25,
2003, that provides for the retirement of Mr. Rogal as Chairman and Chief
Executive Officer of the Company effective at the conclusion of the Meeting.
Pursuant to the terms of the retirement agreement, Mr. Rogal shall be entitled
to receive his current annual salary of $513,000 and an annual incentive bonus
of $800,000 until May 31, 2006; all outstanding stock options shall become
immediately exercisable and awards of restricted stock shall vest in full as of
his retirement date; all accrued benefits in the Company's Supplemental
Executive Retirement Plan shall be fully vested as of his retirement date; and
the Company shall be required to transfer its interest in certain split dollar
agreements
13
(including the Company's interest in the underlying insurance policies) to Mr.
Rogal. All other benefits earned by or due to Mr. Rogal through the date of his
retirement under the Company's benefit plans shall be paid in accordance with
the terms of the respective plans.
Mr. Vaughan entered into an employment agreement with the Company,
effective December 1, 2001, to serve as President and Chief Operating Officer of
the Company. Mr. Vaughan's term of employment under the agreement terminates
initially on May 31, 2005. Commencing on May 31, 2004 and on each annual
anniversary of that date, the term of employment will be automatically extended
to set the term for a two year period, unless notice that the term of employment
will not be extended is given by either party to the other at least 60 days
prior to May 31, 2004 or an anniversary date. The agreement provides for an
annual review of his salary by the Compensation Committee of the Board of
Directors of the Company to consider appropriate increases, but in no event
shall his base annual salary of $385,000 be reduced. Mr. Vaughan is also
eligible for an annual incentive bonus and stock options as may be determined by
the Compensation Committee. The agreement may be terminated by the Company with
or without "proper cause" or by Mr. Vaughan for "good reason," in each case as
defined in the agreement; however, should the agreement be terminated without
proper cause or for good reason, Mr. Vaughan would be entitled to receive
salary, annual incentive bonus and benefits until the expiration of the term of
employment or for one year, whichever is greater, all stock options and awards
of restricted stock would immediately vest in full, all benefits in the
Company's Supplemental Executive Retirement Plan would immediately vest in full
and the Company would be required to transfer its interest in split dollar
agreements to Mr. Vaughan. The annual incentive bonus would be equal to the
greater of the highest annual incentive bonus payment previously received by Mr.
Vaughan for the last four fiscal years prior to the date of termination or 50%
of his annual base salary.
Mr. Korman entered into an employment agreement with the Company, effective
December 1, 2001, to serve as Executive Vice President, Finance and
Administration of the Company. Mr. Korman's agreement has an initial term of two
years terminating on November 30, 2003. Commencing on December 1, 2002 and on
each annual anniversary of that date, the term of employment will be
automatically extended to set the term for a two year period, unless notice that
the term of employment will not be extended is given by either party to the
other at least 60 days prior to December 1, 2002 or an anniversary date. The
agreement provides for an annual review of his salary by the Compensation
Committee of the Board of Directors of the Company to consider appropriate
increases, but in no event shall his base annual salary of $286,000 be reduced.
Mr. Korman is also eligible for an annual incentive bonus and stock options as
may be determined by the Compensation Committee. The agreement may be terminated
by the Company with or without "proper cause" or by Mr. Korman for "good
reason," in each case as defined in the agreement; however, should the agreement
be terminated without proper cause or for good reason, Mr. Korman would be
entitled to receive salary, annual incentive bonus and benefits until the
expiration of the term of employment. The annual incentive bonus would be equal
to the greater of the highest annual incentive bonus payment previously received
by Mr. Korman for the last two fiscal years prior to the date of termination or
50% of his annual base salary.
Mr. McGrath entered into an employment agreement with the Company,
effective December 1, 2001, to serve as Senior Vice President - Business and
Product Development of the Company. Mr. McGrath's agreement has an initial term
of two years terminating on November 30, 2003. Commencing on December 1, 2002
and on each annual anniversary of that date, the term of employment will be
automatically extended to set the term for a two year period, unless notice that
the term of employment will not be extended is given by either party to the
other at least 60 days prior to December 1, 2002 or an anniversary date. The
agreement provides for an annual review of his salary by the Compensation
Committee of the Board of Directors of the Company to consider appropriate
increases, but in no event shall his base annual salary of $306,000 be reduced.
Mr. McGrath is also eligible for an annual incentive bonus and stock options as
may be determined by the Compensation Committee. The agreement may be terminated
by the Company with or without "proper cause" or by Mr. McGrath for "good
reason," in each case as defined in the agreement; however, should the agreement
be terminated without proper cause or for good reason, Mr. McGrath would be
entitled to receive salary, annual incentive bonus and benefits until the
expiration of the term of employment. The annual incentive bonus would be equal
to the greater of the highest annual incentive bonus payment previously received
by Mr. McGrath for the last two fiscal years prior to the date of termination or
50% of his annual base salary.
Mr. Deal entered into an employment agreement with Hilb, Rogal and Hamilton
Company of Richmond (now known as Hilb, Rogal and Hamilton Company of Virginia)
(HRH Virginia), a wholly owned subsidiary of the
14
Company, effective January 1, 1990, to serve as President of HRH Richmond. Mr.
Deal's agreement, which remains in effect today, has an initial term of three
years terminating on January 1, 1992; provided that, commencing on January 1,
1992 and on each annual anniversary of that date, the term of employment will be
automatically extended for an additional one year period, unless notice that the
term of employment will not be extended is given by either party to the other at
least ninety days prior to January 1, 1992 or an anniversary date. The agreement
provides for an annual review of his salary to consider appropriate changes. Mr.
Deal is also eligible for annual bonuses. The agreement may be terminated by the
Company or Mr. Deal with or without cause.
All of the foregoing employment agreements contain restrictive covenants
relating to the protection of confidential information and clients of the
Company.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
To ensure continuity and the continued dedication of key executives during
any period of uncertainty caused by the threat or occurrence of a takeover, the
Company has entered into change of control employment agreements with its
executive officers, including each of the Named Executive Officers named in the
Summary Compensation Table.
In the event there is a change of control of the Company, the executive
will be employed for a period of three years after the change of control. If the
employment of the executive terminates at any time during the three year period
following a change of control for any reason other than death, cause or the
executive's election, the executive will receive an agreed upon amount of
severance pay equal to two to three times such executive's highest applicable
annual salary and bonus. Additionally, the executive would be eligible to
receive benefits substantially equivalent to those which would have been
received under the Company's qualified and non-qualified plans. The change of
control employment agreements provide that any excise taxes shall be paid by the
Company, as well as any legal expenses of the executive. If an executive elects
to terminate his employment in the first year after the change of control, but
without any deemed breach by the Company or its successor, the executive shall
be entitled to severance pay equal to one-half to one times the executive's
highest applicable annual salary and bonus.
Mr. Rogal, Mr. Vaughan and Mr. Korman each have a change of control
employment agreement which provides for a multiplier of three for determining
the amount of severance pay (except for death or cause) and a multiplier of one
for determining the amount of severance pay in the event of a voluntary
termination in the first year after the change of control. The same provisions
in the change of control agreements for the other Named Executive Officers use
multipliers of two and one-half for determining the amount of severance pay.
15
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
shareholder return on its Common Stock, assuming reinvestment of dividends, with
the cumulative total return on the published Standard & Poor's 500 Index and the
cumulative total return on the Company-constructed composite industry index,
consisting of the Company, Aon Corporation, Arthur J. Gallagher & Co., Brown &
Brown, Inc., Marsh & McLennan Cos., Inc. and Willis Group Holdings Limited, over
the five year period ended December 31, 2002. The Company selected the
businesses in the composite industry index in its good faith belief that these
other public companies are most similar to the Company's insurance agency
business.
[STOCK PERFORMANCE GRAPH]
[COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILB, ROGAL AND HAMILTON COMPANY, S&P 500 INDEX
& PEER GROUP INDEX
Hilb, Rogal and Hamilton S&P 500 Index Peer Group
1997 100 100 100
1998 106.58 128.58 110.58
1999 155.97 155.63 160.55
2000 224.42 141.46 189.44
2001 320.48 124.65 187.83
2002 472.01 97.10 161.09
ASSUMES $100 INVESTED ON DECEMBER 31, 1997 IN HILB, ROGAL AND HAMILTON
COMPANY COMMON STOCK, S&P 500 INDEX AND PEER GROUP INDEX.]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 3, 1999, the Company issued to Holdings and Phoenix Life
$32,000,000 in aggregate principal amount of the Company's 5.25% Convertible
Subordinated Debentures Due 2014 (Debentures) in connection with the Company's
acquisition of APC from Holdings and Vaughan. Immediately after the Company's
acquisition of APC, Holdings distributed all of its consideration received,
including the Debentures, to Phoenix Life. Robert W. Fiondella, a director of
the Company, is an executive officer of Phoenix Life and its parent, The Phoenix
Companies, Inc., and David W. Searfoss, a director of the Company until December
2002, was an executive officer of Phoenix Life and The Phoenix Companies, Inc.
until September 2002. Phoenix Life and its affiliates converted the Debentures
into shares of Common Stock on November 12, 2002, and all outstanding Debentures
have been cancelled.
