UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HILB, ROGAL AND HAMILTON COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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Notes:
[LOGO OF HRH]
March 30, 2001
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, May 1, 2001, at 10:00 a.m. at The Jefferson Hotel, 101 W. Franklin
Street, Richmond, Virginia. At the meeting you will be asked to elect four
directors to the class of directors whose term of office expires in 2004. 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,
/s/ Andrew L. Rogal
Andrew L. Rogal
Chairman and Chief Executive Officer
HILB, ROGAL AND HAMILTON COMPANY
4235 Innslake Drive
P. O. Box 1220
Glen Allen, Virginia 23060-1220
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 2001
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The Annual Meeting of Shareholders of Hilb, Rogal and Hamilton Company (the
Company) will be held on Tuesday, May 1, 2001, 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 2004; and
2. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 16, 2001, the
record date fixed by the Board of Directors of the Company, are entitled to
notice of, and to vote at, the meeting.
By Order of The Board of Directors
/s/ Walter L. Smith
Walter L. Smith
Vice President, General Counsel and
Corporate Secretary
March 30, 2001
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 1, 2001, and any duly
reconvened meeting after adjournment thereof (the Meeting). Any shareholder
who executes a proxy has the power to revoke it at any time by written notice
to the Secretary of the Company, by executing a proxy dated as of a later date
or by voting in person at the Meeting. It is expected that this proxy
statement and the enclosed proxy card will be mailed on or about March 30,
2001, 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 16, 2001, the date for determining shareholders
entitled to notice of, and to vote at, the Meeting, there were 13,473,290
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.
1
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2001, 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
Robert B. Lockhart (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 or group.
Beneficial Ownership
------------------------- Deferred
Number of Stock
Common Exercisable Units
Name Shares (1)(2) Options (3) (4)
- ---- ------------- ----------- --------
Theodore L. Chandler, Jr....................... 12,370 27,000 5,588
Norwood H. Davis, Jr........................... 10,000 23,000 266
Robert W. Fiondella (5)........................ 5,000 10,000 2,212
J. S. M. French................................ 43,900 27,000 4,639
Robert H. Hilb................................. 115,300 15,000 5,555
Timothy J. Korman.............................. 55,518 46,000 0
Robert B. Lockhart............................. 12,570 2,875 4,478
Anthony F. Markel.............................. 7,000 15,000 4,390
John P. McGrath................................ 26,339 44,500 0
Thomas H. O'Brien (6).......................... 14,642 27,000 0
Andrew L. Rogal................................ 94,189 94,000 0
David W. Searfoss (5).......................... 1,000 10,000 2,320
Robert S. Ukrop................................ 20,648 27,000 4,418
Martin L. Vaughan, III......................... 147,058 3,000 6,905
------- ------- ------
All directors and executive officers as a group
(24 persons, including those named above)..... 697,179 556,000 47,337
- --------
(1) The number of shares of Common Stock shown in the table includes 51,080
shares held for certain executive officers in the Company's Retirement
Savings Plan as of March 1, 2001 and 99,200 shares of Restricted Stock
granted to executive officers pursuant to the Company's 1989 Stock Plan
and 2000 Stock Incentive Plan. The number of shares also includes 100,061
shares of Common Stock held by immediate family members, 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, 2001, the Company had 13,469,290 shares of Common Stock issued
and outstanding. Each of the individuals listed in the table is the
beneficial owner of less than 1% of the issued and outstanding shares on
that date, except for Andrew L. Rogal and Martin L. Vaughan, III, who
beneficially owned 1.39% and 1.11%, respectively, 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 8.94% of the Common Stock issued and
outstanding on that date.
(3) The number of shares indicated includes shares which may be acquired
through the exercise of stock options within sixty days after March 1,
2001, pursuant to the Company's 1986 Incentive Stock Option Plan, 1989
Stock Plan, 2000 Stock Incentive Plan and Nonemployee Directors Stock
Incentive Plan.
(4) The amounts reported in this column are Deferred Stock Units held by (i)
nonemployee 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, 2001. 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 cash.
(5) The number of shares listed does not include 865,042 shares of Common
Stock owned by Phoenix Home Life Mutual Insurance Company (Phoenix Home
Life) and debentures owned by Phoenix Home Life which
2
are convertible into 1,406,593 shares of Common Stock at $22.75 per share,
beneficial ownership of each of which is disclaimed by Messrs. Fiondella
and Searfoss.
(6) Includes 249 shares of Common Stock for Mr. O'Brien earned pursuant to the
Nonemployee Directors Stock Incentive Plan as of March 1, 2001, to be
issued on March 31, 2001.
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
5% 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)
- ------------------------------------ --------- ----------
Southeastern Asset Management, Inc. (2)................... 1,913,900 14.21%
Longleaf Partners Small-Cap Fund
O. Mason Hawkins
6410 Poplar Avenue
Suite 900
Memphis, Tennessee 38119
Phoenix Home Life Mutual Insurance Company (3)............ 2,271,635 (3)
1 American Row
Hartford, Connecticut 06103
Investors Group Inc. (4).................................. 1,107,000 8.22%
Investors Group Trustco Inc.
Investors Group Trust Co. Ltd.
I. G. Investment Management, Ltd.
Investors U.S. Opportunities Fund
Investors U.S. Growth Fund
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba R3C 3B6
FMR Corp. (5)............................................. 736,750 5.47%
Edward C. Johnson III
Abigail P. Johnson
Fidelity Management & Research Company
Fidelity Management Trust Company
82 Devonshire Street
Boston, Massachusetts 02109
Capital Research and Management Company (6)............... 675,000 5.01%
333 South Hope Street
Los Angeles, California 90071
- --------
(1) Based on 13,469,290 shares of Common Stock issued and outstanding on March
1, 2001.
(2) Southeastern Asset Management, Inc. (Southeastern), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
Longleaf Partners Small-Cap Fund (Longleaf), an investment company
registered under Section 8 of the Investment Company Act of 1940, and O.
