Table of Contents
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
Filed by the Registrant
☑
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)) |
☑ |
|
Definitive Proxy
Statement |
☐ |
|
Definitive Additional
Materials |
☐ |
|
Soliciting Material Pursuant to §
240.14a-12 |
Brown & Brown,
Inc. |
(Name of Registrant as
Specified In Its Charter) |
|
(Name of Person(s) Filing Proxy Statement, if Other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☑ |
|
No fee
required. |
☐ |
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
|
|
(1) |
Title of each class of securities
to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
(2) |
Aggregate number of securities to
which transaction applies: |
|
|
|
|
|
|
|
|
|
|
(3) |
Per unit price or other
underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined): |
|
|
|
|
|
|
|
|
|
|
(4) |
Proposed maximum aggregate value
of transaction: |
|
|
|
|
|
|
|
|
|
|
(5) |
Total fee paid: |
|
|
|
|
☐ |
|
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 number, or the Form or Schedule and the date of
its filing. |
|
|
|
|
|
|
(1) |
Amount Previously
Paid: |
|
|
|
|
|
|
|
|
|
|
(2) |
Form, Schedule or
Registration Statement No.: |
|
|
|
|
|
|
|
|
|
|
(3) |
Filing
Party: |
|
|
|
|
|
|
|
|
|
|
(4) |
Date
Filed: |
|
|
|
|
Table of Contents
Table of Contents
MESSAGE FROM OUR PRESIDENT AND CEO AND OUR LEAD
DIRECTOR
Fiscal 2016 was an exciting year for Brown & Brown, reflected
by strong financial and operational performance in the face of a tough insurance
market
March 22, 2017
Dear Fellow Shareholders:
On behalf of Brown & Brown, Inc.s
Board of Directors, we are pleased to invite you to attend our Annual Meeting of
Shareholders on Wednesday, May 3, 2017. The attached Notice of Annual Meeting of
Shareholders and Proxy Statement include important information about the matters
to be voted upon at the meeting.
The proxy materials for the Annual Meeting,
which include the Proxy Statement and 2016 Annual Report, are available online,
in order to expedite shareholders receipt of proxy materials while lowering the costs
and reducing the environmental impact of the meeting.
Fiscal 2016 was an exciting year for
Brown & Brown, reflected by strong financial and operational performance in
the face of a tough insurance market. As part of our ongoing mission to align
our compensation practices with the long-term interests of our shareholders, our
Compensation Committee made several meaningful changes to our executive pay
framework for 2016, including re-designing the structure of our long-term equity
incentive awards and changing one of the performance metrics for our short-term
cash incentives. We believe these improvements continue to motivate our
executive officers to deliver results that benefit our shareholders, and we are
proud of our performance for the year. In 2016, we increased our revenues, net
income, earnings per share, and grew our organic revenue in all four of our
divisions, all while maintaining strong EBITDAC margins.
In addition, our Board of Directors
remains focused on our strategy to conservatively manage our capital in the
long-term interests of our shareholders. In spite of increasing acquisition
prices, we maintained our disciplined approach to sourcing acquisitions that fit
culturally and make sense financially, acquiring eight high-quality insurance
businesses this year with annual revenues of approximately $56 million. In
addition, we made key investments in technology that we believe position us for
future growth, including implementing a new Company-wide financial system and
introducing a standardized agency management system for our Retail Division.
Finally, we increased our dividend for the 23rd consecutive year, returning
approximately $70 million in dividends to shareholders.
Whether or not you expect to attend the
meeting, we encourage you to vote online or by phone, or by signing and
returning your proxy card promptly in the enclosed envelope to assure that your
shares will be represented at the meeting. If you decide to attend the meeting
and vote in person, you will, of course, have that opportunity.
On behalf of our Board of Directors,
our management team, and our teammates, thank you for your investment in Brown
& Brown. We look forward to seeing you at the Annual
Meeting.
|
Wendell S.
Reilly J. Powell
Brown |
2016 Total Shareholder Return |
|
|
|
|
|
+45% |
|
|
|
|
|
Proxy Statement Highlights |
|
|
Proxy Summary |
|
4 |
Corporate Governance |
|
7 |
Executive Compensation |
|
21 |
Sincerely,
|
|
Wendell S. Reilly |
J. Powell Brown |
Lead Independent Director |
President and Chief Executive
Officer |
Table of Contents
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 3, 2017
The Annual Meeting of Shareholders of
Brown & Brown, Inc. will be held in the Atlantic Room of The Shores Resort,
2637 South Atlantic Avenue, Daytona Beach, Florida 32118, on Wednesday, May 3,
2017 at 9:00 a.m. (EDT), for the following purposes:
1. |
To elect twelve (12) nominees to
the Companys Board of Directors; |
|
2. |
To ratify the appointment of
Deloitte & Touche LLP as Brown & Brown, Inc.s independent
registered public accountants for the fiscal year ending December 31,
2017; |
|
3. |
To approve, on an advisory basis,
the compensation of named executive officers; |
|
4. |
To conduct an advisory vote on
the desired frequency of holding an advisory vote on the compensation of
named executive officers; |
|
5. |
To approve an amendment to the
Companys 2010 Stock Incentive Plan to increase the number of shares
available for issuance under the plan; and |
|
6. |
To transact such other business
as may properly come before the meeting or any adjournment
thereof. |
The Board of Directors has fixed the close
of business on February 27, 2017 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and any
postponements or adjournments.
By Order of the Board of
Directors |
|
Robert W. Lloyd |
Corporate
Secretary |
|
Daytona Beach, Florida |
March 22,
2017 |
For your convenience, we are also offering
an audio webcast of the meeting. To access the webcast, please visit the
Investor Relations section of our website (www.bbinsurance.com) shortly before
the meeting time and follow the instructions provided. A replay of the webcast
will be available on our website beginning the afternoon of May 3, 2017, and
continuing for 30 days thereafter.
By Internet |
|
|
|
|
You can vote your shares online at
www.proxyvote.com. |
By Telephone |
|
|
|
|
In the U.S. or Canada, you can vote
your shares toll-free by calling 1-800-579-1639 |
By Mail |
|
|
|
|
Please vote, date, sign and promptly
return the enclosed proxy in the envelope provided for that purpose,
whether or not you intend to be present at the
meeting. |
Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to be Held on May 3, 2017
The Proxy Statement and Annual Report to Shareholders
are available at: www.viewproxy.com/bbinsurance/2017
Table of Contents
TABLE OF CONTENTS
Table of Contents
PROXY SUMMARY
This summary highlights information
contained elsewhere in this Proxy Statement. This summary does not contain all
of the information you should consider. You should read the entire Proxy
Statement carefully before voting.
9:00 a.m. (EDT) on
Wednesday, May 3, 2017
The Shores Resort,
Atlantic Room, 2637 South Atlantic Avenue, Daytona Beach, Florida
32118
Monday, February 27, 2017
Proposals |
|
Recommendation |
|
Page |
Election of Directors |
|
FOR each nominee |
|
7 |
Ratification of the Appointment of Deloitte & Touche
LLP |
|
FOR |
|
18 |
Advisory Vote to Approve Executive Compensation |
|
FOR |
|
21 |
Advisory Vote on Frequency of Advisory Votes on Executive
Compensation |
|
FOR one year |
|
37 |
Approval of Amendment to the Companys 2010 Stock
Incentive Plan to Increase Number of Shares Available for Issuance under
the Plan |
|
FOR |
|
44 |
|
|
|
|
|
|
|
|
|
Committees |
Name
and Principal Employment |
|
Age |
|
Director Since |
|
|
Independent |
|
Audit |
|
Compensation |
|
Nominating/ Corporate Governance |
J. Hyatt Brown Chairman, Brown & Brown, Inc. |
|
79 |
|
1993 |
|
|
|
|
|
|
|
|
|
Samuel P. Bell, III Of Counsel to the law firm of Buchanan Ingersoll &
Rooney PC |
|
77 |
|
1993 |
|
|
✓ |
|
|
|
● |
|
|
Hugh M. Brown Founder
and former President & Chief Executive Officer, BAMSI,
Inc. |
|
81 |
|
2004 |
|
|
✓ |
|
● |
|
|
|
● |
J. Powell Brown President & Chief Executive Officer, Brown & Brown,
Inc. |
|
49 |
|
2007 |
|
|
|
|
|
|
|
|
|
Bradley Currey, Jr. Former Chairman & Chief Executive Officer, Rock-Tenn
Company |
|
86 |
|
1995 |
|
|
✓ |
|
|
|
|
|
● |
Theodore J. Hoepner Former Vice Chairman, SunTrust Bank Holding
Company |
|
75 |
|
1994 |
|
|
✓ |
|
● |
|
● |
|
|
James S. Hunt Former Executive
Vice President and Chief Financial Officer, Walt Disney Parks and Resorts
Worldwide |
|
61 |
|
2013 |
|
|
✓ |
|
|
|
● |
|
|
Toni Jennings Chairman, Jack
Jennings & Sons; Former Lieutenant Governor, State of
Florida |
|
67 |
|
2007 |
(1) |
|
✓ |
|
● |
|
|
|
|
Timothy R.M. Main Chairman -
Global Financial Institutions Group, Barclays Plc |
|
51 |
|
2010 |
|
|
✓ |
|
|
|
|
|
|
H. Palmer Proctor, Jr. President/Director, Fidelity Bank |
|
49 |
|
2012 |
|
|
✓ |
|
|
|
● |
|
|
Wendell S. Reilly** Managing
Partner, Grapevine Partners, LLC |
|
59 |
|
2007 |
|
|
✓ |
|
|
|
|
|
|
Chilton D. Varner Partner, King & Spalding LLP |
|
74 |
|
2004 |
|
|
✓ |
|
|
|
|
|
● |
(1) |
Ms. Jennings previously served on our Board
of Directors from 1999 until April 2003. |
** |
Denotes Lead Independent
Director |
● |
= Committee Member |
|
= Committee
Chair |
Table of Contents
Tenure Balance |
|
Gender |
|
Director Independence |
|
|
|
|
|
|
|
|
|
|
Corporate Governance
Highlights |
Shareholder Rights |
|
● |
Annual election of directors |
|
|
● |
Majority voting for directors, with director resignation
policy |
Board Independence |
|
● |
Strong role for Lead Independent
Director |
|
|
● |
10 of 12 directors are
independent |
|
|
● |
Periodic rotation of committee members,
committee chairs, and Lead Independent Director |
|
|
● |
Executive sessions at every in-person Board
meeting |
Good Governance |
|
● |
Strong anti-hedging and anti-pledging
provisions |
|
|
● |
Annual Board and committee
self-evaluations |
|
|
● |
Strong stock ownership
guidelines |
|
|
● |
Robust clawback policy |
|
|
● |
Committee meetings generally open to, and attended by,
all directors |
Table of Contents
Our Strategy and Performance |
The Companys strategy is focused on
increasing our organic revenue growth,(1) while maintaining our strong,
industry-leading operating margins and cash conversion metrics. As part of our
goal to manage our capital in the long-term interests of our shareholders, we
generally invest our earnings in the following ways: (1) hiring new teammates
and expanding our capabilities, (2) returns to shareholders through the payment
of dividends and periodic share repurchases, and (3) making high quality
acquisitions.
In fiscal 2016, we delivered strong
results, as reflected in the following financial and operational
highlights:
|
|
2016 Performance |
|
2015 Performance |
Revenues |
|
$1.767 billion |
|
$1.661 billion |
Net income |
|
$257 million |
|
$243 million |
Earnings per share |
|
$1.82 |
|
$1.70 |
Company total commissions and fees
growth |
|
6.4% |
|
5.7% |
Retail Division total
commissions and fees growth |
|
5.7% |
|
5.4% |
National Programs Division
total commissions and fees growth |
|
4.5% |
|
7.8% |
Wholesale Brokerage
Division total commissions and fees growth |
|
12.1% |
|
2.4% |
Services Division Organic
total commissions and fees growth |
|
7.4% |
|
6.5% |
Company Organic Revenue(1)
growth |
|
3.0% |
|
2.6% |
Retail Division Organic
Revenue(1) growth |
|
1.9% |
|
1.4% |
National Programs Division
Organic Revenue(1) growth |
|
4.2% |
|
1.8% |
Wholesale Brokerage
Division Organic Revenue(1) growth |
|
4.3% |
|
5.9% |
Services Division Organic
Revenue(1) growth |
|
3.8% |
|
6.8% |
Income before income taxes
margin(2) |
|
24.0% |
|
24.2% |
Adjusted EBITDAC Margin(1) |
|
32.7% |
|
33.3% |
23rd consecutive annual dividend increase,
returning approximately $70 million to shareholders through
dividends |
Eight strategic agency acquisitions with aggregate
annual revenues of approximately $56 million |
Technology improvements to support further
growth, including implementation of a new Company-wide financial system
and introduction of a standardized agency management system for our Retail
Division |
(1) See Annex A for additional
information regarding Organic Revenue, Organic Revenue growth and Adjusted
EBITDAC Margin, which are non-GAAP financial measures, including a
reconciliation to the most closely comparable GAAP financial measure.
(2) Income before income taxes margin is
calculated as the Companys income before income taxes, as reported, divided by
total revenues, as reported.
Table of Contents
BOARD AND CORPORATE GOVERNANCE MATTERS
Proposal
1 |
Election of
12 Directors |
At the Meeting, our 12 directors
will stand for re-election for a term expiring at the 2018 Annual Meeting
of Shareholders. Information about each nominees experience and
qualifications appears below.
✓The Board recommends a vote FOR each of the 12 Director
nominees. |
All nominees have consented to being named in the Proxy Statement and have agreed to serve if elected. If any director nominee becomes
unable or unwilling to serve, proxies will be voted for any substitute nominee(s) as the Board may nominate on the recommendation of the
Nominating/Corporate Governance Committee.
Vote Required; Majority Voting; Board Recommendation
Our Bylaws provide for a majority voting
standard for the election of our directors in uncontested elections. If the
director election were contested, the plurality standard would apply, which
means the nominees receiving the greatest numbers of votes would be elected to
serve as directors.
To be elected, a nominee must receive the affirmative vote of more than 50% of the
votes cast, either in person or by proxy, at the Meeting. If an incumbent director does not receive more than 50% of the
votes cast with respect to his or her election, he or she must promptly tender a conditional resignation following
certification of the vote. The Nominating/Corporate Governance Committee will then consider
the resignation and recommend to the Board whether to accept it, and the Board would be expected to act on the
recommendation within 90 days. Thereafter, the Board will promptly publicly disclose its decision concerning whether to
accept the directors resignation offer (and, if applicable, the reasons for rejecting the offer). If the Board does
not accept the resignation, the director will continue to serve until the next annual meeting and until a successor has
been elected and qualified. If the Board accepts the resignation, then the Board may fill any resulting vacancy or may
decrease the size of the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR EACH OF THE 12 DIRECTOR NOMINEES
|
Table of Contents
Board and Corporate
Governance Matters |
Director Nominees
Director Nominees and Qualifications
Set forth below is certain information
concerning our current directors, all of whom are director nominees. All
directors hold office for one-year terms or until their successors are elected
and qualified.
J. Hyatt Brown |
Chairman
of the Board
Director since 1993
Committees served
None |
|
Skills and
Experience Mr. Hyatt Brown was our Chief Executive Officer from
1993 to 2009 and our President from 1993 to December 2002, and served as
President and Chief Executive Officer of our predecessor corporation from
1961 to 1993. He was a member of the Florida House of Representatives from
1972 to 1980, and Speaker of the House from 1978 to 1980. Mr. Brown serves
on the Board of Directors of International Speedway Corporation, and
Verisk Analytics, Inc. (formerly Insurance Services Office), each a
publicly held company. Mr. Brown is a member of the Board of Trustees of
Stetson University, of which he is a past Chairman, and the Florida
Council of 100. Mr. Hyatt Browns son, J. Powell Brown, is employed by us
as President and Chief Executive Officer, and has served as a director
since October 2007.