Julious P. Smith, Jr., a director of the Company, is the Chairman and Chief
Executive Officer of the law firm of Williams Mullen, which serves as outside
counsel to the Company.
16
Alvin Rogal, who is the father of Andrew L. Rogal, Chairman and Chief
Executive Officer of the Company, is an employee of Hilb, Rogal and Hamilton
Company of Pittsburgh, LLC, a subsidiary of the Company. During 2002, Mr. Rogal
received total compensation of $253,992 from that subsidiary.
Robert J. Hilb, who is the son of Robert H. Hilb, a director and Chairman
Emeritus of the Company, is a party to a severance agreement with the Company,
in connection with the termination of his employment in June 2001. Under the
terms of the severance agreement, Mr. Hilb received $120,000 in severance pay in
2002. The severance agreement terminates in June 2003.
In 2001, the Company entered into an aircraft lease agreement with Tiger
Air, L.L.C., a Virginia limited liability company, for the lease of a jet
aircraft for use by the Company. Norwood H. Davis, Jr., a director of the
Company, is a managing director of Tiger Air, L.L.C. The initial term of the
lease is three years, subject to automatic renewals for successive one year
periods unless terminated by either party on sixty days written notice prior to
the expiration of the initial term or any renewal period. The lease provides for
monthly payments by the Company of $2,200 per flight hour for use of the
aircraft plus any applicable fuel surcharge; however, the minimum monthly lease
payment is $27,500 irrespective of use by the Company.
Robert H. Hilb, a director and Chairman Emeritus of the Company, entered
into a consulting agreement with the Company, dated June 1, 1997, to provide
consulting services to the Company at the request of the Board of Directors or
the Chief Executive Officer of the Company. The consulting agreement, as amended
and restated in 2002, provides for the payment to Mr. Hilb of $7,000 per month
for his consulting services until May 2003 and $9,000 per month from June 2003
until the expiration of the agreement on May 31, 2006.
PROPOSAL TWO
APPROVAL OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
The Proposal
The Board of Directors has approved unanimously, and recommends that the
Company's shareholders approve, the Company's Amended and Restated Articles of
Incorporation (the Amended and Restated Articles). The Amended and Restated
Articles include the following changes to the Company's original Articles of
Incorporation, as amended to date (the Original Articles):
* an increase in the number of authorized shares of Common Stock that
the Company would have the authority to issue from 50 million to 100
million shares; and
* the addition of a provision that reduces the required shareholder vote
on amendments to the Amended and Restated Articles (except in certain
instances) from more than two-thirds of all votes entitled to be cast
by holders of record of the Company's Common Stock to a majority of the
votes entitled to be cast by such shareholders.
Either of these changes requires shareholder approval and, as a result,
the Company is presenting the Amended and Restated Articles, in their entirety,
for shareholder approval. The complete text of the Amended and Restated Articles
is attached to this Proxy Statement as Exhibit A.
The Amended and Restated Articles also delete outdated information on the
initial directors and registered agent of the Company, which information was
required when the Original Articles were initially filed, and modify and update
other provisions of the Original Articles in connection with the restatement.
Purposes and Effects of the Proposal
General. Since it was formed in 1982, the Company has made a series of
amendments to the Original Articles, as initially filed. In addition, as
described in this section, the Company seeks to make two additional substantive
17
amendments to the Original Articles. As a result, the Company's Board of
Directors determined that it was in the Company's best interests to consolidate
the existing provisions of the Original Articles, with the substantive and other
amendments to them, into one single document to be filed with the Virginia State
Corporation Commission. The Company thus will be able to simplify paperwork in
situations in which it needs to provide a copy of its corporate charter by
combining all past and proposed amendments to the Original Articles in a single
document.
On February 11, 2003, the Board of Directors approved the adoption of the
Amended and Restated Articles and directed that they be submitted to a vote of
the shareholders at the Meeting. Upon shareholder approval, the Company will
file the Amended and Restated Articles with the Virginia State Corporation
Commission.
Increase in Number of Authorized Shares of Common Stock. Of the 50 million
currently authorized shares of Common Stock, as of March 1, 2003, 33,849,203
shares were issued and outstanding. The additional shares of Common Stock for
which authorization is sought would be a part of the existing class of Common
Stock and, if and when issued, would have the same rights and privileges as the
shares of Common Stock presently outstanding. No holder of Common Stock has any
preemptive rights. The Company has no plans for the issuance of any shares of
Common Stock at the present time, except in connection with employee benefit
plans and acquisitions in the ordinary course of business of independent
insurance agencies and other businesses and assets.
The Board of Directors believes that an increase in the number of shares
of authorized Common Stock as contemplated by the Amended and Restated Articles
would benefit the Company and its shareholders by giving the Company needed
flexibility in its corporate planning and in responding to developments in the
Company's business, including possible acquisition transactions, stock splits or
stock dividends and other general corporate purposes. Having such authorized
shares available for issuance in the future would give the Company greater
flexibility and allow shares of Common Stock to be issued without the expense
and delay of a special shareholders' meeting.
Unless otherwise required by applicable law or regulation, the shares of
Common Stock to be authorized in the Amended and Restated Articles will be
issuable without further shareholder action and on such terms and for such
consideration as may be determined by the Board of Directors. However, the New
York Stock Exchange, on which the Company's Common Stock is listed, currently
requires shareholder approval as a prerequisite to listing shares in several
instances, including acquisition transactions, where the present or potential
issuance of shares could result in an increase of 20 percent or more in the
number of shares of Common Stock outstanding.
The Board of Directors could use the additional shares of Common Stock to
discourage an attempt to change control of the Company, even though a change in
control might be perceived as desirable by some shareholders, by selling a
substantial number of shares of Common Stock to persons who have an arrangement
with the Company concerning the voting of such shares, or by distributing Common
Stock, or rights to receive such stock, to the shareholders. The Board of
Directors, however, has no present intention of issuing any shares of Common
Stock or rights to acquire Common Stock for such purposes, and there are no
arrangements with any person for the purchase of shares of Common Stock in the
event of an attempted change of control.
Reduction of Vote Required on Amendments to Articles. Under the Virginia
Stock Corporation Act (the Virginia Act), certain corporate events must be
approved by a vote of more than two-thirds of the votes entitled to be cast by
each voting group of shareholders. These events include approval of an amendment
to a company's articles of incorporation, a merger or share exchange, a sale of
all or substantially all of the company's assets and a dissolution of the
company. The Virginia Act permits the articles of incorporation of a company to
provide for a greater or lesser vote for approval of such corporate events so
long as the vote provided for is not less than a majority of all the votes cast
by each voting group of shareholders entitled to vote at a meeting at which a
quorum of the voting group is present.
The Original Articles do not contain any provisions that modify the
shareholder approval requirement under the Virginia Act. The Amended and
Restated Articles, however, contain a provision that reduces the required
shareholder vote on amendments to the Amended and Restated Articles (except in
certain instances) from a vote of more than two-thirds of the votes entitled to
be cast by each voting group of shareholders to a simple majority of such votes.
The Amended and Restated Articles will still require the more than a two-thirds
vote required for shareholder approval for any amendment that changes or affects
the vote required for shareholder approval of mergers or share exchanges, sales
of all of substantially all of the Company's assets and a dissolution of the
18
Company. Under the Amended and Restated Articles, as the only voting group of
shareholders, the holders of Common Stock are entitled to one vote per share on
all matters as to which a shareholder vote is taken.
The reduced shareholder voting requirement on certain amendments to the
Amended and Restated Articles will make it easier for the Company to amend them
for matters that do not involve a corporate merger, share exchange, sale of
assets or dissolution. The Company believes that a simple majority of shares
entitled to vote is all that is necessary to effect a change that does not
involve such a significant corporate event. Examples include an increase in
authorized stock as described above and an addition or modification to a
corporate governance or indemnification provision.
Vote Required
In order for them to be adopted, the Amended and Restated Articles must be
approved by the holders of more than two-thirds of all votes entitled to be cast
by holders of record of the Company's Common Stock, which is the requirement
under the Original Articles. Abstentions and Broker Shares that are not voted on
this proposal will not be included in determining the number of votes cast.
The Board of Directors recommends that the shareholders vote FOR Proposal
Two.
PROPOSAL THREE
APPROVAL OF AMENDMENT AND RESTATEMENT OF
HILB, ROGAL AND HAMILTON COMPANY
2000 STOCK INCENTIVE PLAN
The Proposal
The Board of Directors has adopted unanimously, and recommends that the
Company's shareholders approve, an amendment and restatement of the Hilb, Rogal
and Hamilton Company 2000 Stock Incentive Plan (the 2000 Plan). The amendment
and restatement includes, among other things, the following changes to the 2000
Plan:
* an increase in the number of shares of Common Stock currently reserved
for issuance under the 2000 Plan from 2,400,000 to 4,400,000 (an
increase of 2,000,000 shares);
* the addition of SARs and phantom stock awards as incentives under the
2000 Plan; and
* an increase in the maximum number of shares of Common Stock available
for awards of Common Stock, restricted stock and now phantom stock
from 600,000 to 1,100,000 (an increase of 500,000 shares).