Mason Hawkins (Hawkins) filed a joint Schedule 13G/A with the Commission
reporting beneficial ownership as of
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December 31, 2000 of 1,913,900 shares of Common Stock, which are held in
various capacities. Southeastern reported that it had sole voting and
disposition authority as to 254,600 shares and shared voting and
disposition authority as to 1,659,300 shares, owned by Longleaf, a series
of Longleaf Partners Funds Trust. Hawkins may be deemed to be a
controlling person of Southeastern as a result of his official positions
with or ownership of its voting securities; however, the existence of such
control is expressly disclaimed as Hawkins does not own directly or
indirectly any shares for his own account.
(3) Phoenix Home Life filed a Form 3 for May 1999 reporting that as of May 3,
1999, it had sole voting and dispositive power as to 865,042 shares of
Common Stock, which represents 6.42% of the Common Stock issued and
outstanding as of March 1, 2001. Additionally, Phoenix Home Life holds
$32,000,000 of subordinated debentures convertible into 1,406,593 shares
of Common Stock at a price of $22.75 per share. If the debentures were
converted as of March 1, 2001, Phoenix Home Life would own 2,271,635
shares of Common Stock representing 15.27% of the issued and outstanding
Common Stock.
(4) Investors Group, Inc. filed a joint Schedule 13G/A with the Commission on
February 14, 2001 reporting that as of February 13, 2001 it had shared
voting and dispositive power as to 1,107,000 shares of Common Stock, of
which 206,000 shares were held in its Investors U.S. Opportunities Fund
and 901,000 shares were held in its Investors U. S. Growth Fund
(collectively, the Funds). According to the Schedule 13G/A, the Funds are
open-end mutual fund trusts managed by I.G. Investment Management, Ltd.
Investors Group Trust Co. Ltd. serves as trustee of the Funds. Investors
Group, Inc. and Investors Group Trustco Inc. are holding companies.
(5) In a Schedule 13G filed with the Commission on February 13, 2001, FMR
Corp. reported that its wholly owned subsidiary, Fidelity Management &
Research Company (Fidelity Management), an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, was the
beneficial owner of 319,730 shares of the Company's Common Stock as a
result of acting as investment advisor to various investment companies
(Fidelity Funds), and that its wholly owned subsidiary, Fidelity
Management Trust Company (Fidelity Trust), was the beneficial owner of
417,020 shares of the Company's Common Stock as a result of serving as
investment manager of certain institutional accounts. FMR Corp. and Edward
C. Johnson, III, through their control of Fidelity Management, have
disposition authority over the 319,730 shares held by the Fidelity Funds;
however, the Board of Trustees of the Fidelity Funds have sole voting
authority with respect to shares held by such Funds. FMR Corp. and Edward
C. Johnson, III, through their control of Fidelity Trust, have voting and
disposition authority over the 417,020 shares owned by its institutional
accounts.
(6) Capital Research and Management Company (Capital), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, filed
a Schedule 13G with the Commission on February 12, 2001 reporting that it
was the beneficial owner of 675,000 shares of the Company's Common Stock
as a result of acting as investment advisor to various investment
companies registered under Section 8 of the Investment Company Act of
1940. Capital reported that it had no voting authority and sole
disposition authority with respect to the 675,000 shares of Common Stock.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
Four (4) directors are to be elected at the Meeting to serve for terms of
three (3) years expiring on the date of the Annual Meeting in 2004 and until
their successors are elected.
It is intended that votes represented by proxies, unless otherwise
specified, will be cast for the election as directors of the nominees listed
below, all of whom are now directors of the Company. The election of each
nominee for director requires 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.
The following information is furnished with respect to each nominee and
each director whose term of office will continue after the Meeting.
Nominees for Election for Terms Expiring in 2004
J.S.M. French, 60, has been President of Dunn Investment Company, a
construction materials and construction investment company in Birmingham,
Alabama, since 1978 and has been a director of the Company since 1984. He is a
director of Regions Financial Corporation, Energen Corporation and Protective
Life Corporation. Mr. French is a member of the Audit Committee.
Anthony F. Markel, 59, 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 March 1992 and has
been a director of the Company since 1998. He is a director of Markel
Corporation and Open Plan Systems, Inc. Mr. Markel is a member of the Audit
Committee, Executive Committee and the Product Development Committee.
David W. Searfoss, 49, has been Executive Vice President and Chief
Financial Officer of Phoenix Home Life, a company providing insurance services
throughout the Northeast, since 1988 and has been a director of the Company
since 1999. He is a director of PXRE Group, Ltd. Mr. Searfoss is a member of
the Audit Committee.
Robert S. Ukrop, 54, 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 and has been a
director of the Company since 1989. He is a first cousin of Timothy J. Korman,
Executive Vice President, Finance and Administration of the Company. Mr. Ukrop
is Chairman of the Corporate Affairs Committee.
The Board of Directors recommends that the shareholders vote FOR the
nominees set forth above.
Incumbent Directors Whose Terms Expire at the 2002 Annual Meeting
Theodore L. Chandler, Jr., 48, has been Senior Executive Vice President of
LandAmerica Financial Group, Inc., a company providing title insurance and
related services through its underwriting and other subsidiaries, since
January 2000. He had been a principal in the law firm of Williams, Mullen,
Clark & Dobbins in Richmond, Virginia from 1982 to January 2000 and has been a
director of the Company since 1986. Williams, Mullen,
5
Clark & Dobbins has represented the Company as legal counsel since the
Company's formation in 1982. Mr. Chandler is a director of LandAmerica
Financial Group, Inc. and Open Plan Systems, Inc. Mr. Chandler is Chairman of
the Audit and Corporate Governance Committees and a member of the Compensation
Committee, Corporate Affairs Committee and the Executive Committee.
Norwood H. Davis, Jr., 61, has been Chairman of the Board of Trigon
Healthcare, Inc., a company providing health care coverage and specialty
health services in Virginia, since 1989, was Chief Executive Officer from 1981
to 1999 and has been a director of the Company since 1994. Mr. Davis is a
director of Trigon Healthcare, Inc. and First Union Corporation. Mr. Davis is
a member of the Compensation Committee, Corporate Governance Committee,
Executive Committee and Product Development Committee.
Timothy J. Korman, 48, has been Executive Vice President, Finance and
Administration of the Company since 1997 and a director of the Company since
1999. He was Executive Vice President, Chief Financial Officer and Treasurer
of the Company from 1995 to 1997. Mr. Korman is a member of the Corporate
Affairs Committee.