Nominee
Attributes Mr. Hyatt Browns extensive business and industry
experience, knowledge of our company, service on boards of other publicly
traded companies and proven leadership ability are just a few of the
attributes that make him uniquely qualified to serve on, and chair, our
Board. |
|
|
|
Samuel P. Bell, III |
Independent Director
Director since 1993
Committees served
Acquisition Compensation |
|
Skills and
Experience Mr. Bell has served as Of Counsel to the law firm of
Buchanan Ingersoll & Rooney PC since March 2015. From November 2013
until March 2015, he served as Of Counsel to the law firm of Pennington,
Moore, Wilkinson, Bell & Dunbar, P.A., and prior to that, had been a
shareholder of the firm since January 1998. Prior to that, he was a
shareholder and managing partner of Cobb Cole & Bell (now Cobb &
Cole, P.A.), and he served as Of Counsel to Cobb Cole & Bell until
August 2002. Mr. Bell was a member of the Florida House of Representatives
from 1974 to 1988. He is Chairman of the Advisory Board for the College of
Public Health at the University of South Florida, Member of the Florida
Public Health Institute, and a member of the Board of Directors of the
Florida Childrens Home Society.
Nominee
Attributes Mr. Bells extensive legal experience and familiarity
with issues relating to Florida legislative and regulatory matters, along
with his contributions in the form of service as a current member of the
Compensation and Acquisition Committees and a past Chair of the
Compensation Committee, are among the factors that were considered with
respect to his nomination for re-election to the Board. |
|
|
|
Hugh M. Brown |
Independent Director
Director since 2004
Committees served
Acquisition
Audit
Nominating/Corporate
Governance |
|
Skills and
Experience Mr. Brown, who is unrelated to Mr. Hyatt Brown and Mr. Powell Brown, founded BAMSI, Inc., a
full-service engineering and technical services company, in 1978 and served as its Chief Executive Officer
until his retirement in 1998. Mr. Brown currently serves as a member of the Advisory Board of Directors
of SunTrust Bank of Orlando and a member of the Board of Managers (BOM), Nemours Childrens
Hospital, Orlando, Florida.
Nominee
Attributes Mr. Browns business experience, leadership abilities and proven value in leading the Audit Committee,
of which he is a past chair and a current member, and his service on the Nominating/Corporate
Governance Committee and Acquisition Committee are among the features considered in his
nomination for re-election to the Board. |
|
|
|
Table of Contents
Board and Corporate
Governance Matters |
J. Powell Brown |
Director
and Chief Executive Officer
Director since 2004
Committees served
None |
|
Skills and
Experience Mr. Powell Brown was named Chief Executive Officer in
July 2009. He has been our President since January 2007 and was appointed
to be a director in October 2007. Prior to 2007, he served as one of our
Regional Executive Vice Presidents since 2002. Mr. Brown was previously
responsible for overseeing certain or all parts of all of our divisions
over the years, and worked in various capacities throughout the Company
since joining us in 1995. Mr. Brown has served on the Board of Directors
of WestRock Company (formerly RockTenn Company), a publicly held company,
since January 2010. He is the son of our Chairman, J. Hyatt Brown.
Nominee
Attributes Mr. Powell Browns work in all divisions of our
Company, leadership experience at every level of our Company and current
position as President and Chief Executive Officer are among the qualities
considered in connection with his nomination for re-election to the Board.
|
|
|
|
Bradley Currey, Jr. |
Independent Director
Director since 1995
Committees served
Nominating/Corporate Governance |
|
Skills and
Experience Mr. Currey served as Chief Executive Officer of
RockTenn Company, a publicly held manufacturer of packaging and recycled
paperboard products, from 1989 to 1999 and as Chairman of the Board of
RockTenn Company from 1993 to 2000, when he retired. He also previously
served as President (1978-1995) and Chief Operating Officer (1978-1989) of
RockTenn Company. Mr. Currey previously served as a member of the Board of
Directors and Executive Committee of RockTenn Company, and is currently
Director Emeritus of Genuine Parts Company, a publicly traded company. Mr.
Currey is Trustee Emeritus and a past Chairman of the Board of Trustees of
Emory University. He is a Trustee Emeritus and past Chairman of the Board
of the Woodruff Arts Center and the Atlanta Symphony Orchestra, a division
of the Woodruff Arts Center in Atlanta, Georgia.
Nominee
Attributes Mr. Curreys business experience, proven leadership
abilities, financial accounting and management expertise, as well as
contributions in his years of service as Chairman of the
Nominating/Corporate Governance Committee, our former Lead Independent
Director, and a past member of our Audit Committee, were all considered in
connection with his nomination for re-election to the
Board. |
|
|
|
Theodore J.
Hoepner |
Independent Director
Director since 1994
Committees served
Audit
Compensation |
|
Skills and
Experience Mr. Hoepner served as Vice Chairman of SunTrust Bank,
Inc. from January 2000 to December 2004 and as Vice Chairman of SunTrust
Bank Holding Company from January 2005 until June 2005, when he retired.
From 1995 to 2000, Mr. Hoepner was Executive Vice President of SunTrust
Bank, Inc. and Chairman of the Board, President and Chief Executive
Officer of SunTrust Banks of Florida, Inc.
Nominee
Attributes Mr. Hoepners years of experience in the banking
industry, including extensive experience in management, make him a
valuable addition to the Board. He previously chaired our Audit,
Compensation and Acquisition Committees and currently serves as a member
of the Audit Committee and the Compensation Committee. All of these
attributes were among the factors considered in connection with his
nomination for re-election to the Board. |
|
|
|
Table of Contents
Board and Corporate
Governance Matters |
James S. Hunt |
Independent Director
Director since 2013
Committees served
Acquisition Audit
(Chair) Compensation |
|
Skills and
Experience Mr. Hunt served as Executive Vice President and Chief
Financial Officer of Walt Disney Parks and Resorts Worldwide from 2003
until his retirement in 2012. During that period, he was a member of the
Boards of Directors of Disneys Hong Kong International Theme Park Company
Limited, Shanghai International Theme Park Company Limited and Shanghai
International Associated Facilities Company, Limited, as well as Disneys
Alameda Insurance and Buena Vista Insurance companies. Prior to that,
between 1992 and 2003 he held senior finance positions with Walt Disney
World Resort. Before that time, Mr. Hunt was a Partner with Ernst &
Young. Mr. Hunt is a member of the Boards of Trustees of Penn Mutual Life,
a mutual life insurance company, where he serves on the Investment and
Executive Committees and as Chair of the Audit Committee, and the
Childrens Hospital Los Angeles, where he chairs the Compensation
Committee and is a member of the Executive Committee, and he is a member
of the Board of Directors of The Nemours Foundation, where he serves as
Chairman of the Audit and Finance Committee. Mr. Hunt is a Certified
Public Accountant (CPA). Mr. Hunt chairs our Audit Committee and serves as
a member of our Compensation and Acquisition Committees.
Nominee
Attributes Mr. Hunts 39 years of increasingly responsible
executive and senior executive finance, strategy and related operational
roles, financial expertise and significant international experience were
factors considered in connection with his nomination for re-election to
the Board. |
|
|
|
Toni Jennings |
Independent Director
Director since 2007
Committees served
Audit Compensation
(Chair) |
|
Skills and
Experience Ms. Jennings serves as Chairman of the Board of Jack
Jennings & Sons, Inc., a commercial construction firm based in
Orlando, Florida, and Jennings & Jennings, Inc., an architectural
millwork firm based in Orlando, Florida. Ms. Jennings previously served on
our Board of Directors from 1999 until April 2003. From 2003 through 2006,
Ms. Jennings served as Lieutenant Governor of the State of Florida. She
was the President of Jack Jennings & Sons, Inc. and Secretary and
Treasurer of Jennings & Jennings, Inc. from 1982 to 2003. Ms. Jennings
was a member of the Florida Senate from 1980 to 2000, and President of the
Florida Senate from 1996 to 2000. She served in the Florida House of
Representatives from 1976 to 1980. She is a member of the Board of
Directors of Next Era Energy, Inc., a publicly held company, Mid-America
Apartment Communities, Inc., a publicly traded real estate investment
trust (REIT), The Nemours Foundation, and the Foundation for Floridas
Future.
Nominee
Attributes Ms. Jennings experience as owner and operator of a
successful business, and her years of service in the legislative and
executive branches of the State of Florida are features considered in
concluding that she should continue to serve as a director of the Company.
Ms. Jennings chairs our Compensation Committee and serves on our Audit
Committee. |
|
|
|
Timothy R.M. Main |
Independent Director
Director since 2010
Committees served
Acquisition |
|
Skills and
Experience Mr. Main has served as the Chairman of the Global
Financial Institutions Group at Barclays Plc since September 2016. From
October 2011 until September 2016, he was a Senior Managing Director of
Evercore Partners. Prior to joining Evercore, Mr. Main worked at JPMorgan
Chase, a global investment bank, for 23 years, most recently as a Managing
Director and Head of the Financial Institutions Group.
Nominee
Attributes Mr. Mains extensive experience with complex
financial transactions and acquisitions, as well as his broad knowledge of
the insurance industry acquired throughout his career, are key components
considered in nominating Mr. Main for re-election to the Board. Mr. Main
serves on our Acquisition Committee. |
|
|
|
Table of Contents
Board and Corporate
Governance Matters |
H. Palmer Proctor, Jr. |
Independent Director
Director since 2012
Committees served
Acquisition
(Chair) Compensation |
|
Skills and
Experience Mr. Proctor is President and Director of Fidelity
Bank and its holding company, Fidelity Southern Corporation, a publicly
held company in Atlanta, Georgia. He currently serves on the banks Loan
& Discount Committee and serves on the Executive Committee for the
bank and the holding company. He also serves as a member of the Board of
Directors of Callanwolde Fine Arts Center. He is a member of the Advisory
Board of Allied Financial. Mr. Proctor serves as a director of the Georgia
Bankers Association.
Nominee
Attributes Mr. Proctors business experience, leadership
abilities and management expertise were factors considered in connection
with his nomination for re-election to the Board. He chairs our
Acquisition Committee and serves on our Compensation Committee and is a
past member of the Audit Committee. |
|
|
|
Wendell S. Reilly |
Lead
Independent Director
Director since 2007
Committees served
Nominating/Corporate Governance (Chair) |
|
Skills and
Experience Mr. Reilly is the Chairman of Berman Capital Advisors
and Managing Partner of Grapevine Partners, LLC, of Atlanta, Georgia, a
private company. He is also a General Partner of Peachtree Equity Partners
II. Previously, he was Chairman and Chief Executive Officer of Grapevine
Communications, LLC, a group of local television stations. Earlier, he was
the Chief Financial Officer of The Lamar Corporation and Haas Publishing
Companies. Mr. Reilly currently serves on the Board of Directors of Lamar
Advertising Company, a publicly traded company. He is also on the Board of
Trustees of Emory University and The Carter Center. Mr. Reilly is a
graduate of Emory College and earned his MBA in Finance from Vanderbilt
University.
Nominee
Attributes Mr. Reillys business background and experience,
including years of service with The Lamar Corporation, a publicly traded
company in which the families of the founders hold significant ownership
interests, enhance his ability to analyze and contribute valuable and
unique insights on matters including those relating to capital structure,
financing and acquisition structure.
Mr. Reillys contributions as a past
Chairman of our Acquisition Committee, current Chairman of our
Nominating/Corporate Governance Committee and his role as Lead Independent
Director were also taken into consideration in connection with his nomination for re-election to the Board.
|
|
|
|
Chilton D. Varner |
Independent Director
Director since 2004
Committees served
Nominating/Corporate Governance |
|
Skills and
Experience Ms. Varner has been a member of the law firm of King
& Spalding in Atlanta, Georgia since 1976 and a partner since 1983. A
graduate of Smith College, where she was named to membership in Phi Beta
Kappa, and Emory University School of Law, Ms. Varner was honored with
Emory University School of Laws Distinguished Alumni Award in 1998. In
2001, the National Law Journal profiled Ms. Varner as one of the
nations top ten women litigators. With more than 30 years of courtroom
experience, she specializes in defending corporations in product
liability, commercial and other civil disputes. She was a Trustee of Emory
University from 1995 until 2014 and currently continues her services as a
Trustee Emeritus.
Nominee
Attributes As a practicing attorney and partner of one of the
nations premier law firms, and a counselor to businesses, their directors
and management concerning risk and risk control, Ms. Varner brings a depth
of experience and a wealth of unique and valuable perspectives to our
Board. She serves on the Nominating/Corporate Governance Committee, which
she previously chaired, and previously chaired the Compensation Committee
and served as our Lead Independent Director.
|
|
|
|
Table of Contents
Board and Corporate
Governance Matters |
Director Independence
New York Stock Exchange (NYSE) listing
standards require directors to satisfy certain criteria to be deemed
independent. The Board applies these standards in determining whether any
director has a material relationship with the Company that would impair his or
her independence, as discussed below. As required by the NYSE listing standards,
the Board considers all material relevant facts and circumstances known to it in
making an independence determination, from the standpoints of both the director
and persons or organizations with which the director has an
affiliation.
The Board has considered the independence
of our nominees in light of these NYSE standards and has affirmatively
determined that the following 10 of the 12 director nominees have no material
relationship with us other than service as a director, and are therefore
independent: Samuel P. Bell, III; Hugh M. Brown; Bradley Currey, Jr.; Theodore
J. Hoepner; James S. Hunt; Toni Jennings; Timothy R.M. Main; H. Palmer Proctor,
Jr.; Wendell S. Reilly; and Chilton D. Varner. The following factors were
relevant to the Boards determination of independence:
● |
The Board considered the
relationships described below in Relationships and Transactions with
Affiliated Parties. |
● |
In each case, the Board considered
the fact that from time to time, in the ordinary course of business and on
usual commercial terms, we and our subsidiaries may provide services in
our capacities as insurance intermediaries to various directors of the
Company, and to entities in which various directors of the Company have
direct or indirect interests. |
● |
In the case of Mr. Main, the Board
considered the fact that Mr. Main is the Chairman of Global Financial
Institutions Group at Barclays Plc. The Board considered that
(i) Mr.
Mains ownership interest in Barclays does not exceed ten percent, and he
is not an executive officer of Barclays; (ii) there are no existing projects or
transactions between Barclays investment banking division (i.e., the
division in which Mr. Main holds his position) and the Company;
(iii) in his
role at Barclays, Mr. Main (a) is not permitted to cover the insurance
brokerage sector, (b) is required to recuse himself from any conversations
with clients or Barclays employees regarding the insurance business
sector, (c) is prohibited from appearing as the coverage person for the
Company on any Barclays books, records, or systems, and may not supervise
any activity in relation to the Company or the insurance brokerage sector
generally, (d) is prohibited from selling the Companys common stock while
it is on Barclays watch or restricted list, except in accordance with
Barclays personal investment policy; and (iv) during 2015 and 2016, the
interest amounts the Company paid to Barclays in connection with the
Companys borrowings from Barclays were less than one percent of the
Companys annual revenue, and less than one percent of Barclayss annual
revenue. |
● |
In the case of Messrs. Currey and
Hoepner, the Board considered the fact that these two directors are
investors in a bank holding company in which Messrs. Hyatt Brown and
Powell Brown also are investors, in which a checking account with a
balance of approximately $3 million was maintained by the Company in 2016
and for which a subsidiary of the Company provides insurance
services and concluded that the investment, which in the aggregate comprised
less than five percent of the outstanding stock of the bank holding
company, was not material. |
Director Nominee Selection Process
The Nominating/Corporate Governance
Committee is responsible for identifying and evaluating director nominees and
for recommending to the Board a slate of nominees for election at each Annual
Meeting of Shareholders. The Committee has not established minimum
qualifications for director nominees because it believes that rigid minimum
qualifications might preclude the consideration of otherwise desirable
candidates for election to the Board. The Committee evaluates director
candidates based on a number of factors, including: (a) the need or desirability
of maintaining or expanding the size of the Board; (b) independence; (c)
credentials, including, without limitation, business experience, experience
within the insurance industry, educational background, professional training,
designations and certifications; (d) interest in, and willingness to serve on,
the Board; (e) ability to contribute by way of participation as a member of
Board committees; (f) financial expertise and sophistication; (g) basic
understanding of the Companys principal operational and financial objectives,
plans and strategies, results of operations and financial condition, and
relative standing in relation to the Companys competitors; and (h) willingness
to commit requisite time and attention to Board service, including preparation
for and attendance at regular quarterly meetings, special meetings, committee
meetings and periodic Board retreats and director education programs. With respect to diversity, while no formal policy has
been proposed or adopted, heterogeneity of points of view, background,
experience, credentials, gender and ethnicity are considered desirable, and
characterize the current composition of our Board.