The Company's experience with stock options and other stock-based
incentives has convinced the Board of Directors of their important role in
recruiting and retaining officers, directors and employees with ability and
initiative and in encouraging such persons to have a greater financial
investment in the Company. The Board of Directors approved the amendment and
restatement of the 2000 Plan on February 11, 2003. Subject to shareholder
approval, the 2000 Plan, as amended and restated, replaces the original version
of the 2000 Plan.
The complete text of the 2000 Plan, as amended and restated, is attached
to this Proxy Statement as Exhibit B. The following general description of the
principal features of the 2000 Plan is qualified in its entirety by reference to
Exhibit B.
General Information
The 2000 Plan, as originally adopted, authorizes the Compensation
Committee of the Board of Directors (the Committee) to award shares of Common
Stock, restricted stock and stock options to directors, officers and key
employees of the Company and its subsidiaries who are designated by the
Committee. The 2000 Plan, as amended and restated, includes SARs and phantom
stock awards as additional incentives.
19
The 2000 Plan initially authorized the issuance of up to 1,200,000 shares
of Common Stock. On December 31, 2001, the Company effected a two-for-one stock
split and, as provided therein, the 2000 Plan currently authorizes the issuance
of up to 2,400,000 shares of Common Stock. The 2000 Plan, as amended and
restated, authorizes the issuance of up to 4,400,000 shares of Common Stock.
Shares are considered to be issued under the 2000 Plan only when the
shares are actually issued to a participant. Additionally, any shares tendered
or withheld in payment of all or part of the exercise price of a stock option
granted under the 2000 Plan or in satisfaction of withholding tax obligations,
any shares forfeited or canceled in accordance with the terms of a grant or
award under the 2000 Plan and any shares that are not issued under the 2000 Plan
because of a payment of cash in lieu of shares will become available for
issuance under new grants and awards under the 2000 Plan. The 2000 Plan, as
originally adopted, provides that not more than 600,000 shares (as adjusted to
reflect a two-for-one stock split on December 31, 2001) of Common Stock shall be
available for awards of Common Stock and/or restricted stock. The 2000 Plan, as
amended and restated, provides that not more than 1,100,000 shares of Common
Stock shall be available for awards of Common Stock, restricted stock and/or
phantom stock.
The 2000 Plan replaced the Hilb, Rogal and Hamilton Company 1989 Stock
Plan (the "1989 Plan"), which terminated as of May 31, 2000. Shares forfeited or
not issued due to cancellation, termination or expiration of a grant or award
under the 1989 Plan are also available for issuance under the 2000 Plan. Shares
tendered or withheld in payment of all or part of a stock option granted, or in
satisfaction of withholding tax obligations, under the 1989 Plan are also
available for issuance under the 2000 Plan.
The 2000 Plan provides that if there is a stock split, stock dividend or
other event that affects the Company's capitalization, appropriate adjustments
will be made in the number of shares that may be issued under the 2000 Plan and
in the number of shares and price in all outstanding grants and awards made
before such event.
As of February 28, 2003, the Company has made grants and awards as to
2,327,225 shares of Common Stock reserved for issuance under the 2000 Plan. As a
result, 322,206 shares of Common Stock remain available for grants and awards
under the 2000 Plan. This amount includes shares that have been forfeited or
canceled in accordance with the terms of a grant or award, or not issued because
of a payment of cash in lieu of shares, under the 1989 Plan or 2000 Plan and
that are thus available for issuance under new grants and awards under the 2000
Plan. On February 28, 2003, the closing price for a share of the Company's
Common Stock on the New York Stock Exchange was $29.73.
20
The following table sets forth information relating to all grants of stock
options under the 2000 Plan to (i) each of the Named Executive Officers, (ii)
all current executive officers as a group, (iii) all current directors who are
not executive officers as a group and (iv) all employees, including all current
officers who are not executive officers, as a group. The table does not include
awards of Common Stock and restricted stock.
Number of Securities Value of Unexercised
Underlying Exercise or Base In-the-Money Options at
Options Granted (1) Price ($/Share) February 28, 2003 ($) (2)
------------------- --------------- - -------------------------
Andrew L. Rogal 82,000 $18.755 - 37.45 $351,200
Martin L. Vaughan, III 72,000 18.755 - 37.45 263,400
Timothy J. Korman 48,000 18.755 - 37.45 175,600
John P. McGrath 48,000 18.755 - 37.45 175,600
Steven C. Deal 42,000 18.755 - 37.45 142,675
Executive Group 807,000 18.755 - 45.15 2,292,350
Non-Executive Director Group
100,000 38.45 0
Non-Executive Officer Employee
Group 1,248,500 18.755 - 45.15 2,837,550
---------
(1) Stock options were granted at the closing sales price of a share of Common
Stock as reported on the New York Stock Exchange at the date of grant.
(2) The value of in-the-money options was calculated by determining the
difference between the closing price of a share of Common Stock as reported
on the New York Stock Exchange on February 28, 2003 and the exercise price
of the options.
The Company intends to continue to grant options to purchase shares of
Common Stock under the 2000 Plan to directors, eligible officers and key
employees. The persons eligible to participate in the 2000 Plan include the
directors and officers of the Company and its subsidiaries and over 3,000
employees. No determination has been made as to which of the persons eligible to
participate in the 2000 Plan will receive awards under the 2000 Plan in the
future and, therefore, the future benefits to be allocated to any individual or
to various groups of eligible participants are not presently determinable.
Grants and Awards under the 2000 Plan
The principal features of awards under the 2000 Plan are summarized below.
Stock Options. The 2000 Plan permits the granting of incentive stock
options (ISOs), which qualify for special tax treatment, and non-qualified stock
options. The exercise price for options will not be less than the fair market
value of a share of Common Stock on the date of grant. The period in which an
option may be exercised is determined by the Committee on the date of grant, but
will not exceed 10 years in the case of an ISO. Payment of the option exercise
price may be in cash or, if the grant agreement provides, by "cashless exercise"
or surrendering previously owned shares of Common Stock or the Company
withholding shares of Common Stock upon exercise to the extent permitted under
the applicable laws and regulations. In addition, the 2000 Plan permits the
Committee to cash out all or any portion of any option by paying the options, in
cash or shares of Common Stock, the difference between the fair market value of
the shares covered by the option and the exercise price.
21
Stock Appreciation Rights (SARs). SARs may also be granted either
independently or in combination with underlying stock options. Each SAR will
entitle the holder upon exercise to receive the excess of the fair market value
of a share of Common Stock at the time of exercise over the fair market value of
a share of Common Stock on the date of grant of the SAR. A limited SAR is
exercisable upon a Change of Control and entitles the holder to receive, with
respect to each share of Common Stock encompassed by the exercise of such SAR,
the higher of (x) the highest sales price of a share of Common Stock as reported
on the New York Stock Exchange composite tape during the 60-day period prior to
and including the date of the Change of Control, or (y) the highest price per
share paid in a Change of Control transaction, except that in the case of a SAR
related to an ISO, such price shall be based only on the fair market value of a
share of Common Stock on the date the ISO is exercised. At the discretion of the
Committee, all or part of the payment in respect of a SAR may be in cash, shares
of Common Stock or a combination thereof. The original version of the 2000 Plan
does not provide for the award of SARs.
Common Stock and Restricted Stock. The Committee may also authorize the
award of shares of Common Stock and/or restricted Common Stock. The restricted
stock would vest and become transferable upon the satisfaction of conditions set
forth in the applicable award agreement. Restricted stock awards may be subject
to forfeiture if, for example, the recipient's employment terminates before the
award vests. During the period of restriction, holders of restricted stock will
have voting rights and the right to receive dividends on their shares.
Phantom Stock. The Committee may also award shares of phantom stock by
means of a bookkeeping entry by which an account is credited (but not funded) as
though shares of Common Stock had been transferred to such account. The award
may entitle the recipient to receive, upon satisfaction of such terms and
conditions as prescribed by the Committee, cash, shares of Common Stock or a
combination of both. The original version of the 2000 Plan does not provide for
the award of phantom stock.
Change of Control Provisions
The 2000 Plan provides that in the event of a "Change of Control" (as
defined in the 2000 Plan), unless otherwise provided by the Committee in a grant
or award agreement, all outstanding stock options, and now SARs and phantom
stock will become fully exercisable and the restrictions applicable to
outstanding restricted stock will lapse. The Committee may also provide that
under such circumstances holders of restricted stock may elect to receive, in
exchange for shares that were restricted stock, a cash payment equal to the fair
market value of the shares surrendered.
Federal Income Tax Consequences
The principal federal tax consequences to participants and to the Company
of grants and awards under the 2000 Plan are summarized below.
Non-Qualified Stock Options. Non-qualified stock options granted under the
2000 Plan are not taxable to an optionee at grant but result in taxation at
exercise, at which time the individual will recognize ordinary income in an
amount equal to the difference between the option exercise price and the fair
market value of the Common Stock on the exercise date. The Company will be
entitled to deduct a corresponding amount as a business expense in the year the
optionee recognizes this income.