Thomas H. O'Brien, 64, has been Chairman and Chief Executive Officer of The
PNC Financial Services Group, Inc., a multi-bank holding company engaged in
financial services activities in Pittsburgh, Pennsylvania, since 1985 and has
been a director of the Company since 1982. He has been Chairman of PNC Bank,
N.A., a national banking institution in Pittsburgh, Pennsylvania, since 1993.
He is a director of Bell Atlantic Corporation and The PNC Financial Services
Group, Inc. Mr. O'Brien is Chairman of the Compensation Committee and a member
of the Executive Committee and Corporate Governance Committee.
Incumbent Directors Whose Terms Expire at the 2003 Annual Meeting
Robert W. Fiondella, 58, has been Chairman of the Board and Chief Executive
Officer of Phoenix Home Life since February 2001 and was Chairman of the
Board, President and Chief Executive Officer from February 1994 until February
2001 and has been a director of the Company since June 1999. Mr. Fiondella is
the President of PM Holdings, Inc. (Holdings) and is also a member of the
Board of Directors of several of Phoenix Home Life's subsidiaries, including
Holdings and Phoenix Charter Oak Trust Company. Mr. Fiondella is also a member
of the Boards of Directors of PXRE, PXRE Reinsurance, Advest Group, Inc. and
Barnes Group. Mr. Fiondella is Chairman of the Product Development Committee
and a member of the Corporate Affairs Committee.
Robert H. Hilb, 73, has been Chairman Emeritus since January 2000. He was
Chairman of the Company from 1991 until December 1999 and has been a director
of the Company since 1982. He was Chief Executive Officer of the Company from
1991 to May 1997. Mr. Hilb is a member of the Executive Committee, Corporate
Governance Committee and Compensation Committee.
Andrew L. Rogal, 52, has been Chairman since January 2000 and Chief
Executive Officer since May 1997. He was President of the Company from 1995
until December 1999 and has been a director of the Company since 1989. He was
Chief Operating Officer of the Company from 1995 to May 1997. Mr. Rogal is
Chairman of the Executive Committee.
Martin L. Vaughan, III, 54, has been President of the Company since January
2000. He has been Chief Operating Officer and a director of the Company since
June 1999. He was President and Chief Executive Officer of American Phoenix
Corporation from 1990 to 1999. Mr. Vaughan is a member of the Product
Development Committee.
Certain Nomination and Voting Arrangements
On May 3, 1999, the Company acquired from Holdings and Martin L. Vaughan,
III (Vaughan) all of the issued and outstanding shares of the capital stock of
American Phoenix Corporation (APC), resulting in APC becoming a wholly owned
subsidiary of the Company. In connection with the acquisition, the Company,
Holdings and Holdings' parent, Phoenix Home Life, entered into a Voting and
Standstill Agreement (the Voting Agreement). The Voting Agreement provided,
among other things, that (i) in connection with the 2000 Annual
6
Meeting, the Company would nominate and recommend for election two directors,
Vaughan and a person designated by the Company, and (ii) commencing with the
2000 Annual Meeting and continuing during the term of the Voting Agreement,
the Company would nominate and recommend for election two additional
directors, Robert W. Fiondella and a person designated by Holdings, to serve
on the Board of Directors of the Company. Timothy J. Korman and David W.
Searfoss were the designees of the Company and Holdings, respectively. The
Voting Agreement requires the Holdings designee to resign from the Board of
Directors once Holdings' ownership percentage of the Company's adjusted
outstanding shares of Common Stock (as defined in the Voting Agreement) is
reduced to less than 10%.
Pursuant to the Voting Agreement, Phoenix Home Life and Holdings have
agreed to vote the shares of Common Stock owned by them or their affiliates in
accordance with the recommendation of the Board of Directors on matters
relating to (i) the election of directors nominated by the Board of Directors
or a nominating committee thereof, (ii) certain tender or exchange offers,
election contests and other attempts to acquire control of the Company or the
Board of Directors and (iii) for a period of five years, business combination
and similar transactions for which shareholder approval is sought. Unless
terminated earlier by written agreement of the parties, the Voting Agreement
will remain in effect until May 3, 2009.
Meetings and Committees of the Board of Directors
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Compensation Committee, the Corporate
Affairs Committee, the Product Development Committee and the Corporate
Governance Committee. The Executive Committee, which is subject to the
supervision and control of the Board of Directors, has been delegated
substantially all of the powers of the Board of Directors in order for the
Executive Committee to act between meetings of the Board. The responsibilities
of the Audit Committee include the review of the scope and the results of the
work of the independent auditors and internal auditors, the review of internal
accounting controls and the recommendation of the independent auditors to be
designated for the ensuing year. As more fully discussed below under
"Compensation Committee Report on Executive Compensation," the Compensation
Committee establishes the compensation of all executive officers of the
Company and administers the Company's stock option plans, the Outside
Directors Deferral Plan, the Executive Voluntary Deferral Plan and the
Supplemental Executive Retirement Plan. The Corporate Affairs Committee is
responsible for monitoring the Company's external relations in its
communities. The Product Development Committee is charged with investigating
and developing new product offerings for the Company's subsidiaries. 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. Refer to
"Proposals for 2002 Annual Meeting."
In 2000, there were four meetings of the Board of Directors, four meetings
of the Audit Committee, three meetings of the Compensation Committee, two
meetings of the Executive Committee, three meetings of the Corporate
Governance Committee, one meeting of the Product Development Committee, and
one meeting of the Corporate Affairs Committee. Each member of the Board of
Directors attended at least 75% of the aggregate total number of meetings of
the Board and the committees on which he served.
Directors' Compensation
Each director who is not an employee of the Company receives an annual
retainer of $14,000, a fee of $2,500 for each Board meeting attended and a fee
of $1,000 for each committee meeting attended. Additionally, the chair of
every committee receives an annual retainer of $2,000. Directors who are also
officers of the Company receive no compensation for their services as
directors.