The Committee and the Board consider a
variety of sources when identifying individuals as potential Board members,
including other enterprises with which current Board members are or have
previously been involved and through which they have become acquainted with
qualified candidates. The Company does not pay any third party a fee to assist
in the identification or evaluation of candidates.
The Committee will consider director
nominations that are submitted in writing by shareholders in accordance with our
procedures for shareholder proposals. See Proposals of Shareholders below.
Such proposals must contain all information with respect to a proposed candidate
as required by the SECs proxy rules, must address the manner in which the
proposed candidate meets the criteria described above, and must be accompanied
by the consent of such proposed candidate to serve as a director, if
elected.
Table of Contents
Board and Corporate
Governance Matters |
The Boards Role and
Responsibilities
Overview
The role of the Board of Directors is to
oversee the affairs of the Company for the benefit of our shareholders and other
constituencies, including our employees, customers, suppliers, and the
communities in which we do business. The Board strives to ensure the success and continuity of the Companys business through
the selection of qualified management and through ongoing monitoring designed to
assure the Companys activities are conducted in a legal, responsible and
ethical manner.
Risk Oversight
The Board and its committees actively
oversee management of the Companys risks. They receive regular reports from
senior management on areas of material risk to the Company, including
operational, financial, strategic, technological, competitive, reputational,
legal and regulatory risks.
The Board believes that risk oversight is
a responsibility of the entire Board, and it does not look to any individual
director or committee to lead it in discharging this responsibility. However,
our Board committees have specific oversight responsibilities relating to
certain aspects of risk management:
|
|
|
|
|
|
|
|
|
|
|
|
Our Audit Committee regularly
reviews our financial statements, and our financial and other internal
controls, and regularly receives reports from management, including the
Companys Chief Information Officer,on the Companys cybersecurity risks.
Additionally, our independent registered public accountants regularly
identify and discuss with the Committee risks and related mitigation
measures that may arise during their regular reviews of the Companys
financial statements, audit work and executive compensation policies and
practices, as applicable. |
|
|
|
Our Compensation
Committee
regularly reviews our executive
compensation policies and practices, and employee benefits, and the risks
associated with each. We believe that our compensation policies and
principles in conjunction with our internal oversight of those policies
and principles reduce the possibility of imprudent risk-taking. We do not
believe that our compensation policies and principles are reasonably
likely to have a material adverse effect on the Company. |
|
|
|
Our Nominating/Corporate
Governance Committee considers issues
associated with the independence of our Board, corporate governance and
potential conflicts of interest. |
|
|
|
|
|
|
|
|
|
|
|
|
While each committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board of Directors is
regularly informed through attendance at committee meetings or through committee
reports about such risks.
We believe that the Boards approach to
risk oversight, as described above, helps assess various risks, make informed
decisions, and evaluate emerging risks in a proactive manner for the Company.
Further, our Financial Operations Review
Team is responsible for the performance of the internal audit function and for
monitoring compliance with policies and procedures relating to our financial
control environment, and was previously responsible for monitoring our data
security and selected general information technology controls. In early 2017, we
formed a dedicated Information Technology Review Team with responsibility for
monitoring our data security and information technology controls. Our Insurance
Operations Review Team is responsible for the monitoring of our operational
internal controls. Our Team Resources Review Team monitors compliance with
internal guidelines and state and federal employment law requirements relating
to compensation and human resources, regularly
assess risks and potential risks associated with our operations. These
departments support the integration of our acquisitions and report to our Audit
Committee on a quarterly basis, unless more frequent reports are
necessary.
Our General Counsel is primarily
responsible for enterprise risk management for the Company. On a quarterly
basis, our General Counsel presents an enterprise risk management analysis to
our Board of Directors, which includes an assessment of overall risk, risk
mitigation and elimination priorities, anonymous ethics hotline reports and
claims liabilities. Also, our Chief Executive Officer and General Counsel
annually deliver a detailed presentation to our Board of Directors about risks
associated with our business. This presentation includes extensive discussion,
analysis and categorization of risks with respect to likelihood of occurrence,
severity and frequency, as well as consideration of mitigating factors that
contribute to lessening the potential adverse consequences associated with such
risks (which can never, in any business, be fully eliminated). This presentation
is prepared with input from the Companys executive officers, including our
division leaders and our Chief Information Officer.
Table of Contents
Board and Corporate Governance
Matters |
Talent Management and Succession Planning
The Chairman of the Board, as well as our
Chief Executive Officer, routinely discuss with the Board, generally in
executive sessions, the Companys management development and succession
activities.
Communication with Directors
Interested parties, including
shareholders, may communicate with our Board of Directors, with specified
members or committees of our Board, with non-management directors as a group or
with the Lead Independent Director, Wendell S. Reilly, by sending correspondence
to our Corporate Secretary at 220 S. Ridgewood Ave., Daytona Beach, Florida 32114, and specifying in such correspondence
that the message is for our Board or for one or more of its members or
committees. Communications will be relayed to directors no later than the next
regularly scheduled quarterly meeting of the Board and Board
Committees.
Corporate Governance Principles; Code of Business Conduct and
Ethics; Code of Ethics for Chief Executive Officer and Senior Financial
Officers
The Board of Directors has adopted
Corporate Governance Principles, a Code of Business Conduct and Ethics, and a
Code of Ethics for Chief Executive Officer and Senior Financial Officers, the
full text of each of which can be found in the Corporate Governance section, under Key Documents on our website
(www.bbinsurance.com), and each of which is available in print to any
shareholder who requests a copy by writing our Corporate Secretary at 220 S.
Ridgewood Ave., Daytona Beach, Florida 32114.
Related Party Transactions Policy
Under our Related Party Transactions
Policy, our General Counsel (or our Chief Executive Officer if the related party
is our General Counsel or an immediate family member of our General Counsel)
will review any potential Related Party Transaction to determine if it is
subject to the Policy. If so, the transaction will be referred to the
Nominating/Corporate Governance Committee for approval or ratification. If,
however, the General Counsel determines that it is not practical to wait until
the next meeting of the Nominating/Corporate Governance Committee, the Chair of
the Nominating/Corporate Governance Committee shall have the authority to act on
behalf of the Nominating/Corporate Governance Committee on whether to approve or
ratify a Related Party Transaction (unless the Chair of the Nominating/Corporate
Governance Committee is a Related Party in the Related Party Transaction). In
determining whether to approve or ratify a Related Party Transaction, the
Nominating/Corporate Governance Committee (or, as applicable, the Chair of the
Nominating/Corporate Governance Committee) will consider, among other things,
the benefits of the transaction to the Company, the potential effect of entering
into the transaction on a directors independence, the availability of other sources for the products or
services, the terms of the transaction and the terms available to unrelated
third parties generally. The Nominating/Corporate Governance Committee has
authority to administer the Policy and to amend it as appropriate from time to
time.
For purposes of our Policy, Related Party
Transactions are transactions in which the Company is a participant, the amount
involved exceeds $120,000 when all such transactions are aggregated with respect
to an individual, and a related party had, has or will have a direct or
indirect material interest. Related parties are our directors (including any
nominees for election as directors), our executive officers, any shareholder who
beneficially owns more than five percent (5%) of our outstanding common stock,
and any firm, corporation, charitable organization or other entity in which any
of the persons listed above is an officer, general partner or principal or in a
similar position or in which the person has a beneficial ownership interest of
ten percent (10%) or more.
Relationships and Transactions with Affiliated
Parties
J. Hyatt Brown, who is one of our
directors and the father of J. Powell Brown, received compensation of $212,351,
consisting of $180,000 for services rendered to the Company in 2016, including
assistance with acquisitions and recruitment, $6,480 in matching contributions
made by the Company to his 401(k) Plan account, $24,076 for reimbursement of
amounts earned by the Company for personal lines insurance he purchased through
the Company or its subsidiaries, and $1,795 for the cost of certain club
membership dues. Mr. Hyatt Brown serves as Chairman of the Board of the
Company.
P. Barrett Brown, who is the son of Mr.
Hyatt Brown and the brother of Mr. Powell Brown, serves as Senior Vice President
of the Company and as a Regional President of the Companys Retail Division. He
received compensation of $925,800, including relocation expenses totaling
$15,200, for services rendered in 2016, as well as grants under our SIP in March
2016 and February 2017 with values of $599,975 and $299,979, respectively. In
connection with his promotion and relocation in 2014, Mr. Barrett Brown received
a loan of $500,000 from the Company in November 2014, which is
subject
Table of Contents
Board and Corporate Governance
Matters |
to the terms of a Promissory Note
providing that the principal and interest amounts of such loan are forgivable in
increments of one-seventh each year, so long as Mr. Barrett Brown remains
employed by the Company and/or its affiliates. Mr. Barrett Brown is not an
executive officer of the Company.
Carrie Brown, who is married to P. Barrett
Brown, was employed by us as Corporate Counsel until February 2016. Effective
February 1, 2016, Ms. Brown entered into a Consulting Agreement (the Consulting
Agreement) with us to provide legal services to us as an independent contractor
for a term of one year. Ms. Brown received payments of $154,813 for services
rendered in 2016, which included $37,949 for her service as an employee of the
Company during 2016 and $116,864 pursuant to the Consulting
Agreement.
Zambezi, LLC (Zambezi), a Florida
limited liability company whose Members and Managers are J. Hyatt Brown and his
wife, Cici Brown, owns a Cessna Citation Sovereign aircraft (the Aircraft),
which the Company leases pursuant to an Aircraft Dry Lease Agreement (the
Agreement) with Zambezi. In 2016, the Company paid Zambezi $138,215 under the
Agreement to lease the Aircraft. Pursuant to the Agreement, subject to
availability of the Aircraft and other specified conditions, Mr. Hyatt Brown has
the right to use the Aircraft for personal use subject to reimbursement paid to
the Company at the maximum rate permitted by law. Mr. Hyatt Brown paid
$104,730.75 to the Company for such personal use of the Aircraft in 2016. The
Company and Zambezi also are party to an Airside Sub-Lease Agreement and
Services Agreement, pursuant to which Zambezi leases hangar space from the
Company and pursuant to which pilots and mechanics employed by the Company are
available to pilot and service the Aircraft as provided therein. In 2016,
Zambezi paid the Company $19,170 for the lease of hangar space for the Aircraft,
and $20,412.45 for the services of pilots and
mechanics employed by the Company and for parts, equipment, and supplies related
to the Aircrafts maintenance and operation.
Richard A. Freebourn, Jr., who is the son
of Richard A. Freebourn, Sr., is employed by us as an insurance sales executive
(i.e., a producer) in the Lisle, Illinois office of Brown & Brown of
Illinois, Inc., one of our Retail Division subsidiaries, and received
compensation of $284,998 for services rendered in 2016, as well as grants under
our 2010 Stock Incentive Plan (the SIP) in March 2016 and February 2017 with
values of $49,977 and $49,968, respectively.
Chris L. Walker was a shareholder and
employee of Arrowhead General Insurance Agency Superholding Corporation
(Arrowhead) prior to the Companys acquisition of Arrowhead in 2012. In
connection with the acquisition, certain shareholder employees of Arrowhead at
the time of the acquisition (the Earn-Out Equityholders), including Mr.
Walker, were eligible to receive contingent earn-out payments of $5 million on a
pro rata basis, in accordance with their respective ownership interests. This
represented a holdback from the purchase price amount otherwise payable to the
Earn-Out Equityholders based upon their respective ownership interests in
Arrowhead, rather than an additional amount over and above the purchase price
payments to which the shareholders were entitled based on their ownership
interests. In February 2015, the Company made an earn-out payment of $2.5
million to the Earn-Out Equityholders, of which amount Mr. Walker received
$1,181,152. Following the resolution of an indemnification claim the Company
asserted in connection with the Arrowhead acquisition, in August 2016, the
Company made the remaining $2.5 million earn-out payment to the Earn-Out Equity
Holders, of which amount Mr. Walker received $1,181,152. Mr. Walker presently
serves as an Executive Vice President of the Company and the President of the
National Programs Division.
Board Structure and
Process |
Board Leadership
Our Board has the flexibility to determine
whether the roles of Chairman of the Board and Chief Executive Officer should be
separated or combined. The Board makes this decision based on its evaluation of
the circumstances and the specific needs of the Company. Mr. Hyatt Brown, who
retired from the position of Chief Executive Officer in 2009, continues to serve
as Chairman of the Board, while Mr. Powell Brown serves as Chief Executive
Officer.
We believe that our leadership structure is desirable because it allows
Mr. Powell Brown to focus his efforts on running our business and managing the
Company in the best interests of our shareholders, while we continue to realize the benefits
of Mr. Hyatt Browns extensive business and industry experience, knowledge of
our company, current and past service on boards of other publicly traded
companies and proven leadership ability.
The Board conducts executive sessions of
non-management directors in connection with each regularly scheduled meeting of
the Board. Our Lead Independent Director, Wendell S. Reilly, presides over these
executive sessions.
Table of Contents
Board and Corporate Governance
Matters |
Board and Board Committee
Matters
Our Board of Directors has an Audit Committee,
Compensation Committee, and Nominating/Corporate Governance Committee. The charters of each of these Board committees are
available in the Corporate Governance section, under Key Documents on our website
(www.bbinsurance.com) and are also available in print to any shareholder who requests a copy from the Corporate Secretary at
220 S. Ridgewood Ave., Daytona Beach, Florida 32114. Our committee meetings are generally attended by all Board members,
subject to the availability of each director, which we believe enables our Board to function in a more collaborative,
transparent, and effective manner, and which we believe promotes collegiality among the Board.
Audit Committee |
The Audit
Committee is composed of independent directors as defined in the NYSE
listing standards and includes at least one audit committee financial
expert, James S. Hunt, among its members. The duties of the Audit
Committee are to recommend to the Board of Directors the selection of
independent registered public accountants, to meet with our independent
registered public accountants to review and discuss the scope and results
of the annual audit, and to consider various accounting and auditing
matters related to the Company, including our system of internal controls
and financial management practices. |
Members James S. Hunt
(Chair) Hugh M. Brown Theodore J. Hoepner Toni
Jennings
Six Meetings Held in
2016 |
Compensation Committee |
Each member of the Compensation
Committee is independent as defined in the NYSE listing standards. The
Compensation Committee sets the compensation for our Chief Executive
Officer, and reviews and approves the compensation for our other
executive officers, including the Named Executive Officers. See Executive
Compensation - Compensation Committee Report and Compensation Discussion
and Analysis. The Compensation Committee also reviews and makes
recommendations with respect to our existing and proposed compensation
plans, and is responsible for administering our 1990 Employee Stock
Purchase Plan, our Performance Stock Plan (PSP), which was suspended in
April 2010, our ISO Plan, which expired December 31, 2008, and our 2010
Stock Incentive Plan. The Compensation Committee is authorized by its
charter to form and delegate authority to subcommittees when
appropriate. |
Members Toni
Jennings (Chair), Samuel P. Bell, III Theodore J. Hoepner James
S. Hunt H. Palmer Proctor, Jr.
Nine Meetings Held in
2016 |
Nominating/Corporate Governance
Committee |
Each member of the
Nominating/Corporate Governance Committee is independent as defined in the
NYSE listing standards. This Committees duties include responsibilities
associated with corporate governance, as well as the nomination of persons
to stand for election to the Board at our Annual Meeting of Shareholders
and recommendation of nominees to the Board of Directors to fill vacancies
on, or as additions to, the Board. |
Members Wendell S. Reilly (Chair) Hugh M.