Incentive Stock Options. An employee will generally not recognize income
on receipt or exercise of an ISO so long as he or she has been an employee of
the Company or its subsidiaries from the date the option was granted until three
months before the date of exercise; however, the amount by which the fair market
value of the Common Stock at the time of exercise exceeds the option price is a
required adjustment for purposes of the alternative minimum tax applicable to
the employee. If the employee holds the Common Stock received upon exercise of
the option for one year after exercise (and for two years from the date of grant
of the option), any difference between the amount realized upon the disposition
of the stock and the amount paid for the stock will be treated as long-term
capital gain (or loss, if applicable) to the employee. If the employee exercises
an ISO and satisfies these holding period requirements, the Company may not
deduct any amount in connection with the ISO.
In contrast, if an employee exercises an ISO but does not satisfy the
holding period requirements with respect to the Common Stock acquired on
exercise, the employee generally will recognize ordinary income in the year of
22
the disposition equal to the excess, if any, of the fair market value of the
Common Stock on the date of exercise over the option price; and any excess of
the amount realized on the disposition over the fair market value on the date of
exercise will be taxed as long or short term capital gain (as applicable). If,
however, the fair market value of the Common Stock on the date of disposition is
less than on the date of exercise, the employee will recognize ordinary income
equal only to the difference between the amount realized on disposition and the
option price. In either event, the Company will be entitled to deduct an amount
equal to the amount constituting ordinary income to the employee in the year of
the premature disposition.
Stock Appreciation Rights. There are no immediate federal income tax
consequences to an employee when a SAR is granted. Instead, the employee
realizes ordinary income upon exercise of an SAR in an amount equal to the cash
and/or the fair market value (on the date of exercise) of the shares of Common
Stock received. The Company will be entitled to deduct the same amount as a
business expense at the time.
Restricted Stock. The federal income tax consequences of restricted stock
awards depend on the restrictions imposed on the stock. Generally, the fair
market value of the stock received will not be includable in the participant's
gross income until such time as the stock is no longer subject to a substantial
risk of forfeiture or becomes transferable. The employee may, however, make a
tax election to include the value of the stock in gross income in the year of
receipt despite such restrictions. Generally, the Company will be entitled to
deduct the fair market value of the stock transferred to the employee as a
business expense in the year the employee includes the compensation in income.
Phantom Stock. A participant generally will not recognize taxable income
upon the award of shares of phantom stock. The participant, however, will
recognize ordinary income when the participant receives payment of cash and/or
shares of Common Stock for the phantom stock. The amount included in the
participant's income will equal the amount of cash and the fair market value of
the shares of Common Stock received. The Company generally will be entitled to a
corresponding tax deduction at the time the participant recognizes ordinary
income with respect to phantom stock.
Common Stock/Cash Payments. The fair market value of any shares of Common
Stock awarded to a participant and any cash payments a participant receives in
connection with other awards under the 2000 Plan or as dividends on restricted
stock are taxable as ordinary income in the year received or made available to
the participant without substantial limitations or restrictions. Generally, the
Company will be entitled to deduct the amount (other than dividends) that the
participant includes as income as a business expense in the year the participant
recognizes such income.
Section 162(m) of the Internal Revenue Code places a $1 million annual
limit on the deductible compensation of certain executives of publicly traded
corporations. The limit, however, does not apply to "qualified performance-based
compensation." The Company believes that grants of options and SARs under the
2000 Plan will qualify for the performance-based compensation exception to the
deductibility limit, assuming that the 2000 Plan, as amended and restated, is
approved by the shareholders.
State tax consequences may in some cases differ from those described
above. Grants and awards under the 2000 Plan may in some instances be made to
employees who are subject to tax in jurisdictions other than the United States
and may result in tax consequences differing from those described above.
Other Information
The 2000 Plan was effective as of June 1, 2000 and will expire on May 31,
2005, unless terminated earlier by the Board of Directors. The 2000 Plan, as
amended and restated, will expire on May 31, 2010. Grants and awards issued
before the 2000 Plan expires or is terminated may extend beyond the expiration
or termination date.
The Board of Directors may amend the 2000 Plan at any time, provided that
no such amendment will be made without shareholder approval if such approval is
required under any applicable law, rule or regulation. Except for adjustments
that result from events that affect the Company's capitalization, the 2000 Plan
prohibits any repricing of options without shareholder approval. In any calendar
year, no individual may receive awards under the 2000 Plan, as amended and
restated, that cover more than 200,000 shares of the Company's Common Stock.
23
Vote Required
If a quorum exists at the Meeting, the 2000 Plan, as amended and restated,
will be approved if a majority of the votes cast on this proposal vote in favor
of it. Abstentions will be included in determining the number of votes cast, but
Broker Shares that are not voted on this proposal will not be included.
The Board of Directors recommends that the shareholders vote FOR Proposal
Three.
AUDIT INFORMATION
The firm of Ernst & Young LLP has audited the consolidated financial
statements of the Company for the fiscal years ended December 31, 2002 and 2001.
The following information is furnished with respect to fees billed and expected
to be billed for professional services rendered to the Company by Ernst & Young
LLP for the 2002 and 2001 fiscal years.
Audit Fees
The aggregate amounts of fees billed or expected to be billed to the
Company by Ernst & Young LLP for audit services rendered for the fiscal years
ended December 31, 2002 and 2001 were $625,000 and $273,000, respectively.
These audit services include audits of the Company's annual financial
statements, reviews of the Company's interim financial statements, statutory
audits, the issuance of comfort letters for securities offerings in 2002 and
consents and reviews of certain SEC registration statements.
Audit-Related Fees
The aggregate amounts of fees billed to the Company by Ernst & Young LLP
for audit-related services rendered for the fiscal years ended December 31, 2002
and 2001 were $190,000 and $33,000, respectively.
These audit-related fees include employee benefit plan audits, due
diligence related to agency acquisitions and accounting consultations.
Tax Fees
The aggregate amounts of fees billed to the Company by Ernst & Young LLP
for tax services for the fiscal years ended December 31, 2002 and 2001 were
$192,000 and $42,000, respectively.
These tax fees include amounts related to tax compliance and planning
services.
All Other Fees
The aggregate amounts of fees billed to the Company by Ernst & Young LLP
for all other services rendered to the Company for the fiscal years ended
December 31, 2002 and 2001 were $0 and $16,000, respectively.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Ernst & Young LLP as independent public accountants to
audit the consolidated financial statements of the Company for the fiscal year
ending December 31, 2003. Representatives of Ernst & Young LLP will be present
at the Meeting, will be available to respond to appropriate questions from
shareholders and may make a statement if they so desire.
24
AUDIT COMMITTEE REPORT
Management is responsible for the Company's internal controls, financial
reporting process and compliance with laws and regulations and ethical business
standards. The independent auditor is responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and issuing a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes on behalf
of the Board of Directors.
In this context, the Audit Committee has reviewed and discussed the
audited financial statements with management and the independent auditors. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board No. 1 (Independence Discussions with Audit Committees) and discussed with
them their independence from the Company and its management. Moreover, the Audit
Committee has considered whether the independent auditor's provision of
non-audit services to the Company is compatible with maintaining the auditor's
independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002, for filing with the Securities and Exchange
Commission. By recommending to the Board of Directors that the audited financial
statements be so included, the Audit Committee is not opining on the accuracy,
completeness or presentation of the information contained in the audited
financial statements.
AUDIT COMMITTEE
Theodore L. Chandler, Jr., Chairman
J.S.M. French
Anthony F. Markel
Julious P. Smith, Jr.
PROPOSALS FOR 2004 ANNUAL MEETING
Under the regulations of the Commission, any shareholder desiring to make a
proposal to be acted upon at the 2004 Annual Meeting of Shareholders must cause
such proposal to be delivered, in proper form, to the Corporate Secretary of the
Company, whose address is 4951 Lake Brook Drive, Suite 500, Glen Allen, Virginia
23060, no later than December 9, 2003, in order for the proposal to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. The Company anticipates holding the 2004 Annual Meeting of
Shareholders on May 5, 2004.
The Company's Bylaws also prescribe the procedure a shareholder must follow
to nominate directors or to bring other business before shareholders' meetings.
Under the Bylaws, which the Company has amended effective as of May 6, 2003, for
a shareholder to nominate a candidate for director or to bring other business
before a meeting, notice must be received by the Corporate Secretary of the
Company not less than 120 days and not more than 150 days before the first
anniversary of the date of the Company's proxy statement in connection with the
last annual meeting of shareholders (or no later than 90 days before the date of
the meeting if there was no meeting in the prior year). For the 2004 Annual
Meeting of Shareholders, the Company must receive such notice no later than
December 9, 2003, and no earlier than November 9, 2003. Notice of a nomination
for director must describe various matters regarding the nominee and the
shareholder giving notice. Notice of other business to be brought before the
meeting must include a description of the proposed business, the reasons
therefor and other specified matters. Any shareholder may obtain a copy of the
Company's Bylaws, without charge, upon written request to the Corporate
Secretary of the Company.