The Company has an Amended and Restated Outside Directors Deferral Plan
(the Amended and Restated Plan) which permits a nonemployee 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 fees and meeting fees in Deferred Stock
Units. Deferred Stock Units represent a hypothetical
7
share of the Company's Common Stock and are credited to a director's account
on the date fees are earned at the closing price of the Common Stock on that
date. A participant's Deferred Stock Unit Account is increased by phantom
dividends equal to the Common Stock dividends paid by the Company. Those
directors who elect to defer 100% of their total compensation into Deferred
Stock Units for a given year shall receive additional compensation in the form
of Deferred Stock Units equal to 30% of their total compensation. Any amounts
deferred under the former Outside Directors Deferral Plan (effective January
1, 1995) will continue to be credited with interest annually at the rate of
return set forth in the Amended and Restated Plan, which is currently 9%. The
amounts accrued for the director under the former plan and the Amended and
Restated Plan are paid out in cash, in installments or in a lump sum, at the
end of the deferral period pursuant to the director's irrevocable election.
On May 5, 1998, the shareholders of the Company approved the Nonemployee
Directors Stock Incentive Plan which provides that each nonemployee director
will receive a grant of an option to purchase 5,000 shares of the Common Stock
on the first business day following the Annual Meeting of Shareholders.
Therefore, pursuant to the plan, on May 3, 2000, Theodore L. Chandler, Jr.,
Norwood H. Davis, Jr., Robert W. Fiondella, J.S.M. French, Robert H. Hilb,
Anthony F. Markel, Thomas H. O'Brien, David W. Searfoss and Robert S. Ukrop
were each granted an option to purchase 5,000 shares of the Common Stock of
the Company. The exercise price of all options granted to each nonemployee
director is the fair market value of the Common Stock on the date of grant.
All of the options become exercisable six months after the date of grant and
expire ten years from the date of grant. Also, pursuant to the Company's
Nonemployee Directors Stock Incentive Plan, directors may elect to receive
some or all of their fees in shares of the Company's Common Stock. Those
directors electing to receive 100% of their fees in Common Stock receive
additional compensation in the form of Common Stock equal to 30% of their
compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially
own more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership of Common Stock with the
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
2000, except that Robert B. Lockhart filed one late Form 4 reporting the
acquisition of 3,000 shares of Common Stock in February 2000.
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 2000.
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
8
Company's stock option plans. Finally, the Committee recommends to the Board
of Directors such other forms of remuneration as the Committee deems
appropriate. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reported to the full
Board of Directors.
The following is the text of the report adopted by the Compensation
Committee with respect to executive compensation for 2000.
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, 2000, 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 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 2000 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.
2000 Base Salaries and Annual Incentives
On June 1, 1997, the Company entered into an employment agreement with
Andrew L. Rogal to serve as Chief Executive Officer of the Company. Pursuant
to the terms of the employment agreement, Mr. Rogal's annual base salary was
fixed at $400,000, subject to an annual review by the Committee to consider
appropriate increases. In March of 2000, Mr. Rogal's base annual salary was
increased to $465,000. 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 2000, the Committee considered his
individual merit and achievement in attaining annual performance goals, the
Company's financial success and Mr. Rogal's leadership in
9
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 2000, Mr. Rogal was awarded 13,000 shares of Restricted
Stock and a Nonqualified Stock Option for 16,000 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 10, 2000,
the Committee approved the 2000 Corporate Incentive Plan for certain key
executives of the Company. The purpose of the program is to more closely align
the interests of the senior executives with the shareholders and further
strengthen the Company's pay-for-performance policy by providing a pool based
on increased earnings per share. Under the Plan, those individuals responsible
for overseeing and 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
earnings per share. On February 12, 2001, utilizing the aforementioned
factors, the Committee awarded Mr. Rogal an incentive bonus of $362,300 out of
the pool for his 2000 performance.
Tax Considerations
The Omnibus Budget Reconciliation Act of 1993 established certain criteria
for the tax deductibility of compensation in excess of $1.0 million paid to
the Company's executive officers. The Company is not in danger of losing
deductions under the law. The Committee will carefully consider any plan or
compensation arrangement that would result in the disallowance of compensation
deductions. The Committee will use its best judgment in such cases, taking all
factors into account, including the materiality of any deductions that may be
lost. To date, the Committee has not adopted a policy that dictates its
decision in such a situation.
The tables which follow this report, and accompanying narrative and
footnotes, reflect the decisions covered by the above discussion.
COMPENSATION COMMITTEE
Thomas H. O'Brien, Chairman
Theodore L. Chandler, Jr.
Norwood Davis
Robert H. Hilb
Compensation Committee Interlocks And Insider Participation
Theodore L. Chandler, Jr., a member of the Company's Compensation
Committee, was formerly a principal in the law firm of Williams, Mullen, Clark
& Dobbins, Richmond, Virginia, which serves as outside counsel to the Company.
Robert H. Hilb, a member of the Company's Compensation Committee, is the
former Chairman and Chief Executive Officer of the Company and currently holds
the position of Chairman Emeritus.
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term compensation paid
by the Company to each of the Named Executive Officers for the fiscal years
ended December 31, 2000, 1999 and 1998.
Long-Term
Compensation
Awards
-------------------------
Other Annual Restricted Securities All Other
Bonus Compensation Stock Underlying Compensation
Name and Principal Position Year Salary($) ($)(1) ($)(2) Awards ($)(3) Options (#) ($)(4)
- --------------------------- ---- --------- ------- ------------ ------------- ----------- ------------
Andrew L. Rogal............ 2000 460,832 362,300 -- 491,270 16,000 137,405
Chairman and Chief 1999 437,076 272,899 -- -- -- 134,236
Executive Officer 1998 413,126 384,000 -- -- 30,000 133,409
Martin L.
Vaughan, III (5).......... 2000 366,676 264,100 -- 343,889 12,000 17,778
President and Chief 1999 233,344 132,900 -- -- -- 10,166
Operating Officer
Timothy J. Korman.......... 2000 269,180 210,200 -- 324,994 8,000 54,667
Executive Vice President, 1999 235,208 128,700 -- -- 52,051
Finance and Administration 1998 206,563 196,300 -- 13,000 51,125
Jack P. McGrath............ 2000 317,660 210,200 -- 324,994 8,000 36,826
Senior Vice President- 1999 304,376 166,100 -- -- -- 35,995
Business and Product 1998 291,586 250,000 -- -- 12,000 37,340
Development
Robert B. Lockhart (5)..... 2000 256,668 171,300 -- 128,486 6,500 11,165
Vice President 1999 166,672 85,400 -- -- 5,000 6,840
- --------
(1) Bonuses reported in the table reflect the amount earned by the Named
Executive Officer for each year shown. Payment of such bonuses occurred in
the year following the year in which such bonuses were earned.