Brown Bradley Currey, Jr. Chilton D. Varner
Six Meetings Held in
2016 |
Director Tenure and Board
Refreshment
The Nominating/Corporate Governance
Committee regularly considers the composition of the Board. However, we have not
established a mandatory retirement age or other term limits because we believe
longer-tenured directors can bring important experience and institutional
knowledge that are critical to the success of our Board and the long-term
interests of our shareholders. Consideration is given to rotating committee
members, committee chairs, and the Lead Independent Director position every
three to five years because we believe fresh perspectives facilitate enhanced Board and committee performance. Our
Nominating/Corporate Governance Committee evaluates the performance of each
incumbent director at least annually before recommending his or her nomination
for an additional term. In addition, any director who has a job change must
submit a letter of resignation resigning from the Board. The submission of a
letter of resignation provides an opportunity for the Board to review the
continued appropriateness of the directors membership on the Board under the
circumstances.
Table of Contents
Board and Corporate Governance
Matters |
Board
Evaluations
The Nominating/Corporate Governance
Committee conducts an annual evaluation of the Board and its committees, as well
as the individual performance of each director. As part of this process, all
directors complete detailed confidential questionnaires to provide feedback on
the effectiveness of the Board, the committees and the performance of individual
directors. The results of the questionnaires are compiled anonymously by the
Chair of the Nominating/Corporate Governance Committee in the form
of summaries, and the feedback is reviewed and discussed by the Nominating/Corporate Governance Committee and subsequently reported to the full Board. We
believe these assessments allow us to continually improve the effectiveness of
our Board and committee meetings throughout the year.
During 2016, our Board of Directors held
eight meetings. Each incumbent director serving during 2016 attended 100% of the
total number of Board meetings, and 100% of the total number of meetings of
committees of which such director is a member. The Board expects, but does not
require, directors, all of whom are director nominees, to attend the Annual
Meeting of Shareholders. All members of the Board attended the 2016 Annual
Meeting of Shareholders.
|
|
Director
Attendance |
|
|
|
100% |
|
|
at
all Board meetings, committee meetings, and the 2016 Annual Meeting of
Shareholders |
During 2016, non-employee directors were paid an annual retainer of $80,000, payable
in quarterly installments. We also pay an additional $1,500 for each meeting attended by such director in excess of 12. In
addition, the Chair of the Audit Committee is paid a $5,000 retainer, and the Chairs of the Compensation, Nominating/Corporate Governance and Acquisition Committees each receive $3,000 retainers, for services associated with those
positions. Also, each director who is not an employee of ours received in January 2016 a grant of $50,000 worth of shares of
our common stock under our SIP, valued as of the close of business on the last business day before the regular January
meeting of the Compensation Committee. All directors receive reimbursement of reasonable
out-of-pocket expenses incurred in connection with meetings of the Board. No director who is an employee receives separate
compensation for services rendered as a director.
The following table sets forth cash and
other compensation earned during 2016 by directors who are not Named Executive
Officers.
2016 Director Compensation
Name |
|
Fees Earned or Paid in
Cash ($) |
|
Stock Awards ($) |
|
All Other Compensation ($) |
|
|
Total ($) |
Samuel P. Bell, III |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
Hugh M. Brown |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
J. Hyatt Brown |
|
|
|
|
|
212,351 |
(1) |
|
212,351 |
Bradley Currey, Jr. |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
Theodore J. Hoepner |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
James S. Hunt |
|
85,000 |
|
49,973 |
|
|
|
|
135,973 |
Toni Jennings |
|
83,000 |
|
49,973 |
|
|
|
|
132,973 |
Timothy R.M. Main |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
H. Palmer Proctor, Jr. |
|
83,000 |
|
49,973 |
|
|
|
|
132,973 |
Wendell S. Reilly |
|
83,000 |
|
49,973 |
|
|
|
|
132,973 |
Chilton D. Varner |
|
80,000 |
|
49,973 |
|
|
|
|
129,973 |
(1) |
See Relationships and
Transactions with Affiliated Parties for information on additional
payments to Mr. Hyatt Brown. |
Table of Contents
AUDIT
MATTERS
Proposal
2 |
Ratification
of the Appointment of Deloitte & Touche LLP as the Companys
Independent Registered Public Accountants |
The Audit Committee of the Board of
Directors has selected Deloitte & Touche LLP as the Companys
independent registered public accounting firm for the fiscal year ending
December 31, 2017. Deloitte & Touche LLP has served as our independent
registered public accounting firm since the fiscal year ended December 31,
2002.
✓The Board recommends a vote
FOR the ratification of Deloitte &
Touche LLP for 2017 |
The Committee and the Board are requesting
that shareholders ratify this appointment as a means of soliciting shareholders
opinions and as a matter of good corporate governance. If the shareholders do
not ratify the selection, the appointment of the independent registered public
accountants will be reconsidered by the Committee. Even if the selection is
ratified, the Committee, in its discretion, may direct the appointment of a
different independent registered public
accounting firm at any time during the year if it determines that such change
would be in the best interests of the Company and its shareholders.
One or more representatives of Deloitte
& Touche LLP are expected to be present at the Meeting, will have the
opportunity to make a statement and will be available to respond to appropriate
questions from shareholders.
Vote Required;
Board Recommendation
In order to be ratified, this Proposal 2
must receive the affirmative vote of a majority of the votes cast on the
Proposal. The Board of Directors believes that the ratification of Proposal 2 is
in the best interests of the Company and its shareholders.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL. |
Table of Contents
Report of the Audit Committee
The Audit Committee of the Board of
Directors operates pursuant to an Audit Committee Charter, which was most
recently reviewed by the Committee in January 2017. The Charter is posted on the
Companys website (www.bbinsurance.com) in the Corporate Governance section,
under Key Documents.
Each member of the Audit Committee qualifies as
independent (as that term is defined in the NYSE listing standards, as well as
other statutory, regulatory and other requirements applicable to the Companys
Audit Committee members).
With respect to the fiscal year ended
December 31, 2016, the Audit Committee:
|
(1) |
|
has reviewed and
discussed the Companys audited financial statements with management and
the independent registered public accountants; |
|
(2) |
|
has discussed with the
independent registered public accountants of the Company the matters
required to be discussed by the standards of the Public Company Accounting
Oversight Board, including those described in Auditing Standard No.
16, Communications with Audit
Committees; |
|
(3) |
|
has received and
reviewed the written disclosures and the letter from the independent
registered public accountants required by the applicable requirements of
the Public Company Accounting Oversight Board (United States) regarding
the independent registered public accountants communications with the
Audit Committee concerning independence, and has discussed with the
independent registered public accountants the independent registered
public accountants independence; and |
|
(4) |
|
based on the review
and discussions with management and the independent registered public
accountants referenced above, recommended to the Board of Directors that
the audited financial statements be included in the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, for
filing with the Securities and Exchange
Commission. |
It is not the duty or responsibility of
the Audit Committee to conduct auditing or accounting reviews or procedures. In
performing its oversight responsibility, members of the Audit Committee rely
without independent verification on the information provided to them and on the
representations made by management and the independent registered public
accountants. Accordingly, the Audit Committees considerations and discussions
do not assure that the audit of the Companys financial statements has been
carried out in accordance with the standards of the Public Company Accounting
Oversight Board (United States) or that the financial statements are presented
in accordance with generally accepted accounting principles in the United States
of America (GAAP).
AUDIT COMMITTEE
James S. Hunt (Chair)
Hugh M.
Brown
Theodore J. Hoepner
Toni Jennings
Table of Contents
INFORMATION CONCERNING INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
Fees Paid to Deloitte & Touche
LLP
We incurred the following fees for
services performed by Deloitte & Touche LLP for fiscal years 2016 and
2015:
|
|
2015 |
|
|
2016 |
|
Audit
Fees:(1) |
|
$1,465,595 |
|
|
$1,647,468 |
|
Audit-Related
Fees:(2) |
|
$0 |
|
|
$3,501 |
(3) |
Tax
Fees:(4) |
|
$0 |
|
|
$0 |
|
All Other
Fees:(5) |
|
$0 |
|
|
$0 |
|
Total: |
|
$1,465,595 |
|
|
$1,650,969 |
|
(1) |
Audit Fees were the aggregate
fees billed to us by Deloitte & Touche LLP for professional audit
services rendered for the audit of our annual financial statements, the
review of financial statements included in our Forms 10-Q and the audit of
our internal control over financial reporting for the fiscal years ended
December 31, 2016 and 2015, including any out-of-pocket
expense. |
(2) |
Audit-Related Fees were the fees
billed to us by Deloitte & Touche LLP for assurance and related
services reasonably related to the performance of the audit or review of
our financial statements that are not reported above under the caption
Audit Fees for the fiscal years ended December 31, 2015 or
2016. |
(3) |
These fees were billed primarily
in connection with the sale of the Companys Colonial Claims
business. |
(4) |
Tax Fees are fees for tax
compliance, tax advice and tax planning for the fiscal years ended
December 31, 2016 or 2015. Deloitte & Touche LLP did not provide any
such services during the period. |
(5) |
Deloitte & Touche LLP did not
provide any other services during the period. |
Audit Committee Policy for Pre-Approval of
Independent Registered Public Accountant Services
Our policy requires that the Audit
Committee consider and approve in advance any proposed engagement of the
independent registered public accountants to perform services in addition to
those approved in connection with their annual engagement letter, except for
certain limited non-audit services. During fiscal
years 2016 and 2015, all services were approved by the Audit Committee in
accordance with this policy.
Table of
Contents
COMPENSATION MATTERS
Proposal 3 | Advisory Vote to Approve Named Executive Officer Compensation |
At the Meeting, we will ask our shareholders to approve, on a nonbinding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. This proposal, commonly known as a say-on-pay proposal, gives our shareholders the opportunity to express their views on our executive compensation. ✓The Board recommends a vote FOR the resolution to approve on a non-binding advisory basis the compensation of the named executive officers. |
As described in detail below under Compensation Discussion and Analysis, our executive compensation program is designed to attract, motivate, and retain our Named Executive Officers, who are critical to our success. Accordingly, our Named Executive Officers are rewarded to the extent we achieve specific annual goals and deliver financial performance intended to increase long-term shareholder value.
Our Compensation Committee has adopted an approach to executive compensation that we believe enables the Company to retain its executive talent while remaining committed to our core compensation philosophy of paying for performance and aligning executive compensation with shareholder interests. The Committee continually reviews the compensation programs for our Named Executive Officers with the goal of most effectively aligning our executive compensation structure with our shareholders interests and current market practices. For example, (1) a significant portion of pay is performance-based, (2) compensation is incentive-driven with both short- and long-term focus, and (3) we believe components of compensation are linked to increasing shareholder value.
We are again asking our shareholders to indicate their support for our executive officer compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, program and practices described in this Proxy Statement in accordance with the SECs compensation disclosure rules. Accordingly, we ask our shareholders to vote FOR the approval, on an advisory basis, of executive compensation.
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. However, our Board and Compensation Committee value the opinions of our shareholders, and to the extent there is any significant vote against the executive compensation as disclosed in this Proxy Statement, we will consider our shareholders concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Accordingly, we ask our shareholders to vote on the following resolution at the Meeting:
RESOLVED, that the compensation paid to the Companys Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
Vote Required; Board Recommendation
In order to be approved, this Proposal 3 must receive the affirmative vote of a majority of the votes cast on the Proposal. The Board of Directors believes that the advisory approval of Proposal 3 is in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL. |
Compensation Committee Report |
Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Proxy Statement, in whole or in part, the following Board Compensation Committee Report shall not be incorporated by reference into any such filings.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on this review and those discussions, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Toni Jennings (Chair)
Samuel P. Bell, III
Theodore J. Hoepner
James S. Hunt
H. Palmer Proctor, Jr.
Table of
Contents
COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Committee has
responsibility for the design, implementation, and approval of the compensation
of our executive officers. We seek to provide an executive compensation package
that supports our business strategy and is driven by our overall financial
performance, increases in shareholder value, the success of the business
divisions that are directly impacted by the executives performance, and the
performance of the individual executive. The Compensation Committee periodically
reviews the pay practices of other companies with the goal of ensuring that the
Companys executive compensation program remains competitive, but does not
target compensation decisions or levels to a specific percentile or other absolute measures
related to comparison group data.
At last years Annual Meeting of
Shareholders, 98% of the votes cast were in favor of the advisory vote to
approve executive compensation. In view of this favorable vote (as well as a
similar favorable vote in 2015), as well as other factors (including regulatory
requirements, market considerations, and Company and individual performance), we
continued many of our executive compensation policies from year to year. In
2016, however, we made the following enhancements to our compensation system as part of
our ongoing efforts to keep our executive officers compensation aligned with
the long-term interests of our shareholders:
Compensation Component |
|
Description of Change |
|
Rationale |
Annual Cash Incentives |
|
●40% of total target amount now based upon Adjusted
EBITDAC Margin,(1) instead of earnings per share |
|
●Better motivate our executive officers to not only drive
Organic Revenue growth, but also leverage our revenues and increase
operating margins
●Adjusted earnings per share is a key performance metric
for our long-term equity incentive awards |
Long-Term Equity Incentive Awards |
|
●75% of award amount contingent upon both performance-
and time-based vesting conditions; 25% of award amount contingent upon
time-only-based vesting condition |
|
●Tying a majority of our equity awards to pre-established
corporate financial objectives which drive long-term shareholder return
should more closely align the long-term interests of our executive
officers and our shareholders
●Equity awards with time-based vesting conditions
continue to operate as a complement to our traditional equity awards
characterized by both performance-based and time-based vesting conditions
to further incentivize and reward key personnel |
|
|
●Vesting of performance-based awards tied to a
combination of Average Organic Sales Growth (as defined in the applicable
award agreement) and compound annual growth rate of cumulative earnings
per share, excluding any impact for changes in acquisition earn-out
liabilities
●Performance conditions measured over three-year period
beginning January 1, 2016 |
|
●A combination of performance- and time-based vesting
conditions is intended to achieve a strong alignment between pay and
performance, and incentivize the long-term retention of our executive
officers and key employees |
|
|
●Shares with a performance-based vesting condition
contemplate a minimum payout of 0% and a maximum payout of 200%, subject
to the level of performance attained |
|
●Payouts for above-target performance motivate our
executive officers to overperform; recognition of performance that may be
less than target |
|
|
●All awards, including those with a performance-based
vesting component, include a cliff vesting condition requiring five years
of continuous employment from date of grant |
|
●Continued inclusion of a longer-term equity award (e.g.,
five years) helps attract, motivate and retain individuals whose
performance drives our results |
(1) See Annex A for additional information
regarding Organic Revenue, Organic Revenue growth and Adjusted EBITDAC Margin,
which are non-GAAP financial measures, including a reconciliation to the most
closely comparable GAAP financial measure.
Table of
Contents
Compensation Discussion and
Analysis |
We believe these changestogether with the
other elements of our compensation systemeffectively incentivized our executive
officers to deliver strong results for the Company. Our fiscal 2016 performance,
as reflected in the table below, resulted in above-target payouts of our annual
cash incentives to all of our executive officers:
Performance Highlights
|
|
2016 Performance |
|
2015 Performance |
Revenues |
|
$1.767 billion |
|
$1.661 billion |
Net income |
|
$257 million |
|
$243 million |
Earnings per share |
|
$1.82 |
|
$1.70 |
Company total commissions and fees
growth |
|
6.4% |
|
5.7% |
Retail
Division total commissions and fees growth |
|
5.7% |
|
5.4% |
National Programs Division total commissions and fees growth |
|
4.5% |
|
7.8% |
Wholesale Brokerage Division total commissions and fees growth |
|
12.1% |
|
2.4% |
Services Division Organic total commissions and fees growth |
|
7.4% |
|
6.5% |
Company Organic Revenue(1) growth |
|
3.0% |
|
2.6% |
Retail Division Organic Revenue(1) growth |
|
1.9% |
|
1.4% |
National Programs Division Organic Revenue(1) growth |
|
4.2% |
|
1.8% |
Wholesale Brokerage Division Organic Revenue(1) growth |
|
4.3% |
|
5.9% |
Services Division Organic Revenue(1) growth |
|
3.8% |
|
6.8% |
Income before income taxes
margin(2) |
|
24.0% |
|
24.2% |
Adjusted EBITDAC Margin(1) |
|
32.7% |
|
33.3% |
(1) See Annex A for additional information
regarding Organic Revenue, Organic Revenue growth and Adjusted EBITDAC Margin,
which are non-GAAP financial measures, including a reconciliation to the most
closely comparable GAAP financial measure.