25
ANNUAL REPORTS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 2002, including consolidated financial statements, is being mailed
to shareholders with this Proxy Statement. A copy of the Company's Annual Report
on Form 10-K for 2002 filed with the Commission, excluding exhibits, can be
obtained without charge by writing to the Corporate Secretary, 4951 Lake Brook
Drive, Suite 500, Glen Allen, Virginia 23060. Copies of the 2002 Form 10-K and
other filings that the Company makes with the Commission are also available on
its internet website at www.hrh.com.
26
Exhibit A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
HILB, ROGAL AND HAMILTON COMPANY
ARTICLE I
The name of the Corporation is Hilb, Rogal and Hamilton Company.
ARTICLE II
The purpose for which the Corporation is organized is to transact any
lawful business not required to be specifically stated in the Articles of
Incorporation.
ARTICLE III
The Corporation shall have authority to issue one hundred million
(100,000,000) shares of Common Stock, without par value.
Subject to the provisions of law, the holders of shares of Common Stock
at the time outstanding shall be entitled to receive such dividends at such
times and in such amounts as the Board of Directors may deem advisable.
In the event of any liquidation, dissolution or winding up (whether
voluntary or involuntary) of the Corporation, after the payment or provision for
payment in full for all debts and other liabilities of the Corporation, the
remaining net assets of the Corporation shall be distributed ratably among the
holders of the shares of Common Stock at the time outstanding.
The holders of Common Stock shall be entitled to one vote per share on
all matters as to which a shareholder vote is taken.
ARTICLE IV
No holder of capital stock of the Corporation of any class, now or
hereafter authorized, shall have any preemptive right to subscribe to or
purchase (i) any shares of capital stock of the Corporation, (ii) any securities
convertible into such shares or (iii) any options, warrants or rights to
purchase such shares or securities convertible into any such shares.
ARTICLE V
The number of directors shall be fixed by the Bylaws or, in the absence
of a Bylaw fixing the number, the number shall be three. The number of directors
shall be divided into three classes, each class to be as nearly equal in number
as practicable. The term of office of directors of the first class shall expire
at the first annual meeting of the shareholders after their election, the term
of office of directors of the second class shall expire at the second annual
meeting of shareholders after their election, and the term of office of
directors of the third class shall expire at the third annual meeting of
shareholders after their election. At each annual meeting of shareholders after
the classification, directors elected to succeed those directors whose terms
then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of shareholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified. If the office of any director shall become vacant, the directors,
at the time in office, whether or not a quorum, may, by majority vote of the
directors then in office, choose a successor who shall hold office until the
next annual meeting of shareholders. In such event, the successor elected by the
shareholders at that annual meeting shall hold office for a term that shall
coincide with the remaining term of the class of directors to which that person
has been elected. Vacancies resulting from an increase
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in the number of directors shall be filled in the same manner and the class of
directors to which each person has been elected shall be designated.
ARTICLE VI
1. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a director or officer of
the Corporation shall not be liable to the Corporation or its shareholders for
monetary damages.
2. To the full extent permitted by the Virginia Stock Corporation Act, as
it exists on the date hereof or may hereafter be amended, the Corporation shall
indemnify a director or officer of the Corporation who is or was a party to any
proceeding by reason of the fact that he or she is or was such a director or
officer or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other profit or nonprofit enterprise, against
any and all liabilities and expenses as are incurred in the proceeding except
such liabilities and expenses as are incurred because of his or her willful
misconduct or knowing violation of the criminal law. Unless a determination has
been made that indemnification is not permissible, the Corporation shall make
advances and reimbursements for expenses incurred by a director or officer in a
proceeding upon receipt of an undertaking from him or her to repay the same if
it is ultimately determined that he or she is not entitled to indemnification.
Such undertaking shall be an unlimited, unsecured general obligation of the
director or officer and shall be accepted without reference to his or her
ability to make repayment.
3. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section 2 of this
Article VI who was or is a party to any proceeding, by reason of the fact that
he or she is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other profit or nonprofit enterprise, to the same extent as if
such person were specified as one to whom indemnification is granted in Section
2.
4. The Corporation may purchase and maintain insurance for the payment of
the whole or any portion of the liability assumed by it in accordance with this
Article VI and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
profit or nonprofit enterprise, against any liability asserted against or
incurred by any such person in any such capacity or arising from his status as
such, whether or not the Corporation would have power to indemnify him or her
against such liability under the provisions of this Article VI.
5. In the event there has been a change in the composition of a majority
of the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section 2 of this Article VI shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
6. The provisions of this Article VI shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article VI shall diminish the
rights provided hereby or diminish the right to indemnification with respect to
any claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
7. Reference herein to directors, officers, employees or agents shall
include former directors, officers, employees and agents and their respective
heirs, executors and administrators.
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ARTICLE VII
Except as otherwise required by the Virginia Stock Corporation Act, by
the Articles of Incorporation, or by the Board of Directors acting pursuant to
subsection C of Section 13.1-707 of the Virginia Stock Corporation Act or any
successor provision, the vote required to approve an amendment or restatement of
these Articles of Incorporation, other than an amendment or restatement that
amends or affects the shareholder vote required by the Virginia Stock
Corporation Act to approve a merger, share exchange, sale of all or
substantially all of the Corporation's property or the dissolution of the
Corporation, shall be a majority of all votes entitled to be cast by each voting
group entitled to vote on the amendment or restatement.
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Exhibit B
HILB, ROGAL AND HAMILTON COMPANY
2000 STOCK INCENTIVE PLAN
(as amended and restated February 11, 2003)
Article I
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
1.01 Affiliate means any "subsidiary corporation" or "parent
corporation" (within the meaning of Section 424 of the Code) of the Company.
1.02 Agreement means a written agreement (including any amendment
or supplement thereto) between the Company and a Participant specifying the
terms and conditions of a Grant or an Award issued to such Participant.
1.03 Award means an award of Common Stock, Restricted Stock and/or
Phantom Stock.
1.04 Board means the Board of Directors of the Company.
1.05 Change of Control means
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of either (a) the then outstanding shares of
Common Stock of the Company (the "Outstanding Company Common
Stock") or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (w) any acquisition
directly from the Company, (x) any acquisition by the Company,
(y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (z) any acquisition
by any corporation pursuant to a transaction which complies
with clauses (a), (b) and (c) of subsection (iii) of this
Section 1.05; or
(ii) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election, by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to
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vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more Subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be,
(b) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (c) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, for purposes of subsection (i)
of this Section 1.05, a Change of Control shall not be deemed
to have taken place if, as a result of an acquisition by the
Company which reduces the Outstanding Company Common Stock or
the Outstanding Company Voting Securities, the beneficial
ownership of a Person increases to 25% or more of the
Outstanding Company Common Stock or the Outstanding Company
Voting Securities; provided, however, that if a Person shall
become the beneficial owner of 25% or more of the Outstanding
Company Common Stock or the Outstanding Company Voting
Securities by reason of share purchases by the Company and,
after such share purchases by the Company, such Person becomes
the beneficial owner of any additional shares of the
Outstanding Company Common Stock or the Outstanding Company
Voting Stock through any means except an acquisition directly
from the Company, for purposes of subsection (i) of this
Section 1.05, a Change of Control shall be deemed to have
taken place.
1.06 Change of Control Date is the date on which an event described
in (i) through (iv) of Section 1.05 occurs.
1.07 Code means the Internal Revenue Code of 1986, as amended from
time to time. References to the Code shall include the valid and binding
governmental regulations, court decisions and other regulatory and judicial
authority issued or rendered thereunder.
1.08 Commission means the Securities and Exchange Commission or any
successor agency.
1.09 Committee means the Compensation Committee of the Board.
1.10 Common Stock means the Common Stock of the Company.
1.11 Company means Hilb, Rogal and Hamilton Company.
1.12 Disability, with respect to a Participant, means "'disability"
as defined from time to time under any long-term disability plan of the Company
or Subsidiary with which the Participant is employed.
1.13 Effective Date means the date on which this Plan is approved
by the shareholders of the Company.
1.14 Exchange Act means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
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1.15 Fair Market Value means, on any given date, the closing price
of a share of Common Stock as reported on the New York Stock Exchange composite
tape on such day or, if the Common Stock was not traded on the New York Stock
Exchange on such day, then on the next preceding day that the Common Stock was
traded on such exchange, all as reported by such source as the Committee may
select.
1.16 Grant means the grant of an Option or a SAR, or both.
1.17 Incentive Stock Option means an Option which qualifies and
is intended to qualify as an "incentive stock option" under Section 422 of the
Code.
1.18 Initial Value means, with respect to a SAR, the Fair Market
Value of one share of Common Stock on the date of grant, as set forth in an
Agreement.
1.19 Non-Qualified Stock Option means an Option other than an
Incentive Stock Option.
1.20 Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the price
and on the conditions set forth in an Agreement.
1.21 Option Price means the price per share for Common Stock
purchased on the exercise of an Option as provided in Article VI.
1.22 Participant means an officer, director or employee of the
Company or of a Subsidiary who satisfies the requirements of Article IV and is
selected by the Committee to receive a Grant or an Award.