(2) The dollar value of perquisites and other personal benefits received by
each of the Named Executive Officers did not exceed the lesser of either
$50,000 or 10 percent of the total amount of annual salary and bonus
reported for any named individual.
(3) The 2000 amounts in this column are the dollar values, based on the $37.79
closing price of a share of Common Stock on March 1, 2000, 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, 13,000 shares; Mr. Vaughan, 9,100 shares; Mr. Korman, 8,600 shares;
Mr. McGrath, 8,600 shares; and Mr. Lockhart, 3,400 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. The number of shares of Restricted Stock held by each of the
Named Executive Officers on December 31, 2000, and the dollar value of
such shares on such date based on the $39.875 closing price of a share of
Common Stock on December 29, 2001, as reported on the New York Stock
Exchange, were as follows: Mr. Rogal, 13,000 shares, $518,375; Mr.
Vaughan, 9,100 shares, $362,863; Mr. Korman, 8,600 shares, $342,925; Mr.
McGrath, 8,600 shares, $342,925; and Mr. Lockhart, 3,400 shares, $135,575.
Dividends will be paid on the shares of Restricted Stock awarded to the
Named Executive Officers.
(4) The amount shown for each Named Executive Officer for 2000 includes (a)
the Company's profit sharing and 401(k) matching contributions as follows:
Mr. Rogal, $5,100; Mr. Vaughan, $5,100; Mr. Korman, $5,100; Mr. McGrath,
$5,100 and Mr. Lockhart, $5,100; (b) the Company's expense to the
Supplemental Executive Retirement Plan as follows: Mr. Rogal, $29,465
($9,217 contribution and $20,248 interest accrual); Mr. Vaughan, $6,383
($5,900 contribution and $483 interest accrual); Mr. Korman, $20,488
($5,384 contribution and $15,104 interest accrual); Mr. McGrath, $5,336
($4,430 contribution and $906
11
interest accrual) and Mr. Lockhart, $2,810 ($2,600 contribution and $210
interest accrual); and (c) the amount of premiums paid on term and split-
dollar life insurance as follows: Mr. Rogal, $102,840; Mr. Vaughan,
$6,295; Mr. Korman, $29,079; Mr. McGrath, $26,390 and Mr. Lockhart,
$3,255.
(5) Messrs. Vaughan and Lockhart were elected to their respective offices
shown in the table effective May 3, 1999 in connection with the
acquisition of American Phoenix Corporation. The amounts reported in the
table for Messrs. Vaughan and Lockhart for fiscal year 1999 reflect
compensation paid to them by the Company following the acquisition and
their employment by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning grants of stock options
to each of the Named Executive Officers during the fiscal year ended December
31, 2000. No stock appreciation rights (SARs) were granted during fiscal year
2000 and there are no outstanding SARs.
Individual Grants
-------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base Grant Date
Options in Fiscal Price Expiration Present
Name Granted (1) Year ($/Sh)(2) Date (3) Value ($)(4)
- ---- ----------- ---------- --------- ---------- ------------
Andrew L. Rogal......... 16,000 10.42% $28.4375 03/01/07 $129,280
Martin L. Vaughan, III.. 12,000 7.82 28.4375 03/01/07 96,960
Timothy J. Korman....... 8,000 5.21 28.4375 03/01/07 64,640
John P. McGrath......... 8,000 5.21 28.4375 03/01/07 64,640
Robert B. Lockhart...... 6,500 4.23 28.4375 03/01/07 52,520
- --------
(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.
(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 .204, a risk free interest rate of 6.63% and a
dividend yield of 2.32%. 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.
12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information concerning the value of the
outstanding options for the Named Executive Officers on December 31, 2000.
Messrs. Andrew L. Rogal and Timothy J. Korman were the only Named Executive
Officers to exercise options during 2000.
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......... 5,240 188,500 90,000 / 46,000 2,185,938 / 873,937
Martin L. Vaughan, III.. N/A N/A 0 / 12,000 0 / 137,250
Timothy J. Korman....... 3,000 47,250 44,000 / 22,000 1,070,782 / 414,782
John P. McGrath......... N/A N/A 42,500 / 21,500 1,034,063 / 403,688
Robert B. Lockhart...... N/A N/A 1,250 / 10,250 23,672 / 145,360
- --------
(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 $39.875 per share
of the Company's Common Stock on the New York Stock Exchange on December
29, 2000, the last trading day of the fiscal year, and the exercise price
of the options.
HRH RETIREMENT SAVINGS PLAN
The Company administers the HRH Retirement Savings Plan (the Retirement
Savings Plan) in which the Named Executive Officers are permitted to
participate on the same terms as other employees who meet applicable
eligibility criteria. The Retirement Savings Plan's main component is a salary
reduction provision under Section 401(k) of the Internal Revenue Code. As of
April 1, 1998, the Retirement Savings Plan was amended to provide that the
Company's matching contribution would increase from 50% of the first 4% of a
participant's salary reduction to 100% of the first 3% of a participant's
salary reduction. Therefore, as of April 1, 1998, the profit sharing component
of the Retirement Savings Plan was not expected to be used except in
exceptional circumstances. The Company matching contribution for 2000 for the
Named Executive Officers was $25,500, and for all executive officers as a
group was $72,725, under the salary reduction provision of the Retirement
Savings Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Named Executive Officers participate in the Company's Supplemental
Executive Retirement Plan (the SERP), which as of January 1, 1998, was amended
and restated to convert the plan from a defined benefit arrangement to a cash
balance arrangement, to provide a contribution to participants equal to the
Company's profit sharing and matching contributions applied to the
participants' base salary in excess of the Internal Revenue Service (the IRS)
maximum allowable salary for qualified plans, which was $170,000 for 2000. 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 2000 for each of the Named Executive Officers
were as follows: Mr. Rogal, $9,217; Mr. Vaughan, $5,900; Mr. Korman, $5,384;
Mr. McGrath, $4,430 and Mr. Lockhart, $2,600. For all
13
executive officers as a group, the 2000 contribution to the SERP was $44,607.