(2)
Income before income taxes margin is calculated as the Companys income before
income taxes, as reported, divided by total revenues, as reported.
Our Compensation Philosophy |
Our compensation system is intended
to:
In furtherance of these goals, for 2016
our incentive compensation program included both long- and short-term
compensation and was tied to increases in our adjusted earnings per share,
organic revenue growth, adjusted EBITDAC margin, and pre-determined personal
objectives for each of our executive officers.
Table of
Contents
Compensation Discussion and
Analysis |
Our compensation philosophy is reflected
in the following short-term and long-term compensation components:
|
1 Base Salary |
|
2 Annual Cash
Incentives and Bonuses |
|
3 Long-Term Equity
Incentive Awards |
|
|
|
|
|
|
|
|
|
|
|
●Provide competitive levels of compensation to our
executive officers based on scope of responsibility and duties
●Provide a basic level of compensation
●Recruit and retain executive officers |
|
●Align executive officers with annual goals and
objectives
●Create a direct link between pay and financial and
operational performance |
|
●Reward effective long-term capital management and
decision-making
●Focus attention on future returns to shareholders
●Retain executive officers who have the potential to
impact both our short-term and long-term profitability
●Recognize and reward specific achievements and/or the
previous years performance
●Generally granted annually during first quarter;
mid-year grants may occur in recognition of specific achievements or
promotion |
|
|
|
|
|
|
|
|
|
|
|
Percentage at Target
(CEO) |
|
|
|
Percentage at Target
(CEO) |
|
|
|
Percentage at Target
(CEO) |
|
|
|
|
26% |
|
|
|
|
|
|
37% |
|
|
|
|
|
26% |
33% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage at Target (Other
NEOs) |
|
|
|
Percentage at Target (Other
NEOs) |
|
|
|
Percentage at Target (Other
NEOs) |
|
|
|
|
28% |
|
|
|
|
|
|
42% |
|
|
|
|
|
26% |
26% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
How Amounts Are
Determined |
|
|
|
How Amounts Are
Determined |
|
|
|
How Amounts Are
Determined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
●Based on a wide range of factors, including business
results, individual performance and comparative market assessments
|
|
|
|
●Target payouts based upon comparative market assessments
and recommendations by chief executive officer and input from the
Compensation Committees independent compensation consultant, subject to
approval of Compensation Committee or, in the case of the chief executive
officer, recommendations from the Compensation Committees independent
compensation consultant, subject to approval of Compensation Committee
based upon its annual chief executive officer performance review
●Actual payout based upon a combination of Company and/or
divisional performance and achievement of personal performance
objectives
●Additional discretionary bonus available as determined
by chief executive officer, subject to the approval of Compensation
Committee, or, in the case of chief executive officer, as determined by
Compensation Committee |
|
|
|
●Award amount determined based upon a blend of
quantitative goals and consideration of personal factors, as well as
comparative market assessments
●Actual value realized based upon the Companys
performance over measurement and vesting periods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table of
Contents
Compensation Discussion and
Analysis |
The chart below shows the 2016 mix of
compensation for our CEO and for the other NEOs as a group.
2016 Target
Mix
CEO
Base Salary 26% |
Annual Cash Incentive 37% |
Long-Term Equity Awards 33% |
|
Other 4% |
|
|
|
|
|
|
70% At-Risk
|
|
|
|
Other NEOs
Base Salary 28% |
Annual Cash Incentive 42% |
Long-Term Equity Awards 26% |
|
Other 4% |
|
|
|
|
|
|
68% At-Risk
|
|
|
|
Comparative Market Assessment
The Compensation Committee does not target
compensation decisions or levels to a specific percentile or other absolute measures
related to comparison group data, but does periodically review the pay practices
of other companies with the goal of ensuring that the Companys executive
compensation program remains competitive. In 2016, Frederic W. Cook & Co.,
Inc. (FW Cook), an independent outside compensation consulting firm retained
by the Compensation Committee, conducted a comprehensive analysis of the
Companys pay practices and executive compensation levels as compared to a group
of the Companys peers, as described below.
Proxy Comparison Group
This group was focused on our peers in the
Russell 3000 of similar size, industry, and business characteristics. The other
insurance intermediaries for which compensation data was publicly availableAon
plc, Arthur J. Gallagher & Co, Marsh & McLennan Companies Inc. and
Willis Towers Watson PLCcompete with us the most directly for talent. However,
these publicly traded insurance intermediaries are significantly larger than we
are in total assets, total revenue and market capitalization. Because of these
differences in size, FW Cook also reviewed the compensation practices of nine publicly
traded insurance carriers and several other companies in the capital markets
industry. The proxy comparison group was as follows:
Arch Capital Group Ltd. |
Property & Casualty Insurance
Carrier |
AXIS Capital Holdings Limited |
Property & Casualty Insurance Carrier |
Aon
plc |
Insurance Intermediary |
Argo Group International Holdings |
Property & Casualty Insurance Carrier |
Arthur J. Gallagher & Co. |
Insurance Intermediary |
CBIZ, Inc. |
Research & Consulting Services |
Crawford & Company |
Insurance Intermediary |
Erie Indemnity Company |
Property & Casualty Insurance Carrier |
FBL
Financial Group Inc. |
Life & Health Insurance Company |
Marsh & McLennan Companies Inc. |
Insurance Intermediary |
Primerica, Inc. |
Life & Health Insurance Company |
Raymond James Financial, Inc. |
Investment Banking & Brokerage |
RLI
Corp. |
Property & Casualty Insurance Carrier |
Selective Insurance Group Inc. |
Property & Casualty Insurance Carrier |
Waddell & Reed Financial, Inc. |
Asset Management & Custody Banks |
Willis Towers Watson PLC |
Insurance Intermediary |
Table of
Contents
Compensation Discussion and
Analysis |
Survey Comparison
As part of FW Cooks engagement, the
Compensation Committee also reviewed and considered data from the
2016 Towers Watson CDB General Industry
Compensation survey.
Results of the Comparative Market Assessment
Based upon the results of FW
Cooks analysis, the Compensation Committee determined that, among other things,
the total 2016 direct compensation for the Companys executive officers, which
includes each executive officers base salary, target cash incentive amount, and
target long-term equity incentives, was generally aligned with the market blend
median. However, the Compensation Committee also concluded that the Companys
2016 management service fee (MSF), which is the notional amount investors pay
for a company to be managed, calculated as the aggregate 2016 target pay for the
Companys five highest paid executive officers in 2015, was positioned in the
32nd percentile of the Companys peer group, while the Companys 2015 revenue
was positioned in the 48th percentile of its peer group. The Compensation
Committee believes that the evaluation of MSF is valuable to gain an
understanding of the pay competitiveness of the Companys executive officers,
regardless of position or tenure.
While the Compensation Committee did
consider FW Cooks analysis in making our 2017 compensation decisions, in light
of the conclusion that our executive officers total direct compensation was
generally aligned with the market blend median,
the Compensation Committee did not apply any market-rate pay adjustments for any
of our Named Executive Officers, except for Mr. Powell Brown, who received an
increase in his 2017 annual long-term equity incentive award of $250,000, and
Mr. Watts, who received an increase in his 2017 target cash incentive amount of
$125,000:
● |
Mr. Powell Brown. As part of its decision to increase Mr. Powell Browns
long-term equity incentive award from $1,250,000 to $1,500,000, the
Compensation Committee considered the comparative market assessment
conducted by FW Cook and concluded that Mr. Powell Browns 2016 target
total direct compensation was aligned with only the 25th
percentile of the peer group, between the 25th and
50th percentile of the general industry, and that the amount of
his 2016 long-term equity incentive was below the 25th
percentile for the peer group and the general industry.
|
● |
Mr. Watts. As part of its decision to increase Mr. Watts 2017
target cash incentive amount from $400,000 to $525,000, the Compensation
Committee considered the comparative market assessment conducted by FW
Cook and concluded that Mr. Watts 2016 target total direct compensation
was aligned with only the 25th percentile of the peer group,
between the 25th and 50th percentile of the general
industry, and that the amount of his 2016 target cash incentive amount was
below the 50th percentile for the peer group and the general
industry. |
Role of the Compensation Consultant
Beginning in August 2015, the Compensation
Committee engaged FW Cook to assist with a review of the components, structure and
design of the long-term equity incentive arrangements with our executive
officers and other key employees. The primary goal of this engagement was to
help design long-term equity incentive arrangements that continue to be
competitive and aligned with shareholder interests. FW Cook has remained engaged by
the Compensation Committee to advise and assist with other matters related to
executive compensation, including the selection of a new peer group in 2016 and
a subsequent comprehensive analysis of the Companys pay practices and
executive compensation levels as compared to the updated peer group, which the
Compensation Committee considered in making its compensation decisions for 2017.
The Compensation Committee considers FW Cook to be independent because FW
Cook performed no services for the Companys management unrelated to services
performed for the Compensation Committee and there was no conflict of interest
raised as a result of any work performed by FW Cook, directly or indirectly, for
the Compensation Committee during fiscal years 2015 or 2016.
Role of Management
The Compensation Committee considers input
from our Chief Executive Officer in making determinations regarding the
compensation of our executive officers, other than our Chief Executive Officer.
As part of the annual planning process, our Chief Executive Officer recommends,
and presents to the Compensation Committee for consideration, base salary
adjustments, targets for our annual cash incentive
program, and long-term equity incentive award amounts for our executive
officers, other than our Chief Executive Officer. In addition, our Chief
Executive Officer periodically presents to the Compensation Committee and the
Board his
evaluation of each executive officers performance and reviews succession plans
for each of our executive officers.
Consideration of Last Years Say-On-Pay Vote
In accordance with the requirements of the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the
Dodd-Frank Act), we provide our shareholders with an annual opportunity to
approve, on a nonbinding, advisory basis, the compensation of named executive
officers. At our annual meetings of shareholders in both 2015 and 2016, our
shareholders voted to approve this compensation by a significant
margin.
In view of this favorable vote (as well as
a similar favorable vote in 2015), as well as other factors (including
regulatory requirements, market considerations, and Company and individual
performance), we did not substantially change
our executive compensation policies in 2017,
except as set forth above.
At
our 2016 Annual Meeting of Shareholders our executive compensation program
was supported by 98% of votes
cast. |
Table of
Contents
Compensation Discussion and
Analysis |
2016 Base Salaries
The Compensation Committee did not
increase the base salaries for the Named Executive Officers in 2016.
2016 Annual Cash Incentives
Our annual cash incentives are
designed to align executive officer compensation with our annual goals and
objectives and to create a direct link between compensation and financial and
operational performance. During the first quarter of each year, the Compensation
Committee establishes the annual cash incentive components, consisting of
financial performance measures, individual target cash incentive amounts, and
personal objectives, for each executive officer, including the relative
weightings and goals against which performance is measured and payouts are
determined for such fiscal year.
In February 2016, the Compensation
Committee approved a modification to the annual cash incentive components to use
Adjusted EBITDAC Margin (which is a non-GAAP financial measure, as defined in
Annex A), instead of the Companys earnings per share, as part of the
methodology for calculating the annual cash incentives payable to the Companys
executive officers. The consideration of Adjusted EBITDAC Margin as part of the
2016 annual cash incentives was intended to further motivate our
executive officers to not only drive Organic Revenue growth, but also leverage
our revenues and thereby increase the Companys operating margins. This change
was effective for the 2016 annual cash incentives payable to executive officers,
which were calculated and paid in January 2017.
Target Amounts. In February 2016, the Compensation Committee established
the 2016 target cash incentive amounts for the Named Executive Officers. Other
than for Mr. Walker, whose target cash incentive amount for 2016 increased from
$800,000 to $900,000, and for Mr. Watts, whose target cash incentive amount for
2016 increased from $350,000 to $400,000, the Compensation Committee did not
increase the target cash incentive amounts for our Named Executive Officers. The
decision to increase Mr. Walkers target cash incentive amount was based upon
his continued leadership and the growth of our National Programs
Division. The decision to increase Mr. Watts target cash incentive
amount was based upon him assuming additional operational responsibilities
during 2016.
For 2016, the aggregate target cash
incentive amounts were: for Mr. Powell Brown, $1,400,000; for Mr. Watts,
$400,000; for Mr. Penny, $800,000; for Mr. Strianese, $900,000 and for Mr.
Walker, $900,000. Payouts can range from 0% to 200% of the aggregate target cash
incentive depending on financial performance of the Company or division, as
applicable, and Named Executive Officer performance against personal
objectives.
2016 Annual Cash Incentive
Components. For 2016, the Compensation
Committee selected the following components and weightings for the annual cash
incentives for the Named Executive Officers:
|
|
Financial Performance
Measures |
Personal
Objectives |
Executive Officer |
|
Weighting |
Measure |
Weighting |
Measure |
Weighting |
Measure |
J. Powell Brown
|
|
40% |
Company
Organic Revenue growth(1) |
|
40% |
Adjusted
EBITDAC Margin(1) |
|
20% |
Personal
objectives established for each Named
Executive Officer(2) |
|
R. Andrew Watts
|
|
J. Scott
Penny |
|
|
|
|
|
|
Anthony T.
Strianese |
|
40% |
Wholesale
Brokerage Division Organic Revenue growth(1)
|
|
|
|
|
|
|
Chris L.
Walker |
|
40% |
National
Programs Division Organic Revenue growth(1) |
|
(1) See Annex A for additional
information regarding Organic Revenue, Organic Revenue growth and Adjusted
EBITDAC Margin, which are non-GAAP financial measures, including a
reconciliation to the most closely comparable GAAP financial
measure.
(2) The personal objectives for
each of our Named Executive Officers were approved by the Compensation Committee
in February 2016.
The target amounts for each financial
performance measure were reviewed and approved by the Compensation Committee in
February 2016 and were based our 2016 budget, which was approved by the Board in
January 2016. Our budgeting process reflects thorough and thoughtful discussions
among management, and between management and our Board, to ensure that our
performance targets are rigorous yet realistic for our executive officers. In
determining our 2016 budget, which served as the basis for the targets for each
2016 financial performance measure, consideration was given to, among other
things:
● |
Our expectation that insurance
premium rates and insurable exposure units, which are units that
insurance companies use to measure or express insurance exposed to risk
(such as property values, sales and
payroll levels) to determine what premium to charge the insured, were
expected to remain constant or otherwise decline in 2016, making it more
difficult for our businesses to grow their
revenues; |
● |
Our planned investments during
2016 in technology, hiring new teammates, expanding our capabilities, and
developing new product lines, along with the expected impact of such
investments on our operating margins; and |
● |
The anticipated negative impact
on our 2016 revenues resulting from certain regulatory changes that had
already occurred, or were expected to occur in
2016. |
Table of
Contents
Compensation
Discussion and Analysis |
For each financial performance measure, we
make no payout for performance below a certain threshold. As part of our
pay-for-performance framework, the Compensation Committee adopted payout curves
that are intended to incentivize performance generally within a target payout
corridor and that provide for incrementally higher and lower payouts for
performance outside of the target payout corridor. Payout percentages for each
financial performance measure were calculated based on the following
tables:
Determination of 2016
Annual Cash Incentive Payouts. In January
2017, the Compensation Committee reviewed actual 2016 performance of each
financial performance measure against the target performance for each such
measure as set forth in the following table:
Financial Performance Measure |
|
Target |
|
Actual |
|
Percentage of Target
Performance |
|
Payout Percentage |
Adjusted EBITDAC Margin |
|
32.4% |
|
32.7% |
|
|
|
109.3% |
Company Organic Revenue growth |
|
2.6% |
|
3.0% |
|
115.4% |
|
113.5% |
Wholesale Brokerage Division Organic Revenue growth |
|
4.4% |
|
4.3% |
|
97.8% |
|
97.8% |
National Programs Division Organic Revenue growth |
|
3.2% |
|
4.2% |
|
131.3% |
|
125.2% |
Table of
Contents
Compensation
Discussion and Analysis |
With respect to the achievement of
personal objectives by each of the Named Executive Officers, which accounts for
20% of the 2016 cash incentive amount, the Compensation Committee evaluated the
level of achievement for each Named Executive Officers personal objectives in
January 2017. The evaluation for Mr. Powell Brown, our Chief Executive Officer,
was made by the Compensation Committee. For the other Named Executive Officers,
the Compensation Committee, after discussion,
consideration and review, accepted without modification the recommendations as
proposed by the Chief Executive Officer. The Compensation Committee evaluated
the achievement of each Named Executive Officers personal objectives in their
totality instead of assigning a weight to each particular personal
objective.