1.23 Phantom Stock means a bookkeeping entry on behalf of a
Participant by which his or her account is credited (but not funded) as though
Common Stock had been transferred to such account.
1.24 Plan means the Hilb, Rogal and Hamilton Company 2000 Stock
Incentive Plan, as amended from time to time.
1.25 Prior Plan means the Hilb, Rogal and Hamilton Company 1989
Stock Plan.
1.26 Restricted Stock means shares of Common Stock awarded to a
Participant under Article IX and designated as Restricted Stock. Shares of
Common Stock shall cease to be Restricted Stock when, in accordance with the
terms of the applicable Agreement, they become transferable and free of
substantial risk of forfeiture.
1.27 Rule 16b-3 means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time, or any
successor rule.
1.28 SAR means a stock appreciation right granted pursuant to this
Plan that entitles the holder to receive, with respect to each share of Common
Stock encompassed by the exercise of such SAR, the excess of the Fair Market
Value at the time of exercise over the Initial Value of the SAR; provided, that
any limited stock appreciation right granted by the Committee and exercisable
upon a Change of Control shall entitle the holder to receive, with respect to
each share of Common Stock encompassed by the exercise of such SAR, the higher
of (x) the highest closing sales price (excluding after-hours trading) of a
share of Common Stock as reported on the New York Stock Exchange composite tape
during the 60-day period prior to and including the Change of Control Date, or
(y) the highest price per share paid in a Change of Control transaction, over
the Initial Value of such SAR, except that in the case of SARs related to
Incentive Stock Options, such price shall be based only on the Fair Market Value
of the Common Stock on the date that the Incentive Stock Option is exercised.
1.29 Securities Broker means the registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 8.04 hereof.
1.30 Subsidiary means, with respect to any corporation, a
"subsidiary corporation" of that corporation within the meaning of Code Section
424(f).
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Article II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
officers, directors and key employees with ability and initiative by enabling
such persons who contribute significantly to the Company or an Affiliate to
participate in its future success and to associate their interests with those of
the Company and its shareholders. The Plan is intended to permit the award of
Common Stock, Restricted Stock and Phantom Stock, and the grant of Options,
qualifying as Incentive Stock Options or Non-Qualified Stock Options as
designated by the Committee at the time of grant, and SARs. No Option that is
intended to be an Incentive Stock Option, however, shall be invalid for failure
to qualify as an Incentive Stock Option under Section 422 of the Code but shall
be treated as a Non-Qualified Stock Option.
Article III
ADMINISTRATION
This Plan shall be administered by the Committee. The Committee shall
have authority to issue Grants and Awards upon such terms (not inconsistent with
the provisions of this Plan) as the Committee may consider appropriate. The
terms of such Grants and Awards may include conditions (in addition to those
contained in this Plan) on (i) the exercisability of all or any part of an
Option or SAR and (ii) the transferability or forfeitability of Restricted Stock
or Phantom Stock. In addition, the Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. To fulfill the purposes of the Plan without
amending the Plan, the Committee may also modify any Grants or Awards issued to
Participants who are nonresident aliens or employed outside of the United States
to recognize differences in local law, tax policy or custom.
The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. Any
decision made, or action taken, by the Committee or in connection with the
administration of this Plan shall be final and conclusive. All expenses of
administering this Plan shall be borne by the Company.
Article IV
ELIGIBILITY
4.01 General. Any officer, director or employee of the Company or
of any Company Affiliate (including any corporation that becomes an Affiliate of
the Company after the adoption of this Plan) who, in the judgment of the
Committee, has contributed significantly or can be expected to contribute
significantly to the profits or growth of the Company or a Subsidiary of the
Company may receive one or more Awards or Grants, or any combination or type
thereof. Employee and non-employee directors of the Company are eligible to
participate in this Plan.
4.02 Grants and Awards. The Committee will designate the
individuals to whom Grants and/or Awards are to be made and will specify the
number of shares of Common Stock subject to each such Grant or Award. An Option
may be granted alone or in addition to other Grants and/or Awards under the
Plan. The Committee shall have the authority to grant Incentive Stock Options,
Non-Qualified Stock Options or both types of Options to any Participant (in each
case with or without a related SAR); provided, however, that Incentive Stock
Options may be granted only to employees of the Company and its Subsidiaries. A
SAR may be granted with or without a related Option. All Grants or Awards under
this Plan shall be evidenced by Agreements which shall be subject to applicable
provisions of this Plan and to such other provisions as the Committee may
determine. No Participant may be granted Options that are Incentive Stock
Options or related SARs (under all plans of the Company and its Affiliates which
provide for the grant of Incentive Stock Options) which are first exercisable in
any calendar year for Common Stock having an aggregate Fair Market Value
(determined as of the date an Option is granted) exceeding $100,000 or such
other amount as shall be specified in Code Section 422 and the rules and
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regulations thereunder from time to time. No Participant may receive Grants or
Awards under the Plan with respect to more than 200,000 shares of Common Stock
during any one calendar year.
4.03 Designation of Option as an Incentive Stock Option or
Non-Qualified Stock Option. The Committee will designate at the time an Option
is granted whether the Option is to be treated as an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence, however, of any such designation,
such Option shall be treated as a Non-Qualified Stock Option.
4.04 Qualification of Incentive Stock Option under Section 422 of
the Code. Anything in this Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the Participant so affected, to disqualify any Incentive Stock
Option under such Section 422. No Option that is intended to be an Incentive
Stock Option however, shall be invalid for failure to qualify as an Incentive
Stock Option under Section 422 of the Code but shall be treated as a
Non-Qualified Stock Option.
Article V
STOCK SUBJECT TO PLAN
5.01 Maximum Number of Shares to be Issued. Subject to the
adjustment provisions of Article XI and the provisions of (a) through (c) of
this Article V, up to 4,400,000 shares of Common Stock may be issued under the
Plan. In addition to such authorization, the following shares of Common Stock
may be issued under the Plan:
(a) Shares of Common Stock that are forfeited under the Prior
Plan, and shares of Common Stock that are not issued under the Prior Plan
because of (i) the cancellation, termination or expiration of Grants and Awards,
and/or (ii) other similar events under the Prior Plan, shall be available for
issuance under this Plan.
(b) If a Participant tenders, or has withheld, shares of
Common Stock in payment of all or part of the Option Price under an Option
granted under the Plan or the Prior Plan, or in satisfaction of withholding tax
obligations thereunder, the shares of Common Stock so tendered by the
Participant or so withheld shall become available for issuance under the Plan.
(c) Shares of Common Stock that are forfeited under the Plan,
and shares of Common Stock that are not issued under the Plan because of (i) a
payment of cash in lieu of shares of Common Stock, (ii) the cancellation,
termination or expiration of Grants and Awards, and/or (iii) other similar
events under the Plan, shall be available for issuance under this Plan.
Notwithstanding (a) above, any shares of Common Stock that are
authorized to be issued under the Prior Plan but that are not issued or covered
by Grants or Awards under the Prior Plan, shall not be available for issuance
under this Plan.
Subject to the adjustment provisions of Article XI, not more than
1,100,000 shares of Common Stock shall be issued under Awards of Common Stock,
Restricted Stock and/or Phantom Stock.
Subject to the foregoing provisions of this Section 5.01, if a Grant or
an Award may be paid only in shares of Common Stock, or in either cash or shares
of Common Stock, the shares of Common Stock shall be deemed to be issued
hereunder only when and to the extent that payment is actually made in shares of
Common Stock. However, the Committee may authorize a cash payment under a Grant
or an Award in lieu of shares of Common Stock if there are insufficient shares
of Common Stock available for issuance under the Plan.
5.02 Independent SARs. Upon the exercise of a SAR granted
independently of an Option, the Company may deliver to the Participant
authorized but previously unissued Common Stock, cash, or a combination thereof
as provided in Section 8.06. The maximum aggregate number of shares of Common
Stock that may be
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issued pursuant to SARs that are granted independently of Options is subject to
the provisions of Section 5.01 hereof.
Article VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an
Option shall be fixed by the Committee on the date of grant; provided, however,
that the price per share shall not be less than the Fair Market Value on such
date. Notwithstanding the foregoing, if an Incentive Stock Option is granted to
a Participant who, at the time of the Grant, is a 10% shareholder as determined
under Section 422 of the Code, then the Option Price shall be not less than 110%
of the Fair Market Value on the date of Grant.
Article VII
EXERCISE OF OPTIONS AND SARS
7.01 Maximum Option Period or SAR Period. The period in which an
Option or SAR may be exercised shall be determined by the Committee on the date
of grant; provided, however, that an Option or SAR shall not be exercisable
after the expiration of 10 years (or 5 years in the case of an Incentive Stock
Option granted to a 10% shareholder as determined under Section 422 of the Code)
from the date the Option or SAR was granted. The date upon which any Option or
SAR granted by the Committee becomes exercisable may be accelerated by the
Committee in its discretion. Subject to the terms hereof, the term of
exercisability for any Option or SAR granted by the Committee may be extended by
the Committee and may be made contingent upon the continued employment of the
Participant by the Company or Affiliate.