Additionally, interest accruals on their balances for 2000 were as follows:
Mr. Rogal, $20,248; Mr. Vaughan, $483; Mr. Korman, $15,104; Mr. McGrath, $906
and Mr. Lockhart, $210. For all executive officers as a group, interest
accruals on their balances for 2000 equaled $42,653.
EMPLOYMENT AGREEMENTS
Mr. Rogal entered into an employment agreement with the Company on June 1,
1997, for an original term of five (5) years. The agreement provides for an
annual review of his salary by the Compensation Committee of the Board of
Directors of the Company to consider appropriate increases, but in no event
shall his base annual salary of $400,000 be reduced. The agreement may be
terminated by the Company with or without proper cause; however, should the
agreement be terminated without proper cause, Mr. Rogal would be entitled to
receive compensation, annual incentive bonus and benefits until the expiration
of the five year term of employment. The annual incentive bonus would be equal
to the greater of the highest annual incentive bonus payment previously
received by Mr. Rogal during the term of the aforementioned agreement or the
sum of $100,000.
Mr. Vaughan entered into an employment agreement with the Company on May 3,
1999, for an original term of three (3) years. The agreement provides for an
annual review of his salary by the Compensation Committee of the Board of
Directors of the Company to consider appropriate increases and any incentive
bonus payments as may be determined by the Committee, but in no event shall
his base annual salary of $350,000 be reduced. The agreement may be terminated
by the Company with or without proper cause; however, should the agreement be
terminated without proper cause, Mr. Vaughan would be entitled to receive
compensation, annual incentive bonus and benefits until the expiration of the
three year term of employment.
Mr. McGrath entered into an employment agreement with the Company on July
1, 1999, for an original term of two (2) years, subject to the review of the
Board of Directors, at a base annual salary of $306,000, which cannot be
reduced. The agreement may be terminated by the Company with or without proper
cause; however, should the agreement be terminated without proper cause, Mr.
McGrath would be entitled to receive compensation, annual incentive bonus and
benefits until the expiration of the two year term of employment. The annual
incentive bonus would be equal to the greater of the highest annual incentive
bonus payment previously received by Mr. McGrath during the term of the
aforementioned agreement or 50% of his base salary.
Messrs. Lockhart and Korman are each employed under standard employment
agreements. All such agreements may be terminated for cause and may be
terminated without cause on notice of 90 days or less. In no case would any of
the foregoing individuals be entitled to compensation greater than 90 days of
base salary and any pro-rated portion of any applicable incentive.
All of the employment agreements contain restrictive covenants relating to
the protection of confidential information and clients of the Company.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
To ensure continuity and the continued dedication of key executives during
any period of uncertainty caused by the threat or occurrence of a takeover,
the Company has entered into change of control employment agreements with its
executive officers, including each of the Named Executive Officers named in
the Summary Compensation Table.
In the event there is a change of control of the Company, the executive
will be employed for a period of three years after the change of control. If
the employment of the executive terminates at any time during the three year
period following a change of control for any reason other than death, cause or
the executive's election, the executive will receive an agreed upon amount of
severance pay equal to two to three times such executive's
14
highest applicable annual salary and bonus. Additionally, the executive would
be eligible to receive benefits substantially equivalent to those which would
have been received under the Company's qualified and non-qualified plans. The
change of control employment agreements provide that any excise taxes shall be
paid by the Company, as well as any legal expenses of the executive. If an
executive elects to terminate his employment in the first year after the
change of control, but without any deemed breach by the Company or its
successor, the executive shall be entitled to severance equal to one-half to
one times the executive's highest applicable annual salary and bonus.
Mr. Rogal, Mr. Vaughan and Mr. Korman each have a change of control
employment agreement which provides for a three times severance formula
(except for death or cause) and a one-time severance formula for a voluntary
termination in the first year after the change of control. The change of
control agreements for the other Named Executive Officers provide for a two
times and a one-half times severance formula.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 3, 1999, the Company issued to Holdings and Phoenix Home Life
$32,000,000 in aggregate principal amount of the Company's 5.25% Convertible
Subordinated Debentures Due 2014 (Debentures) in connection with the Company's
acquisition of APC from Holdings and Vaughan. Two directors of the Company,
Robert W. Fiondella and David W. Searfoss, are executive officers of Phoenix
Home Life and Mr. Fiondella is an executive officer of Holdings. Immediately
after the Company's acquisition of APC, Holdings distributed all of its
consideration received, including the Debentures, to Phoenix Home Life. The
aggregate amount of the Company's indebtedness to Phoenix Home Life
represented approximately 8.1% of the Company's total consolidated assets as
of December 31, 2000.
Effective as of January 1, 1996, Richard F. Galardini, formerly Vice
President and National Director, Employee Benefits for the Company, sold an
interest in a certain employee benefits business to the Company's Pittsburgh
office. Pursuant to the terms of such agreement, for each of the calendar
years 1996 through 2000, Mr. Galardini would receive the lesser of 10% of the
revenues realized or $150,000. Additionally, Mr. Galardini could, subject to
certain conditions, receive the same amounts for each of the calendar years
2001 through 2005. For 2000, Mr. Galardini received the maximum payment of
$150,000.
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, Arthur J. Gallagher & Co., Brown & Brown,
Inc., Marsh & McLennan Cos., Inc., and Aon Corporation, over the five year
period ended December 31, 2000. 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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILB, ROGAL AND HAMILTON COMPANY, S&P 500
& PEER GROUP INDEX
[GRAPH]
ASSUMES $100 INVESTED ON DECEMBER 31, 1995 IN HILB, ROGAL AND HAMILTON
COMPANY COMMON STOCK, S&P 500 INDEX AND PEER GROUP INDEX.
Source: Standard & Poor's Compustat Services, Inc.
Hilb, Rogal and
Hamilton Company S&P 500 Index Peer Group
1995 100 100 100
1996 103.57 122.96 122.06
1997 156.61 163.98 177.71
1998 166.91 210.85 196.52
1999 244.26 255.21 285.23
2000 351.48 231.98 336.64
AUDIT INFORMATION
The Board of Directors has adopted a written charter for the Audit
Committee that is set forth in Exhibit A to this Proxy Statement. The four
members of the Audit Committee are independent as that term is defined in the
listing standards of the New York Stock Exchange.