Name |
|
Personal Objectives |
|
Personal Objective Portion of 2016
Cash Incentive (0-200% of Target) |
J. Powell Brown |
|
●identification and
implementation of opportunities to leverage Companys full capabilities
for the benefit of its customers
●continued development
of the Senior Leadership Team and Company-wide talent
●contribution to
evolving capital allocation strategy to further increase shareholder
returns
●contribution to
performance of annual plan related to revenues and earnings per
share |
|
100% |
R. Andrew Watts |
|
●continued
contribution to the evolving capital allocation strategy to further
increase shareholder returns
●implementation of a
Company-wide technology strategy and technology upgrades
●work with the Senior
Leadership Team as a business partner
●further development
of the Companys finance and technology talent
●contribution to
monitoring and helping drive delivery of the Companys performance of its
annual plan related to revenues and earnings per share |
|
200% |
J. Scott Penny |
|
●contribution to
sourcing culturally compatible acquisition candidates that would be
expected to yield appropriate financial returns
●continued development
of the current acquisition resource team
●support of
cross-Company initiatives to deliver the full capabilities of the Company
for the benefit of its customers
●contribution to the
Companys performance of its annual plan related to revenues and earnings
per share |
|
100% |
Anthony T.
Strianese |
|
●further development
of the Wholesale Brokerage Divisions leadership team
●contribution to
sourcing culturally compatible acquisition candidates that would be
expected to yield appropriate financial returns
●contribution to
increasing the number of advancing insurance brokers within the Wholesale
Brokerage Division
●contribution to the
Wholesale Brokerage Divisions performance of its annual plan related to
revenues and pre-tax income |
|
128% |
Chris L. Walker |
|
●further development
of the National Program Divisions leadership team
●recruitment of
additional revenue-producing teammates to the National Programs
Division
●contribution to the
expansion of existing, and creation of new, insurance programs within the
National Programs Division
●contribution to the
National Program Divisions performance of its annual plan related to
revenues and pre-tax income |
|
100% |
As illustrated in the table below, the
final 2016 cash incentive amounts were calculated by combining the payout
amounts for each of the components discussed above and then rounding the
resulting number up to the nearest thousand dollars:
Executive Officer |
|
2016 Aggregate Target
Cash Incentive Amount |
|
Organic Revenue Growth
Payout Amount |
|
Adjusted EBITDAC Margin
Payout Amount |
|
Personal Objective
Payout Amount |
|
Total 2016 Cash
Incentive Payout Amount(1) |
|
Payout vs.
Target Cash Incentive Amount |
J.
Powell Brown |
|
$1,400,000 |
|
$631,773 |
|
$612,080 |
|
$280,000 |
|
$1,524,000 |
|
108.9% |
R.
Andrew Watts |
|
$400,000 |
|
$180,507 |
|
$174,880 |
|
$160,000 |
|
$516,000 |
|
129.0% |
J.
Scott Penny |
|
$800,000 |
|
$361,013 |
|
$349,760 |
|
$160,000 |
|
$871,000 |
|
108.9% |
Anthony T. Strianese |
|
$900,000 |
|
$352,763 |
|
$393,480 |
|
$230,400 |
|
$977,000 |
|
108.6% |
Chris L. Walker |
|
$900,000 |
|
$448,458 |
|
$393,480 |
|
$180,000 |
|
$1,022,000 |
|
113.6% |
(1) |
The 2016 cash incentive payouts
are also shown in the Summary Compensation Table under the Non-Equity
Incentive Plan Compensation column. |
Table of
Contents
Compensation
Discussion and Analysis |
While not exercised in 2016, the
Compensation Committee expressly reserves the right, in its sole discretion, to
reduce the annual cash incentive for any Named Executive Officer, or to pay no
annual cash incentive at all, if the Company's performance is unexpectedly poor
or if the intended recipient commits acts of malfeasance.
2016 Discretionary Bonuses
Each of the Named Executive Officers is
eligible to receive an additional discretionary bonus upon such terms and
conditions as might be determined by the Chief Executive Officer, subject to the
approval of the Compensation Committee, or, in the case of the Chief Executive Officer, as might be determined by the
Compensation Committee. None of our Named Executive Officers received a
discretionary bonus for 2016.
2016 SIP Grants
We endeavor to make our long-term equity
incentive arrangements competitive and aligned with shareholder interests. In
furtherance of this goal, in 2015, our Compensation Committee began a
comprehensive review of the components, structure and design of our long-term
equity incentive arrangements with our executive officers and other key
employees. Following an in-depth evaluation and
consideration of many factors, and based upon the recommendations of FW Cook, in
early 2016 the Compensation Committee made several modifications to the design
of our long-term equity incentive program. These changes were reflected as
follows in the March 2016 SIP awards granted to our executive officers and other
key employees:
Terms |
|
Rationale |
75% of
shares granted to each executive officer as Performance Stock Award
(PSA) that vest based on performance (over a three-year period) and time
(over a five-year period from the date of grant); 25% of shares granted to
each executive officer as Restricted Stock Award (RSA) that vest on time
only (over a five-year period from the date of grant) |
|
Tying a
majority of our equity awards to pre-established corporate financial
objectives which drive
long-term shareholder returns should more closely align the long-term interests of our executive officers and
our shareholders |
Vesting
of PSA shares tied to increases in the Companys Average Organic Sales
Growth (as defined in the applicable award agreement) and compound annual
growth rate of the Companys cumulative earnings per share, excluding any
impact for changes in acquisition earn-out liabilities, in each case
measured over a three-year period beginning January 1, 2016. |
|
Average
Organic Sales Growth and cumulative earnings per share are easily
understandable, directly influenced by our executive officers and are intended to drive our
long-term shareholder value |
PSAs
granted to our executive officers contemplate a minimum payout of 0% and a
maximum payout of 200% based upon the level of performance of each
performance condition during the three-year measurement period |
|
Payouts
for above-target performance motivate our executive officers to
overperform; recognition of performance that may be less than
target |
PSAs
are subject to both performance-based and time-based vesting conditions.
In addition to the performance conditions described above, PSAs granted in
March 2016 are subject to an additional time-based, cliff vesting
condition requiring five years of continuous employment from the date of
grant |
|
A
combination of performance- and time-based vesting conditions is intended
to achieve a strong alignment between pay and performance, and incentivize
the long-term retention of our executive officers and key
employees |
RSAs
are subject to a cliff vesting condition requiring five years of
continuous employment from the date of grant; RSA recipients acquired
voting and dividend rights at the time of grant, but cannot dispose of the
shares |
|
Equity
awards with time-based vesting conditions continue to operate as a
complement to our traditional equity awards characterized by both
performance-based and time-based vesting conditions to further incentivize
and reward key personnel; continued inclusion of a longer-term equity
award (e.g., five years) helps attract, motivate and retain individuals
whose performance drives our results |
Table of
Contents
Compensation
Discussion and Analysis |
Based upon the recommendation of our Chief
Executive Officer and, with respect to our Chief Executive Officer, based upon
the Compensation Committees annual evaluation of our Chief Executive
Officers performance, the following long-term equity
incentive awards for our Named Executive Officers were approved by our
Compensation Committee in March 2016:
Executive Officer |
|
2016 Performance Stock
Award (75%) |
|
2016 Restricted Stock
Award (25%) |
|
Total 2016 Long-Term Equity Incentive
Awards (100%) |
J. Powell Brown |
|
$937,500 |
|
$312,500 |
|
$1,250,000 |
R. Andrew Watts |
|
$375,000 |
|
$125,000 |
|
$500,000 |
J. Scott Penny |
|
$240,000 |
|
$80,000 |
|
$320,000 |
Anthony T. Strianese |
|
$375,000 |
|
$125,000 |
|
$500,000 |
Chris L. Walker |
|
$375,000 |
|
$125,000 |
|
$500,000 |
2016 Equity Incentive Plan Outcomes
January 2011 SIP Grants. In January 2011, certain of our Named Executive Officers
received grants of restricted stock under our SIP, which included a performance
condition of vesting based upon the compounded annual growth rate (CAGR) of
our earnings per share, excluding the impact of the change in estimated
acquisition earn-out payables and any other items (for example, extraordinary,
nonrecurring items) that the Compensation Committee determines to be
appropriately disregarded for all grants subject to this vesting condition
(Adjusted EPS). Under the applicable award agreements, this performance
condition is satisfied for (i) two-thirds of the shares granted if our
cumulative Adjusted EPS during the five-year performance period ending December
31, 2015 is at least $6.99 (i.e., a CAGR during the performance period of at
least 7.5%), and (ii) one-third of the shares granted if our cumulative Adjusted
EPS during the performance period is at least $7.52 (i.e., a CAGR during the
performance period of at least 10%).
In March 2016, the Compensation Committee
determined that our cumulative Adjusted EPS, which excluded the net pretax loss
on disposal of the Axiom Re business in 2014, during the performance period was
$7.24 (i.e., the CAGR during the performance period was greater than 7.5%, but
less than 10%), and, therefore, the performance condition was satisfied with
respect to two-thirds of the granted shares, as follows: Mr. Powell Brown,
39,684 shares; Mr. Penny, 33,418 shares; and Mr. Strianese, 33,418 shares. The
Compensation Committee concluded that it was desirable to exclude from the
calculation of Adjusted EPS the net pretax loss on disposal of the Axiom Re
business in 2014 because the sale of these assets was nonrecurring and in furtherance
of the Companys strategic plan to exit the reinsurance business. Upon the Compensation Committees certification of this
performance condition, Messrs. Powell Brown, Penny, and Strianese gained
dividend rights and voting entitlement with respect to these shares. Except in
limited circumstances, one-half of these shares become fully vested in three
equal installments on January 1, 2017, 2018, and 2019, respectively, and the
other half of these shares become fully vested on January 1, 2021, provided,
that in all cases, the grantee remains continuously employed by us until such
dates.
See Annex A for additional
information regarding Adjusted EPS, which is a non-GAAP financial measure,
including a reconciliation to the most closely comparable GAAP financial
measure.
2009 PSP and 2010 SIP
Grants. In July 2009 and April 2010,
Mr. Powell Brown received grants of restricted stock
under our PSP and SIP, respectively, which included a performance condition of
vesting that is satisfied in increments, or tranches, of 20% each time our
20-day average trading stock price increases by 20% during the seven-year period
beginning July 21, 2009.
In May 2016, the Compensation Committee
determined that the average closing price of our common stock was at least
$34.78 and, therefore, the performance condition was satisfied with respect to
the fourth tranche of such grants, totaling 41,408 shares. Upon the Compensation
Committees certification of this performance condition, Mr. Powell Brown gained
dividend rights and voting entitlement with respect to these shares, but full
ownership will not vest, except in limited circumstances, unless Mr. Powell
Brown remains continuously employed by us for a period of 20 years from the date
of grant.
2017 Compensation
As part of its ongoing evaluation of our
executive officers compensation and based, in part, on the recommendation of FW
Cook, in early 2017, the Compensation Committee approved the framework for our
executive officers compensation for 2017, as described below.
2017 Base Salaries
In January 2017, the Compensation
Committee determined not to increase the 2017 base salaries for the Named
Executive Officers, except for Mr. Penny, whose base salary increased from
$463,500 to $500,000, and Mr. Strianese, whose base salary increased from
$500,000 to $600,000. The decision to increase Mr. Pennys 2017 base salary was
based upon his individual performance during 2016 and in recognition of the fact
that his base salary had not been increased since
2014. The decision to increase Mr.
Strianeses 2017 base salary was part of the
Compensation Committees overall determination to increase his total direct
compensation in recognition of his individual performance and the performance of
the Companys Wholesale Brokerage Division, for which Mr. Strianese has
responsibility, during 2016 and
was accompanied by a decrease in Mr. Strianeses 2017 target cash
incentive amount from $900,000 to $850,000.
Table of
Contents
Compensation
Discussion and Analysis |
2017 Annual Cash Incentives
In February 2017, the Compensation
Committee determined not to change the components of our annual executive
officer cash incentives or the weighting of each component. The measurement
metrics and the following aggregate target cash incentive amounts for our named executive officers were reviewed and approved by
the Compensation Committee in early 2017 as part of our annual planning
process:
Executive Officer |
|
2016 Target Cash Incentive
Amount |
|
2017 Target
Cash Incentive Amount |
|
Change |
|
J. Powell Brown |
|
$1,400,000 |
|
$1,400,000 |
|
|
|
R. Andrew Watts |
|
$400,000 |
|
$525,000 |
|
125,000 |
(1) |
J. Scott Penny |
|
$800,000 |
|
$800,000 |
|
|
|
Anthony T. Strianese |
|
$900,000 |
|
$850,000 |
|
(50,000) |
(2) |
Chris L. Walker |
|
$900,000 |
|
$900,000 |
|
|
|
(1) |
The decision to increase Mr.
Watts 2017 target cash incentive amount from $400,000 to $525,000 was
based upon the increasing scope of Mr. Watts operational responsibilities
in 2016 and 2017 and the results of the comparative market assessment
conducted by FW Cook. As part of its consideration of the comparative
market assessment, the Compensation Committee concluded that Mr. Watts
2016 target total direct compensation was aligned with only the
25th percentile of the peer group, between the 25th
and 50th percentile of the general industry, and that the
amount of his 2016 target cash incentive amount was below the
50th percentile for the peer group and the general
industry. |
(2) |
The decision to decrease Mr.
Strianeses 2017 target cash incentive amount from $900,000 to $850,000
was part of the Compensation Committees overall determination to increase
his total direct compensation in recognition of his individual performance
and the performance of the Companys Wholesale Brokerage Division, for
which Mr. Strianese has responsibility, during 2016 and was accompanied by
an increase in Mr. Strianeses base salary from $500,000 to
$600,000. |
2017 SIP Grants
Based upon the recommendation of our Chief
Executive Officer and, with respect to our Chief Executive Officer, based upon
the Compensation Committees annual evaluation of our Chief Executive
Officers performance, as well as input from FW Cook,
the following long-term equity incentive awards for our Named Executive Officers
were approved by our Compensation Committee in February 2017:
Executive Officer |
|
2017 Performance Stock
Award (75%) |
|
2017 Restricted Stock
Award (25%) |
|
Total 2017 Long-Term Equity Incentive
Awards (100%) |
|
Total 2016 Long-Term Equity Incentive
Awards |
|
Change |
J. Powell Brown |
|
$1,125,000 |
|
$375,000 |
|
$1,500,000 |
|
$1,250,000 |
|
$250,000 |
R. Andrew Watts |
|
$375,000 |
|
$125,000 |
|
$500,000 |
|
$500,000 |
|
|
J. Scott Penny |
|
$240,000 |
|
$80,000 |
|
$320,000 |
|
$320,000 |
|
|
Anthony T. Strianese |
|
$375,000 |
|
$125,000 |
|
$500,000 |
|
$500,000 |
|
|
Chris L. Walker |
|
$375,000 |
|
$125,000 |
|
$500,000 |
|
$500,000 |
|
|
As part of its decision to increase Mr.
Powell Browns long-term equity incentive award in 2017 by $250,000, the
Compensation Committee considered the comparative market assessment conducted by
FW Cook in 2016 and concluded that Mr. Powell Browns 2016 target total direct
compensation was aligned with only the 25th percentile of the peer
group, between the 25th and 50th percentile of the general
industry, and that the amount of his 2016 long-term equity incentive was below
the 25th percentile for the peer group and the general
industry.
Other Compensation
We also provide the following compensation
and benefits to attract and retain key employees.