7.02 Transferability of Options and SARs. Non-Qualified Stock
Options and SARs may be transferable by a Participant and exercisable by a
person other than a Participant, but only to the extent specifically provided in
an Option or SAR Agreement. Incentive Stock Options and any related SARs, by
their terms, shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable, during the Participant's lifetime,
only by the Participant. No right or interest of a Participant in any Option or
SAR shall be liable for, or subject to, any lien, obligation or liability of
such Participant.
7.03 Employee Status. For purposes of determining the applicability
of Section 422 of the Code (relating to Incentive Stock Options), or in the
event that the terms of any Grant provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary Disability, or other reasons shall not be
deemed interruptions of continuous employment.
Article VIII
METHOD OF EXERCISE
8.01 Exercise. Subject to the provisions of Articles VII and XII,
an Option or SAR may be exercised in whole at any time or in part from time to
time at such times and in compliance with the applicable Agreement and such
other requirements as the Committee shall determine; provided, however, that a
SAR that is related to an Incentive Stock Option may be exercised only to the
extent that the related Option is exercisable and when the Fair Market Value
exceeds the Option Price of the related Option. An Option or SAR granted under
this Plan may be exercised with respect to any number of whole shares less than
the full number for which the Option or SAR could be exercised. Such partial
exercise of an Option or SAR shall not affect the right to exercise the Option
or SAR from time to time in accordance with this Plan with respect to remaining
shares subject to the Option or SAR. The exercise of an Option or SAR shall
result in the termination of any related Option or SAR to the extent of the
number of shares with respect to which the Option or SAR is exercised.
8.02 Payment. Unless otherwise provided by the Agreement, payment
of the Option Price shall be made in cash. If the Agreement provides, payment of
all or part of the Option Price (and any applicable withholding
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taxes) may be made by surrendering (by either actual delivery or attestation)
already owned shares of Common Stock to the Company or by the Company
withholding shares of Common Stock from the Participant upon exercise, provided
the shares surrendered or withheld have a Fair Market Value (determined as of
the day preceding the date of exercise) that is not less than such price or part
thereof and any such withholding taxes. In addition, the Committee may establish
such payment or other terms as it may deem to be appropriate and consistent with
these purposes.
8.03 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his or her Option or SAR until the
date he or she exercises such Option or SAR.
8.04 Cashless Exercise. To the extent permitted under the
applicable laws and regulations, at the request of the Participant and with the
consent of the Committee, the Company agrees to cooperate in a "cashless
exercise" of the Option. The cashless exercise shall be effected by the
Participant delivering to the Securities Broker instructions to exercise all or
part of the Option, including instructions to sell a sufficient number of shares
of Common Stock to cover the costs and expenses associated therewith. The
Committee may permit a Participant to elect to pay any applicable withholding
taxes by requesting that the Company withhold the number of shares of Common
Stock equivalent at current Fair Market Value to the withholding taxes due.
8.05 Cashing Out of Option. The Committee may elect to cash out
all or part of the portion of any Option to be exercised by paying the optionee
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock that is the subject of the portion of the Option to be
exercised over the Option Price times the number of shares of Common Stock
subject to the portion of the Option to be exercised on the effective date of
such cash out.
8.06 Determination of Payment of Cash and/or Common Stock Upon
Exercise of SAR. At the Committee's discretion, the amount payable as a result
of the exercise of a SAR may be settled in cash, Common Stock, or a combination
of cash and Common Stock. No fractional shares shall be delivered upon the
exercise of a SAR but a cash payment will be made in lieu thereof.
Article IX
COMMON STOCK AND RESTRICTED STOCK
9.01 Award. In accordance with the provisions of Article IV, the
Committee will designate the individuals to whom an Award of Common Stock and/or
Restricted Stock is to be made and will specify the number of shares of Common
Stock covered by such Award or Awards.
9.02 Vesting. In the case of Restricted Stock, on the date of the
Award, the Committee may prescribe that the Participant's rights in the
Restricted Stock shall be forfeitable or otherwise restricted in any manner in
the discretion of the Committee for such period of time as is set forth in the
Agreement. Subject to the provisions of Article XII hereof, the Committee may
award Common Stock to a Participant which is not forfeitable and is free of any
restrictions on transferability.
9.03 Shareholder Rights. Prior to their forfeiture in accordance
with the terms of the Agreement and while the shares are Restricted Stock, a
Participant will have all rights of a shareholder with respect to Restricted
Stock, including the right to receive dividends and vote the shares; provided,
however, that (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of Restricted Stock, (ii) the Company shall
retain custody of the certificates evidencing shares of Restricted Stock, and
(iii) the Participant will deliver to the Company a stock power, endorsed in
blank, with respect to each award of Restricted Stock.
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Article X
PHANTOM STOCK
10.01 Award. Pursuant to this Plan or an Agreement establishing
additional terms and conditions, the Committee may designate employees to whom
Awards of Phantom Stock may be made and will specify the number of shares of
Common Stock covered by the Award.
10.02 Vesting. On the date of the Award, the Committee may prescribe
that the Participant's right to receive payment for Phantom Stock shall be
forfeitable or otherwise restricted in any manner in the discretion of the
Committee for such period of time set forth in the Agreement.
10.03 Shareholder Rights. A Participant for whom Phantom Stock has
been credited shall have none of the rights of a shareholder with respect to
such Phantom Stock. However, an Agreement for the use of Phantom Stock may
provide for the crediting of a Participant's Phantom Stock account with cash or
stock dividends declared with respect to Common Stock represented by such
Phantom Stock.
10.04 Payment. At the Committee's discretion, the amount payable to
a Participant for Phantom Stock credited to his or her account shall be made in
cash, Common Stock or a combination of cash and Common Stock.
10.05 Transferability of Phantom Stock. Phantom Stock may be
transferable by a Participant, but only to the extent specifically provided in
the Agreement. No right or interest of a Participant in any Phantom Stock shall
be subject to any lien, obligation or liability of such Participant.
Article XI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
Should the Company effect one or more (x) stock dividends, stock
split-ups, subdivisions or consolidations of shares or other similar changes in
capitalization; (y) spin-offs, spin-outs, split-ups, split-offs, or other such
distribution of assets to shareholders; or (z) direct or indirect assumptions
and/or conversions of outstanding Options due to an acquisition of the Company,
then the maximum number of shares as to which Grants and Awards may be issued
under this Plan shall be proportionately adjusted and their terms shall be
adjusted as the Committee shall determine to be equitably required, provided
that the number of shares subject to any Grant or Award shall always be a whole
number. Any determination made under this Article XI by the Committee shall be
final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to any
Grant or Award.
Article XII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Grant shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company may rely on an opinion of its
counsel as to such compliance. Any share certificate issued to evidence Common
Stock for which a Grant is exercised or an Award is issued may bear such legends
and statements as the Committee may deem advisable to assure compliance with
federal and state laws and regulations. No Grant shall be exercisable, no Common
Stock shall be issued, no certificate for shares shall be delivered, and no
payment shall be made under this Plan until the
B-8
Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.
Article XIII
GENERAL PROVISIONS
13.01 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
13.02 Unfunded Plan. The Plan, insofar as it provides for a Grant or
an Award of Phantom Stock, is not required to be funded, and the Company shall
not be required to segregate any assets that may at any time be represented by a
Grant or an Award of Phantom Stock under this Plan.
13.03 Change of Control. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control:
(a) Unless otherwise provided by the Committee in an
Agreement, any outstanding Option or SAR (including any limited SAR) or Phantom
Stock which is not presently exercisable and vested as of a Change of Control
Date shall become fully exercisable and vested to the full extent of the
original Grant upon such Change of Control Date.
(b) Unless otherwise provided by the Committee in an
Agreement, the restrictions applicable to any outstanding Restricted Stock shall
lapse, and such Restricted Stock shall become free of all restrictions and
become fully vested, nonforfeitable and transferable to the full extent of the
original Award. The Committee may also provide in an Agreement that a
Participant may elect, by written notice to the Company within 60 days after a
Change of Control Date, to receive, in exchange for shares that were Restricted
Stock immediately before the Change of Control Date, a cash payment equal to the
Fair Market Value of the shares surrendered on the last business day the Common
Stock is traded on the New York Stock Exchange prior to receipt by the Company
of such written notice.
(c) The Committee may, in its complete discretion, cause the
acceleration or release of any and all restrictions or conditions related to a
Grant or Award, in such manner, in the case of officers and directors of the
Company who are subject to Section 16(b) of the Exchange Act, as to conform to
the provisions of Rule 16b-3.
13.04 Rules of Construction. Headings are given to the articles and
sections of this Plan solely for ease of reference and are not to be considered
in construing the terms and conditions of the Plan. The reference to any
statute, regulation, or other provision of law shall be construed to refer to
any amendment to or successor of such provision of law.