Fees of Independent Public Accountants
Audit Fees
The aggregate amount of fees billed or expected to be billed to the Company
by Ernst & Young LLP for professional services rendered in connection with the
audit of the Company's annual financial statements for the fiscal year ended
December 31, 2000, and for the review of the Company's interim financial
statements included in the Company's quarterly reports on Form 10-Q for that
fiscal year, is $164,000.
16
Financial Information System Design and Implementation Fees
There were no professional services rendered to the Company by Ernst &
Young LLP for the design and implementation of financial information systems
for the fiscal year ended December 31, 2000.
All Other Fees
The aggregate amount of fees billed to the Company by Ernst & Young LLP for
all other non-audit services rendered to the Company for the fiscal year ended
December 31, 2000 was $191,000, including audit-related services of $91,000
and non-audit services of $100,000. Audit-related services generally include
fees for pension and statutory audits, business acquisitions, accounting
consultations, internal audits and SEC registration statements.
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, 2001. 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.
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 information technology services and other 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, 2000, 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
Anthony F. Markel
David W. Searfoss
J.S.M. French
17
PROPOSALS FOR 2002 ANNUAL MEETING
Under the regulations of the Commission, any shareholder desiring to make a
proposal to be acted upon at the 2002 Annual Meeting of Shareholders must
cause such proposal to be delivered, in proper form, to the Corporate
Secretary of the Company, whose address is 4235 Innslake Drive, P.O. Box 1220,
Glen Allen, Virginia 23060-1220, no later than November 30, 2001, 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 2002
Annual Meeting of Shareholders on May 7, 2002.
The Company's Bylaws also prescribe the procedure a shareholder must follow
to nominate directors or to bring other business before shareholders'
meetings. For a shareholder to nominate a candidate for director or to bring
other business before a meeting, notice must be received by the Corporate
Secretary of the Company not less than 60 days and not more than 90 days prior
to the date of the meeting. Based on an anticipated date of May 7, 2002 for
the 2002 Annual Meeting of Shareholders, the Company must receive such notice
no later than March 8, 2002, and no earlier than February 7, 2002. Notice of a
nomination for director must describe various matters regarding the nominee
and the shareholder giving notice. Notice of other business to be brought
before the meeting must include a description of the proposed business, the
reasons therefor and other specified matters. Any shareholder may obtain a
copy of the Company's Bylaws, without charge, upon written request to the
Corporate Secretary of the Company.
ANNUAL REPORTS
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 2000, 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 2000 filed with the Commission, excluding
exhibits, can be obtained without charge by writing to the Corporate
Secretary, 4235 Innslake Drive, P.O. Box 1220, Glen Allen, Virginia 23060-
1220.
18
EXHIBIT A
Hilb, Rogal and Hamilton Company
Audit Committee Charter
Organization
The audit committee of the board of directors shall be comprised of at
least three directors who are independent of management and the Company.
Members of the audit committee shall be considered independent if they have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company. All audit committee members will
be financially literate, and at least one member will have accounting or
related financial management expertise.
Statement of Policy
The board of directors has delegated to the audit committee the
responsibility for the oversight of the control environment of the Company
including corporate accounting, reporting practices of the Company, and the
quality and integrity of financial reports of the Company. In so doing, it is
the responsibility of the audit committee to maintain free and open
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the company. The audit committee
believes its policies and procedures should remain flexible, in order to best
react to changing conditions.
Responsibilities
In carrying out its responsibilities, the audit committee will:
. Recommend to the full board of directors the adoption of an Audit
Committee Charter and review and reassess the Charter as conditions
dictate (at least annually).
. Review and recommend to the directors the independent auditors to be
selected to audit the consolidated financial statements of the company
and its subsidiaries.
. Have a clear understanding with the independent auditors that they are
ultimately accountable to the board of directors and the audit
committee, who have the ultimate authority in deciding to engage,
evaluate, and if appropriate, terminate their services.
. Review and concur with management's appointment, termination, or
replacement of the director of internal audit.
. Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
adequacy of the independent auditor's compensation, and at the
conclusion thereof review such audit or review, including any comments
or recommendations of the independent auditors.
. Review with the independent auditors, the Company's director of internal
audit, and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the company,
and elicit any recommendations for the improvement of such internal
controls or particular areas where new or more detailed controls or
procedures are desirable. Particular emphasis should be given to the
adequacy of internal controls to expose any payments, transactions, or
procedures that might be deemed illegal or otherwise improper.
. Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related company compliance policies.
. Review the internal audit function of the Company including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year, and the coordination of such plans with
the independent auditors.
A-1
. Inquire of management, the internal auditor, and the independent
auditors about significant risks or exposures and assess the steps
management has taken to minimize such risks to the Company.
. Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan.
. Review the quarterly financial statements with financial management and
the independent auditors prior to the filing of the Form 10-Q and
discuss any other matters required to be communicated to the committee
by the auditors. The chair of the committee may represent the entire
committee for purposes of this review.
. Review the financial statements contained in the annual report to
shareholders with management and the independent auditors. Review with
financial management and the independent auditors the results of their
analysis of significant financial reporting issues and practices,
including changes in, or adoptions of, accounting principles and
disclosure practices, and discuss any other matters required to be
communicated to the committee by the auditors. Also review with
financial management and the independent auditors their judgments about
the quality, not just acceptability, of accounting principles and the
clarity of the financial disclosure practices used or proposed to be
used, and particularly, the degree of aggressiveness or conservatism of
the organization's accounting principles and underlying estimates, and
other significant decisions made in preparing the financial statements.
. Provide sufficient opportunity for the internal and independent auditors
to meet with the members of the audit committee without members of
management present. Among the items to be discussed in these meetings
are the independent auditors' evaluation of the company's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of audit.
. Review human resources and succession planning for the accounting and
financial departments within the Company.
. Report the results of the annual audit to the board of directors. If
requested by the board, invite the independent auditors to attend the
full board of directors meeting to assist in reporting the results of
the annual audit or to answer other directors' questions (alternatively,
the other directors, particularly the other independent directors, may
be invited to attend the audit committee meeting during which the
results of the annual audit are reviewed).