Table of
Contents
Compensation
Discussion and Analysis |
Benefits Generally
Along with all other full-time employees,
each of the Named Executive Officers is eligible: (a) to receive matching
contributions to the Companys 401(k) Plan; (b) to participate in the Company's
1990 Employee Stock Purchase Plan; (c) to participate in group medical, dental
and other benefit plans; and (d) to the extent permitted by applicable law, for
reimbursement of amounts earned by the Company on personal lines insurance such
as homeowners and flood insurance purchased by such Named Executive Officer. Our
401(k) Plan provides for matching contributions of up to four percent (4.0%) of
the contributions made by each participant. The 401(k) Plan also permits
discretionary profit-sharing contributions, but the Company made no such
contributions to the accounts of Named Executive Officers for 2016.
Dividend Payments on Unvested Stock Awards
The Named Executive Officers receive
dividends on unvested shares granted pursuant to the Companys equity incentive
compensation plans (i) that have exclusively time-based vesting requirements
(e.g., time-based Restricted Stock Awards), or (ii) for which the applicable
performance conditions have been satisfied in accordance with the applicable
award agreements (e.g., performance-based Performance Stock Awards).
Deferred Compensation Plan
The Named Executive Officers are eligible
to participate in the Companys non-qualified deferred compensation plan, which
provides the opportunity to defer receipt of up to 75% of salary and up to 100%
of cash incentive and bonus compensation. Participant deferrals are credited to
the participants deferral contribution account. The participant's account is
credited with earnings based on the performance of the participants investment
allocation among a menu of investment options designated by the Company. The
Company is permitted, but not required, to make matching contributions and other
discretionary contributions under this plan. The Company made no matching or
other discretionary contributions to the accounts of Named Executive Officers
for 2016.
A participants account under the Companys non-qualified deferred
compensation plan generally is distributed in a lump sum or installments upon
the participants retirement, other termination of employment or death. However,
in some circumstances (including hardship) all or a portion of the participants
deferral account may be distributed on one or more specified dates prior to
termination of employment. Participants elect at the time of deferral to have
the distributions made in a lump sum or annual installments.
Personal Benefits
Certain golf or social club membership
dues paid by the Named Executive Officers who have responsibility for the
entertainment of clients, prospective clients and principals of acquisition
prospects are reimbursed by the Company or paid on behalf of the Named Executive
Officer. Additionally, the Company reimburses the costs of annual physical
examinations that are not otherwise covered by insurance and for certain
financial and tax planning services for each of the Named Executive
Officers.
Policy on Tax Deductibility
The Compensation Committee considers the
anticipated tax treatment of the Companys compensation programs and payments,
including the potential impact of Section 162(m) of the United States Internal
Revenue Code of 1986, as amended. Section 162(m) disallows a tax deduction for
any publicly held corporation for individual compensation exceeding one million
dollars in any taxable year for any of the Named Executive Officers (excluding
the Chief Financial Officer), other than compensation that is performance-based
under a plan that is approved by the shareholders and that meets certain other
technical requirements. The deductibility of compensation payments can depend
upon numerous factors, including the nature of the payment and the time that
income is recognized under various awards. Interpretations of, and changes in,
applicable tax laws and regulations as well as other factors beyond the control
of the Compensation Committee also can affect deductibility of compensation. Our
general policy is to deliver equity-based compensation to employees in as
tax-efficient a manner as possible, taking into consideration the overall cost
to the Company. However, we believe that our interests and our shareholders
interests may sometimes be best served by providing compensation that is not
deductible in order to attract and retain high-quality people that are crucial
to both the short-term and long-term success of the Company. Accordingly, the
Compensation Committee retains the flexibility to provide for compensation that
is not deductible.
Table of
Contents
Compensation
Discussion and Analysis |
Payments Upon Termination or Change in Control
With the exception of Mr. Walker, all of
the Named Executive Officers have employment agreements with the Company that
include change-in-control provisions. The terms of our employment agreements
with our Named Executive Officers are described below in the section titled
Employment and Deferred Compensation Agreements.
The SIP provides for
double-trigger vesting under which all participants, including all of the Named
Executive Officers, would become vested in the following amounts if the
participants service with us is involuntarily or constructively terminated
(other than for specified causes, as set forth in the SIP) within 12 months
after a Transfer of Control as defined in the SIP:
●For
all grants, except those performance-based restricted stock grants in March 2016
and February 2017, 100% of all unvested restricted stock grants or stock
appreciation rights granted pursuant to such SIP grants agreements,
and
●For
those performance-based restricted stock grants in March 2016 and February 2017,
the greater of: (a) 100% of such unvested restricted stock grants or (b) the
percentage of unvested restricted stock grants determined in accordance with the
applicable performance schedule based upon the actual level of
achievement (up to the applicable maximum level of
achievement) from the first day of the performance period to the date on which
the Transfer of Control occurs.
For information concerning the value of
the vested shares that each of the Named Executive Officers would have under the
SIP in the event that termination of employment after Transfer of Control had
occurred on the last business day of 2016, please see the table titled
Potential Payments Upon Termination or Change in Control 2016
below.
The PSP (which was terminated in 2010)
provides that all outstanding grants of PSP stock shall become fully vested and
non-forfeitable in the event of: (i) the Companys entry into any agreement to
sell all or substantially all of its assets or to enter into any merger,
consolidation, reorganization, division or other corporate transaction in which
Company stock is converted into another security or into the right to receive
securities or property, where such agreement does
not provide for the assumption or substitution of PSP stock; (ii) any tender or
exchange offer for the Companys stock accepted by a majority of the
shareholders of the Company; or (iii) the death of J. Hyatt Brown and the
subsequent sale by his estate, his wife, his lineal descendants, any trust
created for his benefit during his lifetime, or any combination of the
foregoing, of the Company stock owned by J. Hyatt Brown prior to his death. The
PSP further provides that if any shares of PSP stock become fully vested and
non-forfeitable because of the occurrence of these events, the Company shall pay
to the holders of such shares, within 60 days of the occurrence of such event,
the full amount of any federal and state income tax liability incurred by such
holder as a result of such vesting, including, without limitation, any excise
tax with respect to such vesting (e.g., under Internal Revenue Code Section 4999
and any successor provision) as well as the amount of any tax liability with
respect to such gross-up payment. This excise tax gross-up provision is a
legacy provision that applies only to awards that were granted under the PSP
prior to its suspension in 2010, and no new agreements that contain excise tax
gross-up provisions have been entered into, and no previous agreements
containing such legacy provisions have been materially amended. Additionally,
the PSP provides that in the event of any Change in Control (as defined in the
PSP, and excluding the triggering events described above), the Board thereafter
shall have the right to take such action with respect to any shares of PSP stock
that are forfeitable, or all such shares of PSP stock, as the Board in its
discretion deems appropriate under the circumstances to protect the interests of
the Company in maintaining the integrity of the awards under the PSP. The PSP
further states that the Board shall have the right to take different action with
respect to different Key Employees (as defined in the PSP) or different groups
of Key Employees, as the Board in its discretion deems appropriate under the
circumstances. For information concerning the value of the vested PSP stock that
each of the Named Executive Officers would have in the event that one of the
triggering events described above occurred on the last business day of 2016,
please see the table titled Potential Payments Upon Termination or Change in
Control 2016 below.
Employment and Deferred Compensation
Arrangements
Messrs. Powell Brown, Penny and
Strianese
The Named Executive Officers other than
Mr. Watts and Mr. Walker, entered into new employment agreements with the
Company in 2014, replacing previous employment agreements that had different
terms. Compensation under these agreements is not specified, but rather is to be
agreed upon between us and the executive from time to time. See the section
titled, Compensation Discussion and Analysis for information concerning the
considerations affecting the compensation of the Named Executive Officers. The
agreements include a provision that states that in the event of a Change in
Control, defined as a circumstance in which the holders of more than 50% of the
voting stock of the Company before the
transaction closes hold less than 50% of the voting stock of the Company after
the transaction closes, if the resulting entity employs executives with duties
similar in character, classification or responsibilities to Executives, the
Agreement shall be deemed modified to provide Executive with equivalent terms
and benefits to those of similar executives. The new employment agreements
include, among other provisions, restrictive covenants prohibiting the
solicitation or diversion of business or employees for a period of two years
following voluntary or involuntary separation from employment, and also prohibit
disclosure of confidential information. These agreements may be terminated by
either party at any time, with or without cause or advance notice.
Table of Contents
Compensation Discussion and
Analysis |
Mr.
Watts
In connection with his hiring in 2014, Mr.
Watts and the Company entered into an employment agreement with a term ending on
February 17, 2017 (the Term) pursuant to which, among other things, Mr. Watts:
(1) receives a starting annual base salary of $500,000; (2) was eligible to
receive a performance-based bonus for calendar year 2014, payable in the first
quarter of 2015; (3) received a stock grant with a grant date fair value of
$250,002 that will fully vest five years after the date of grant, subject to
certain conditions (the PTSG Bonus); (4) received a stock grant with a grant
date fair value of $474,991 that will fully vest three years after the date of
grant, subject to certain conditions (the Transition Equity
Bonus); (5) received a stock grant with grant date fair value of $800,020 that
may be earned in five years based upon the Companys achievement of specified
performance targets and, if earned, will vest in years six, seven and eight; and
(6) was entitled to the reimbursement of relocation expenses of up to $100,000.
In 2014, Mr. Watts received reimbursement for relocation expenses in the amount
of $71,281, and in 2016, Mr. Watts received reimbursement for additional
relocation expenses in the amount $109,225. The Company reimbursed Mr. Watts for
relocation expenses in excess of the original limit of $100,000 because of the
actual expenses related to Mr. Watts relocation were higher than originally
expected and because the reimbursement of certain relocation expenses resulted
in unanticipated taxable income to Mr. Watts. In addition, Mr. Watts is eligible to
participate in the Company's medical, dental, vision, group life insurance,
long-term disability insurance, accidental, death and dismemberment insurance,
employee stock purchase plan, stock incentive plan, deferred compensation plan
and 401(k) plan. Following the conclusion of the Term on February 17, 2017, the
terms of the employment agreement continued in effect, except that the agreement
may now be terminated by either party at any time, with or without cause or
advance notice.
In addition, Mr. Watts employment
agreement provides that, during the Term, if his employment is terminated (a) by
the Company other than for Cause (as defined below); (b) by Mr. Watts for
Good Reason (as defined below); (c) due to death or permanent disability; or
(d) by the Company due to a Change in Control (as defined below), then the
Company will pay Mr. Watts (or in the event of his death, his estate) an amount
equal to the sum of his base salary and target cash incentive amount through the
end of the Term; $250,002, representing the grant date fair market value of the
PTSG Bonus; and $474,991, representing the grant date fair market value of
Transition Equity Bonus, all subject to certain customary conditions, including
Mr. Watts entry into a general release in favor of the Company and compliance
with restrictive covenants contained in his employment agreement.
Pursuant to Mr. Watts employment
agreement:
● |
Cause means, among other things,
(a) a material breach of any of the terms of the employment agreement
which remains uncured for 30 days after receiving written notice from the
Company; (b) repeated failures to perform
the services reasonably required of him by the Company which remains
uncured for 30 days after receiving written notice; (c) violation of the
Companys written discrimination or harassment policy; (d) conviction of a
felony or a crime involving moral turpitude; (e) the commission of certain
acts, such as those involving fraud, theft, embezzlement, conversion or
misappropriation of money or property, breach of any fiduciary duties to
the Company, violation of the Companys code of ethics; or (f) the loss,
limitation or suspension of his license to write insurance in any
jurisdiction where such license is material to the performance of his
duties; |
● |
Change in Control means a change
that would have to be reported in response to Item 6(e) of Schedule 14A of
the Regulation 14A promulgated under the Securities and Exchange Act of
1934, as amended, as well as certain other circumstances involving the
beneficial ownership of securities of the Company or the merger,
acquisition or consolidation of the Company and its subsidiaries;
and |
● |
Good Reason means (i) the Company,
without Mr. Watts written consent, (a) materially reduces his salary,
duties, or position, (b) commits a material breach of the employment
agreement, or (c) materially changes the geographic location at which he
must perform services for the Company; (ii) Mr. Watts provides written
notice to the Company of any such action within 90 days of the date on
which such action first occurs and provides the Company with 30 days to
remedy such action (the Cure Period); and (iii) the Company fails to
remedy such action within the Cure Period. |
Mr.
Walker
Mr. Walker entered into an employment
agreement with the Company effective January 9, 2012, in connection with our
acquisition of Arrowhead General Insurance Agency, Inc. The agreement may be
terminated by either party at any time, with or without cause or advance notice.
Compensation under the agreement is at an amount agreed upon between us and Mr.
Walker from time to time, and for a period of two years following the
termination of employment, the agreement prohibits Mr. Walker from directly or
indirectly soliciting or servicing our clients, or soliciting our employees to
leave their employment with us.
The above descriptions of our employment
agreements with our Named Executive Officers are summaries and are qualified by
reference to the copies of such agreements that have been filed as exhibits to
our SEC filings as follows:
● |
With respect to Messrs. Powell
Brown, Penny and Strianese, Exhibit 10.2 to
Form 10-Q for the quarter ended September 30,
2014; |
● |
With respect to Mr. Watts, Exhibit
10.2 to Form 10-Q for the quarter ended March 31, 2014;
and |
● |
With respect to Mr. Walker, Exhibit
10.1 to Form 10-Q for the quarter ended March 31,
2013. |
Table of Contents
Compensation Discussion and
Analysis |
Hedging and Pledging Policies; Stock
Ownership Requirements; Clawback Policy
The Board has adopted policies prohibiting
the hedging (as defined below) of our stock by directors, executive officers,
and other members of our Senior Leadership Team and prohibiting the pledging of
our stock by directors, as well prohibiting the pledging of our stock held
pursuant to our stock ownership requirements by our executive officers and other
members of our Senior Leadership Team. For the purposes of this policy,
hedging includes engaging in short sales of Company stock and engaging in
hedging transaction in publicly traded options
that are based on the trading price of Company stock, such as puts, calls and
other derivative securities. Our stock ownership requirements provide that
members of the Companys Senior Leadership Team must accumulate Company stock
valued at the following multiples of their base salaries within three years of
hire or promotion, and retain such stock until retirement, separation from
employment, or removal from one of the categories set forth
below:
Stock
Ownership Guidelines - NEO Compliance As of December 31,
2016
|
(1) |
Ownership levels include (i) shares owned directly or indirectly,
excluding shares owned by immediate family members as to which beneficial
ownership is disclaimed; (ii) unvested PSP shares that have met the
applicable performance conditions under the applicable award agreements
and (iii) unvested SIP shares that (a) are subject to a time-based-only
vesting condition or (b) have met the applicable performance conditions
under the applicable award agreements. |
(2) |
The ownership requirements are as follows: Chief Executive Officer -
six times base salary; Senior Leadership Team members who are officers
pursuant to Section 16 of Securities Exchange Act 1934 - three times base
salary; and Senior Leadership Team members who are not officers pursuant
to Section 16 of the Securities Exchange Act of 1934 - one times base
salary. |
In addition, each non-employee director is
encouraged to accumulate at least $100,000 worth of Company stock within five
years of joining the Board, and to retain such stock until after such service as
a member of the Board has ceased.
The Board has adopted a policy that
provides for the clawback of certain performance-based compensation in the event
of a restatement of the Companys financial results, other than a restatement
caused by a change in applicable accounting rules or interpretations. Under the
policy, if any performance-based equity or non-equity compensation paid to a
current or former officer of the Company in the three years prior to the date of
restatement would have been a lower amount had it been calculated based on the
restated results, the Boards Compensation Committee will evaluate recovery of such performance-based equity or
non-equity compensation. If a recovery is determined to be appropriate, then the
Compensation Committee will seek to recover, for the benefit of the Company and
to the extent permitted by applicable law, the after-tax portion of the
difference between the previously awarded compensation and the recalculated
compensation.
In determining whether to seek recovery
under the Companys clawback policy, the Compensation Committee will take into
account such considerations as it deems appropriate, including, without
limitation, whether the assertion of a claim may violate applicable law or
prejudice the interests of the Company in any related proceeding or
investigation, and the likelihood of success under applicable law.