13.05 Rule 16b-3 Requirements. Notwithstanding any other provisions
of the Plan, the Committee may impose such conditions on any Grant or Award, and
the Board may amend the Plan in any such respects, as they may determine, on the
advice of counsel, are necessary or desirable to satisfy the provisions of Rule
16b-3. Any provision of the Plan to the contrary notwithstanding, and except to
the extent that the Committee determines otherwise: (a) transactions by and with
respect to officers and directors of the Company who are subject to Section
16(b) of the Exchange Act shall comply with any applicable conditions of Rule
16b-3; and (b) every provision of the Plan shall be administered, interpreted
and construed to carry out the foregoing provisions of this sentence.
13.06 Amendment, Modification and Termination. At any time and from
time to time, the Board may terminate, amend or modify the Plan. Such amendment
or modification may be without shareholder approval except to the extent that
such approval is required by the Code, pursuant to the rules under Section 16 of
the Exchange Act, by any national securities exchange or system on which the
Common Stock is then listed or reported, by any regulatory body having
jurisdiction with respect thereto or under any other applicable laws, rules, or
regulations. No termination, amendment, or modification of the Plan, other than
pursuant to Section 13.05 herein,
B-9
shall in any manner adversely affect any Grant or Award theretofore issued under
the Plan, without the written consent of the Participant. The Committee may
amend the terms of any Grant or Award theretofore issued under this Plan,
prospectively or retrospectively, but no such amendment shall impair the rights
of any Participant without the Participant's written consent except an amendment
provided for or contemplated in the terms of the Grant or Award, an amendment
made to cause the Plan, or Grant or Award, to qualify for the exemption provided
by Rule 16b-3, or an amendment to make an adjustment under Article XI. Except as
provided in Article XI, the Option Price of any outstanding Option may not be
adjusted or amended, whether through amendment, cancellation or replacement,
unless such adjustment or amendment is approved by the shareholders of the
Company.
13.07 Governing Law. The validity, construction and effect of the
Plan and any actions taken or related to the Plan shall be determined in
accordance with the laws of the Commonwealth of Virginia and applicable federal
law.
13.08 Successors and Assigns. All obligations of the Company under
the Plan, with respect to Grants and Awards issued hereunder, shall be binding
on any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business and/or assets of the Company. The Plan
shall be binding on all successors and permitted assigns of a Participant,
including, but not limited to, the estate of such Participant and the executor,
administrator or trustee of such estate, and the guardians or legal
representative of the Participant.
13.09 Effect on Prior Plan and Other Compensation Arrangements. The
adoption of this Plan shall have no effect on Grants and Awards made pursuant to
the Prior Plan and the Company's other compensation arrangements. Nothing
contained in this Plan shall prevent the Company from adopting other or
additional compensation plans or arrangements for its officers, directors or
employees.
13.10 Duration of Plan. No Grant or Award may be made under this
Plan after May 31, 2010.
13.11 Grants Prior to Effective Date. Options may be granted under
this Plan, upon its adoption by the Board, provided that no Option will be
effective unless and until this Plan is approved by the holders of a majority of
the shares of the Company's outstanding voting stock present in person, or
represented by proxy, and entitled to vote at a duly held meeting of the
shareholders. No Option granted prior to the Effective Date may be exercised
before the requisite shareholder approval is obtained.
B-10
[FORM OF PROXY AND VOTING INSTRUCTION]
PROXY
HILB, ROGAL AND HAMILTON COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
The shareholder shown on the reverse side hereby appoints Timothy J. Korman and
Walter L. Smith, and each or either of them, proxy for said shareholder, with
power of substitution, to vote all the shares of Common Stock of Hilb, Rogal and
Hamilton Company held of record by said shareholder as of March 14, 2003 at the
Annual Meeting of Shareholders of Hilb, Rogal and Hamilton Company to be held at
The Jefferson Hotel, 101 West Franklin Street, Richmond, Virginia, on May 6,
2003, at 10:00 a.m. eastern time, and at any adjournments or postponements
thereof, upon the matters designated on the reverse side, as more fully set
forth in the Proxy Statement, and for the transaction of such other business as
may properly come before the meeting and any adjournments or postponements
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2 AND 3.
(Continued on reverse side)
Please fold and detach card at perforation before mailing.
-------------------------------------------------------------------------
-----------------------------------------
HILB, ROGAL AND HAMILTON COMPANY Please mark your votes as
----------------------------------------- indicated in this example |X|
COMMON STOCK
ITEM 1. ELECTION OF DIRECTORS
Nominees: Please disregard if you have previously
FOR all nominees WITHHOLD (01) Robert W. Fiondella provided your consent decision.
listed at right AUTHORITY to (02) Thomas A. Golub
except as marked to vote for all (03) Robert H. Hilb By checking the box to the right, |_|
the contrary nominees (04) Julious P. Smith, Jr. I consent to future delivery of annual
listed at right (05) Martin L. Vaughan, III reports, proxy statements, prospectuses
and other materials and shareholder
|_| |_| INSTRUCTIONS: To withhold communications electronically via the
authority to vote for any Internet at a webpage which will be
individual nominee, write each disclosed to me. I understand the
such nominee's name in the Company may no longer distribute
following space: printed materials to me from any
future shareholder meeting until such
consent is revoked. I understand that I
------------------------------ may revoke my consent at any time by
contacting the Company's transfer agent,
ITEM 2. APPROVAL OF AMENDED AND RESTATED Mellon Investor Services LLC, Ridgefield
ARTICLES OF INCORPORATION Park, NJ and that costs normally
associated with electronic delivery,
such as usage and telephone charges as
FOR AGAINST ABSTAIN well as any costs I may incur in
|_| |_| |_| printing documents, will be my
responsibility.
ITEM 3. APPROVAL OF AMENDMENT AND RESTATEMENT OF 2000 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
CONTROL NUMBER:
RECORD DATE
SHARES:
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature(s) Signature(s) Date
---------------------------- -------------------------- -------------------------------
Please sign exactly as name appears. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title of such. If a corporation,
please sign in corporation's name by President or other authorized officer. If a partnership, please sign in
partnership's name by authorized person.
----------------------------------------------------------------------------------------------------------------------
Please fold and detach card at perforation before mailing.
[Internet and Telephone Voting Instructions]
VOTING INSTRUCTION
HILB, ROGAL AND HAMILTON COMPANY
TO TRUSTEE, HRH RETIREMENT SAVINGS PLAN
This Voting Instruction is Solicited on Behalf of the Board of Directors
Pursuant to Section 12.9 of the HRH Retirement Savings Plan of Hilb, Rogal and
Hamilton Company, you are directed to vote, in person or by proxy, the whole
shares of Common Stock of Hilb, Rogal and Hamilton Company credited to the
undersigned Participant's Account as of March 14, 2003 at the Annual Meeting of
Shareholders of Hilb, Rogal and Hamilton Company to be held at The Jefferson
Hotel, 101 West Franklin Street, Richmond, Virginia, on May 6, 2003, at 10:00
a.m. eastern time, and at any adjournments or postponements thereof, upon the
matters designated on the reverse side, as more fully set forth in the Proxy
Statement, and for the transaction of such other business as may properly come
before the meeting and any adjournments or postponements thereof.
THIS VOTING INSTRUCTION, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED ON THE REVERSE SIDE BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS
MADE, OR IF A VOTING INSTRUCTION IS NOT PROPERLY EXECUTED AND RECEIVED BY THE
TRUSTEE, THE SHARES OF HILB, ROGAL AND HAMILTON COMPANY COMMON STOCK CREDITED TO
YOUR ACCOUNT WILL BE VOTED IN THE SAME PROPORTION AS THOSE SHARES FOR WHICH THE
TRUSTEE HAS RECEIVED PROPER VOTING INSTRUCTIONS.
(Continued on reverse side)
Please fold and detach card at perforation before mailing.
-----------------------------------------------------------------------
-----------------------------------------
HILB, ROGAL AND HAMILTON COMPANY Please mark your votes as
----------------------------------------- indicated in this example |X|
TO TRUSTEE, HRH RETIREMENT SAVINGS PLAN
This Voting Instruction, when properly executed, will be voted in the manner
directed by the undersigned shareholder.
ITEM 1. ELECTION OF DIRECTORS
Nominees:
FOR all nominees listed at right WITHHOLD AUTHORITY to vote for all (01) Robert W. Fiondella
except as marked to the contrary nominees listed at right (02) Thomas A. Golub
(03) Robert H. Hilb
|_| |_| (04) Julious P. Smith, Jr.
(05) Martin L. Vaughan, III
INSTRUCTIONS: To withhold authority to
vote for any individual nominee, write
each such nominee's name in the
following space:
---------------------------------------
ITEM 2. APPROVAL OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
FOR AGAINST ABSTAIN
|_| |_| |_|
ITEM 3. APPROVAL OF AMENDMENT AND RESTATEMENT OF 2000 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN
|_| |_| |_|
RECORD DATE SHARES:
PLEASE MARK, SIGN, DATE AND RETURN THE VOTING INSTRUCTION PROMPTLY USING THE ENCLOSED ENVELOPE. PLEASE SIGN EXACTLY
AS NAME APPEARS.
Signature(s) Date
---------------------------------------------- --------------------
[Internet and Telephone Voting Instructions]