. On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, in connection with the
audit committee's consideration of the independence of the auditor. In
addition, review with the independent auditors the nature and scope of
any disclosed relationships or professional services and take, or
recommend that the board of directors take, appropriate action to ensure
the continuing independence of the auditors. In considering the
auditor's independence, the audit committee shall consider any non-audit
services performed by the auditor for the Company and the impact such
services may have on the auditor's independence. The audit committee may
adopt policies regarding auditor independence including, but not limited
to, policies regarding the auditor's performance of non-audit services.
. Prepare a report of the audit committee to be included in the company's
proxy statement in accordance with the SEC rules.
. Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
. Investigate, in its discretion, any matter brought to its attention
within the scope of its duties, with the power to retain outside counsel
for this purpose.
. Include a copy of this Charter in the proxy statement at least
triennially or the year after any significant amendment to the Charter.
A-2
PROXY
HILB, ROGAL AND HAMILTON COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shareholder shown on the reverse side hereby appoints Andrew L. Rogal,
Timothy J. Korman and Walter L. Smith, and each or any of them, proxy for said
shareholder, with power of substitution, to vote all the shares of Common Stock
of Hilb, Rogal and Hamilton Company held of record by said shareholder as of
March 16, 2001 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 1, 2001 at 10:00 a.m. eastern time, and at any adjournments or
postponements thereof, upon the matters designated on the reverse side as more
fully set forth in the Proxy Statement and for the transaction of such business
as may properly come before the meeting and any adjournments or postponements
thereof.
(Continued on reverse side)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
You can now access your Hilb, Rogal and Hamilton Company account online.
Access your Hilb, Rogal and Hamilton Company shareholder
account online via Investor ServiceDirectSM(ISD).
Mellon Investor Services LLC agent for Hilb, Rogal and Hamilton Company, now
makes it easy and convenient to get current information on your shareholder
account. After a simple, and secure process of establishing a Personal
Identification Number (PIN), you are ready to log in and access your account
to:
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
Visit us on the web at http://www.mellon-investor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS - Establish a PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
Investor ServiceDirectSM is currently only available for domestic individual
and joint accounts.
o SSN
o PIN
o Then click on the (ESTABLISH PIN) button
Please be sure to remember your PIN, or maintain it in a secure place for
future reference.
- --------------------------------------------------------------------------------
Step 2: Log in for Account Access
You are now ready to log in. To access your account please enter your:
o SSN
o PIN
o Then click on the (SUBMIT) button
If you have more than one account, you will now be asked to select the
appropriate account.
- --------------------------------------------------------------------------------
Step 3: Account Status Screen
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
o Certificate History
o Book-Entry Information
o Issue Certificate
o Payment History
o Address Change
o Duplicate 1099
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be
voted FOR Items 1 and 2.
Please mark
your votes as
indicated
in this
example [X]
Item 1. ELECTION OF DIRECTORS Nominees: (01) J.S.M. French, (02) Anthony Please disregard if you have previously
F. Markel, (03) David W. Searfoss, (04) provided your consent decision.
FOR all nominees WITHHOLD Robert S. Ukrop
listed at right AUTHORITY By checking the box to the right, I [ ]
(except as marked to vote for all INSTRUCTIONS: To withhold authority to vote consent to future delivery of
to the contrary) nominees for any individual nominee, write each such annual reports, proxy statements,
listed at right nominee's name in the following space: prospectuses and othermaterials and
shareholder communications
------ ------- --------------------------------------- electronically via the Internet at a
webpage which will be disclosed to me.
I understand that the Company may no
longer distribute 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, Mellon
Investor Services LLC, Ridgefield Park,
NJ and that costs normally associated
with electronic delivery, such as
usage and telephone charges as well as
any costs I may incur in printing
documents, will be my responsibility.
Item 2. In their discretion, the proxies are PLEASE MARK, SIGN, DATE AND RETURN
authorized to vote upon such other THE PROXY PROMPTLY USING THE
business as may properly come ENCLOSED ENVELOPE.
before the meeting.
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.
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
Internet http://www.proxyvoting.com/hrh Use the Internet to vote
your proxy. Have your proxy card in hand when you access the web site. You
will be prompted to enter your control number, located in the box below, to
create and submit an electronic ballot.
OR
Telephone 1-800-840-1208
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed
postage-paid envelope.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
[VOTING INSTRUCTION]
Please fold and detach card at perforation before mailing.
- --------------------------------------------------------------------------------
HILB, ROGAL AND HAMILTON COMPANY
TO TRUSTEE, HRH RETIREMENT SAVINGS PLAN
This Voting Instruction is Solicited on Behalf of the
Board of Directors of Hilb, Rogal and Hamilton Company
Pursuant to Section 12.9 of the HRH Retirement Savings Plan 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 16, 2001 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 1, 2001, at 10:00
a.m. eastern time, and at any adjournments or postponements thereof, upon the
matters designated on the reverse side as more fully set forth in the Proxy
Statement and for the transaction of such business as may properly come before
the meeting and any adjournments or postponements thereof.
THIS VOTING INSTRUCTION, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED ON THE REVERSE SIDE BY THE UNDERSIGNED PARTICIPANT. IF NO DIRECTION IS
MADE, OR IF A VOTING INSTRUCTION IS NOT PROPERLY EXECUTED AND RECEIVED BY THE
TRUSTEE, THE SHARES CREDITED TO YOUR PARTICIPANT'S ACCOUNT SHALL BE VOTED IN THE
SAME PROPORTION AS THOSE SHARES FOR WHICH THE TRUSTEE HAS RECEIVED PROPER VOTING
INSTRUCTIONS.
Please fold and detach card at perforation before mailing.
- --------------------------------------------------------------------------------
HILB, ROGAL AND HAMILTON COMPANY
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
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
[ ] FOR Nominee: J. S. M. French write each such nominee's name in the following space:
Anthony F. Markel
David W. Searfoss
Robert S. Ukrop ---------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY RECORD DATE SHARES:
to vote for all such nominees
Please be sure to sign and date this Voting Instruction.
Please sign exactly as name(s) appear(s) hereon.
---------------------------------------------------------------------------
Participant Sign Here
Date: _____________________________________________________________ , 2001