Table of Contents
Compensation Discussion and
Analysis |
Proposal
4 |
Approval, on
an Advisory Basis, of One Year as the Interval at Which an Advisory Vote
on the Compensation of the Named Executive Officers will be
Conducted |
We are required to provide our
shareholders with the opportunity to vote, on a nonbinding, advisory
basis, for their preference on how frequently an advisory vote on the
compensation of our named executive officers, such as the say on pay
proposal, above, should be conducted. By voting on this Proposal 4,
shareholders may indicate whether they would prefer an advisory vote on
named executive officer compensation once every one, two, or three
years.
✓The Board unanimously recommends a vote FOR one year on this
proposal. |
After careful consideration, our Board has
determined that an advisory vote on executive compensation that occurs every
year is the most appropriate alternative for the Company, and therefore our
Board recommends that you vote for a one-year interval for the advisory vote on
executive compensation. In determining its recommendation, our Board considered
that an annual advisory vote on executive compensation will allow our
shareholders to provide us with their direct input on our compensation
philosophy, policies and practices as disclosed in the Proxy Statement every
year.
This vote is advisory, and therefore not
binding on the Company, the Compensation Committee or our Board. Our Board and
our Compensation Committee value the opinions of our shareholders and will take
into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive
compensation. The Board may decide that it is in the best interests of our
shareholders and the Company to hold an advisory vote on executive compensation
more or less frequently than the option approved by our shareholders.
You may cast your vote on your preferred
voting frequency of an advisory vote on executive compensation by choosing any
one of the following options: an advisory vote every one year; an advisory vote
every two years; an advisory vote every three years; or abstaining from voting.
Please note that when casting a vote on this proposal, you will not be voting to
approve or disapprove the Boards recommendation.
Vote Required;
Board Recommendation
The option that receives the highest
number of votes cast by shareholders will indicate the frequency for the
advisory vote on executive compensation selected by shareholders casting votes
on this Proposal. Abstentions and broker non-votes will have no effect on the
vote.
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR ONE YEAR ON THIS
PROPOSAL |
Table of Contents
EXECUTIVE
COMPENSATION TABLES
The following table sets forth the
compensation received by our Named Executive Officers for services rendered to
us in such capacity for the years ended December 31, 2016, 2015 and 2014, except
in the case of Mr. Walker, who was not a named executive officer in 2014, for
the year ended December 31, 2014.
Summary Compensation Table
2014-2016
Name and Principal Position |
Fiscal Year |
|
Salary ($) |
|
Bonus ($) |
|
Stock Awards ($)(1) |
|
Non-Equity Incentive
Plan Compensation ($) |
|
All
Other Compensation ($)(2) |
|
Total ($) |
J.
Powell Brown |
2016 |
|
1,000,000 |
|
|
|
1,249,963 |
|
1,524,000 |
|
143,668 |
|
3,917,631 |
Chief Executive Officer and |
2015 |
|
1,029,422 |
|
|
|
399,993 |
|
958,000 |
|
118,143 |
|
2,505,558 |
President |
2014 |
|
787,509 |
|
217,460 |
|
499,991 |
|
1,304,400 |
|
112,319 |
|
2,921,679 |
R.
Andrew Watts |
2016 |
|
500,000 |
|
|
|
499,985 |
|
516,000 |
|
148,784 |
|
1,664,769 |
Chief Financial Officer |
2015 |
|
500,000 |
|
|
|
349,986 |
|
239,000 |
|
32,111 |
|
1,121,097 |
Executive Vice President and Treasurer |
2014 |
|
423,077 |
|
|
|
1,525,013 |
|
331,474 |
|
855,354 |
|
3,134,918 |
J.
Scott Penny |
2016 |
|
463,500 |
|
|
|
319,975 |
|
871,000 |
|
79,862 |
|
1,734,337 |
Executive Vice President and |
2015 |
|
463,500 |
|
|
|
199,996 |
|
625,000 |
|
66,873 |
|
1,355,369 |
Chief Acquisitions Officer |
2014 |
|
469,867 |
|
|
|
300,008 |
|
869,634 |
|
55,086 |
|
1,694,595 |
Anthony T. Strianese |
2016 |
|
500,000 |
|
|
|
499,985 |
|
977,000 |
|
74,692 |
|
2,051,677 |
Executive Vice President and |
2015 |
|
500,000 |
|
|
|
324,998 |
|
900,000 |
|
57,925 |
|
1,782,923 |
President Wholesale Brokerage Division |
2014 |
|
505,385 |
|
|
|
300,008 |
|
1,034,888 |
|
59,781 |
|
1,900,062 |
Chris
L. Walker |
2016 |
|
500,000 |
|
|
|
499,985 |
|
1,022,000 |
|
22,649 |
|
2,044,634 |
Executive Vice President and |
2015 |
|
497,292 |
|
|
|
199,996 |
|
625,000 |
|
17,019 |
|
1,339,307 |
President Programs Division |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts shown under
the Stock Awards column reflect the aggregate grant date fair value of
awards computed in accordance with Statement of Financial Accounting
Standards ASC Topic 718 (formerly SFAS 123(R)) with respect to stock
granted under the SIP to our Named Executive Officers rather than the
dollar amount recognized during the fiscal year for financial statement
purposes. The assumptions used for the valuations are set forth in Note 11
to our audited consolidated financial statements in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2016. See the
Compensation Discussion and Analysis and the Outstanding Equity Awards
at 2016 Fiscal Year-End tables for information with respect to stock
granted under the SIP and PSP prior to 2016. For awards that are
performance based, the indicated grant date fair value amounts assume that
the target level of performance will be achieved. |
(2) |
These dollar amounts
include the items identified in the table titled All Other Compensation
Table 2016 below. |
Table of Contents
Executive Compensation
Tables |
All Other Compensation Table
2016
Name |
Year |
|
Perquisites and
Other Personal Benefits ($)(1) |
|
Insurance Premiums ($)(2) |
|
Company Contributions to
Retirement and 401(k) Plans ($) |
|
Cash Dividends ($)(3) |
|
Other
($) |
|
|
Total
($) |
J.
Powell Brown |
2016 |
|
3,633 |
|
|
|
10,600 |
|
129,435 |
|
|
|
|
143,668 |
|
2015 |
|
15,885 |
|
|
|
10,600 |
|
91,658 |
|
|
|
|
118,143 |
|
2014 |
|
24,055 |
|
|
|
10,400 |
|
77,864 |
|
|
|
|
112,319 |
R.
Andrew Watts |
2016 |
|
9,752 |
|
|
|
10,600 |
|
19,207 |
|
109,225 |
(4) |
|
148,784 |
|
2015 |
|
5,421 |
|
|
|
10,600 |
|
16,090 |
|
|
|
|
32,111 |
|
2014 |
|
|
|
|
|
10,400 |
|
7,593 |
|
837,361 |
(5) |
|
855,354 |
J.
Scott Penny |
2016 |
|
7,988 |
|
2,955 |
|
10,600 |
|
58,319 |
|
|
|
|
79,862 |
|
2015 |
|
7,192 |
|
2,907 |
|
10,600 |
|
46,174 |
|
|
|
|
66,873 |
|
2014 |
|
3,853 |
|
2,590 |
|
9,398 |
|
39,245 |
|
|
|
|
55,086 |
Anthony T. Strianese |
2016 |
|
9,753 |
|
964 |
|
10,600 |
|
53,375 |
|
|
|
|
74,692 |
|
2015 |
|
3,781 |
|
|
|
10,600 |
|
43,544 |
|
|
|
|
57,925 |
|
2014 |
|
5,016 |
|
|
|
10,400 |
|
44,365 |
|
|
|
|
59,781 |
Chris
L. Walker |
2016 |
|
4,151 |
|
|
|
|
|
18,498 |
|
|
|
|
22,649 |
|
2015 |
|
1,567 |
|
|
|
|
|
15,452 |
|
|
|
|
17,019 |
(1) |
These amounts include
reimbursement of the cost of annual physical examinations to the extent
not otherwise covered by insurance, the reimbursement of the cost of
certain financial and tax planning services and reimbursement of certain
club membership dues and car service expenses. For additional information,
please see Compensation Discussion and Analysis - Other
Compensation. |
(2) |
These amounts include
amounts earned by the Company and reimbursed to these employees for
personal lines insurance purchased by these employees through the Company
or its subsidiaries. |
(3) |
These amounts
represent cash dividends paid on granted PSP and SIP shares for which
conditions of vesting other than time-based conditions have been
satisfied. |
(4) |
This amount includes
relocation expenses that included closing costs of $72,823 related to the
sale of Mr. Watts home in New Jersey and $36,402 for the reimbursement of
income taxes related to his relocation (including income taxes in the
amount of $8,667 related to amounts reimbursed to him in 2014) and related
tax gross-up amounts. |
(5) |
This amount includes a
transition cash bonus of $225,000 to compensate Mr. Watts for a cash bonus
that he did not receive from his previous employer due to his acceptance
of employment with the Company, a transition cash bonus of $500,000 to
compensate Mr. Watts for a stock award that he did not receive from his
previous employer due to acceptance of employment with the Company,
relocation expenses totaling $71,281 and expenses of $41,080 related to
travel to and from Mr. Watts home in New Jersey to his office in Daytona
Beach, Florida. |
Table of Contents
Executive Compensation Tables |
Grants of Plan-Based Awards in Fiscal
2016
The following table provides information
about the range of possible annual incentive cash payouts in respect of 2016
performance, the range of shares that may be earned pursuant to the stock grants
made to our Named Executive Officers under our SIP in 2016 and the grant date
fair value of these stock grants computed under Statement of Financial
Accounting Standards ASC Topic 718 (formerly SFAS 123(R)).
Name |
Grant Date |
|
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards(1) |
|
Estimated Future Payouts
Under Equity Incentive Plan Awards(2) |
|
Grant Date Fair Value of Stock
Awards ($)(5) |
Threshold ($)(3) |
|
Target ($) |
|
Maximum ($)(4) |
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
J.
Powell Brown |
2/19/16 |
|
0 |
|
1,400,000 |
|
2,800,000 |
|
|
|
|
|
|
|
|
|
3/23/16 |
|
|
|
|
|
|
|
0 |
|
26,430 |
|
52,860 |
|
937,472 |
|
3/23/16 |
|
|
|
|
|
|
|
|
|
8,810 |
|
8,810 |
|
312,491 |
R.
Andrew Watts |
2/19/16 |
|
0 |
|
400,000 |
|
800,000 |
|
|
|
|
|
|
|
|
|
3/23/16 |
|
|
|
|
|
|
|
0 |
|
10,572 |
|
21,144 |
|
374,989 |
|
3/23/16 |
|
|
|
|
|
|
|
|
|
3,524 |
|
3,524 |
|
124,996 |
J.
Scott Penny |
2/19/16 |
|
0 |
|
800,000 |
|
1,600,000 |
|
|
|
|
|
|
|
|
|
3/23/16 |
|
|
|
|
|
|
|
0 |
|
6,766 |
|
13,532 |
|
239,990 |
|
3/23/16 |
|
|
|
|
|
|
|
|
|
2,255 |
|
2,255 |
|
79,985 |
Anthony T. Strianese |
2/19/16 |
|
0 |
|
900,000 |
|
1,800,000 |
|
|
|
|
|
|
|
|
|
3/23/16 |
|
|
|
|
|
|
|
0 |
|
10,572 |
|
21,144 |
|
374,989 |
|
3/23/16 |
|
|
|
|
|
|
|
|
|
3,524 |
|
3,524 |
|
124,996 |
Chris
L. Walker |
2/19/16 |
|
0 |
|
900,000 |
|
1,800,000 |
|
|
|
|
|
|
|
|
|
3/23/16 |
|
|
|
|
|
|
|
0 |
|
10,572 |
|
21,144 |
|
374,989 |
|
3/23/16 |
|
|
|
|
|
|
|
|
|
3,524 |
|
3,524 |
|
124,996 |
(1) |
For additional
information related to the annual cash incentive awards including
performance targets and measures, see the Compensation Discussion and
Analysis section of this Proxy Statement. |
(2) |
The Estimated Future
Payouts Under Equity Incentive Plan Awards column shows the range of
shares that may be earned pursuant to the stock awards granted under our
SIP in 2016. For additional information related to these grants, see the
Compensation Discussion and Analysis section of this Proxy
Statement. |
(3) |
For additional
information related to the annual cash incentive awards including
performance targets and measures, see the Compensation Discussion and
Analysis section of this Proxy Statement. |
(4) |
For additional
information related to the annual cash incentive awards including
performance targets and measures, see the Compensation Discussion and
Analysis section of this Proxy Statement. |
(5) |
The Grant Date Fair
Value of Stock Awards column shows the full grant date fair value of the
shares granted to our Named Executive Officers under our SIP in 2016. The
grant date fair value of the awards is determined under Statement of
Financial Accounting Standards ASC Topic 718 (formerly SFAS 123(R)) and
represents the amount we would expense in our financial statements over
the vesting schedule for the grants. In accordance with SEC rules, the
amounts in this column reflect the actual ASC 718 accounting cost without
reduction for estimates of forfeitures related to service-based vesting
conditions. The fair value of each share underlying a SIP award for this
purpose is equal to the closing price per share of a share of our common
stock on the grant date. The amounts reflect our accounting for these
grants and do not correspond to the actual values that may be realized by
the grantees. |
Table of Contents
Executive Compensation Tables |
Fiscal Year-End Option and Stock Award
Values
The closing market price of our stock
underlying the stock options granted under the ISO Plan was $44.86 per share as
of December 31, 2016. The resulting difference between the year-end market price
and the exercise price per share of $18.48 for options granted in 2008 is $26.38
per share. Therefore, the values at fiscal year-end of unexercised
in-the-money options granted to the Named Executive Officers, in addition to
the unvested stock awards, are as set forth in the table below:
Outstanding Equity Awards at Fiscal
Year-End - 2016
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(1) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested ($)(2) |
J. Powell |
|
105,000 |
|
|
|
|
|
18.48 |
|
2/26/2018 |
|
|
|
|
|
|
|
|
Brown |
|
|
|
|
|
|
|
|
|
|
|
275,320 |
|
12,350,855 |
|
96,219 |
|
4,316,384 |
R. Andrew |
|
|
|
|
|
|
|
|
|
|
|
39,082 |
|
1,753,219 |
|
36,572 |
|
1,640,620 |
Watts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott |
|
20,000 |
|
|
|
|
|
18.48 |
|
2/26/2018 |
|
|
|
|
|
|
|
|
Penny |
|
|
|
|
|
|
|
|
|
|
|
120,575 |
|
5,408,995 |
|
43,987 |
|
1,973,257 |
Anthony T. |
|
50,000 |
|
|
|
|
|
18.48 |
|
2/26/2018 |
|
|
|
|
|
|
|
|
Strianese |
|
|
|
|
|
|
|
|
|
|
|
111,744 |
|
5,012,836 |
|
47,793 |
|
2,143,994 |
Chris L. |
|
|
|
|
|
|
|
|
|
|
|
37,671 |
|
1,689,921 |
|
47,793 |
|
2,143,994 |
Walker |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The market value shown
was determined by multiplying the number of shares of stock that have not
vested by $44.86, the closing market price of our common stock on December
31, 2016. |
(2) |
The market value shown
was determined by multiplying the number of unearned stock shares (at
target) by $44.86, the closing market price of our common stock on
December 31, 2016. |
Table of Contents
Executive Compensation Tables |
Option Exercises and Stock Vested -
2016
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number of Shares Acquired on Exercise (#) |
|
Value Realized on Exercise ($)(1) |
|
Number of Shares Acquired on Vesting (#) |
|
Value Realized on
Vesting ($)(2) |
J. Powell Brown |
|
|
|
|
|
17,140 |
|
613,612 |
R. Andrew Watts |
|
|
|
|
|
|
|
|
J. Scott Penny |
|
34,589 |
|
548,927 |
|
17,140 |
|
613,612 |
Anthony T. Strianese |
|
30,000 |
|
474,000 |
|
14,280 |
|
511,224 |
Chris L. Walker |
|
|
|
|
|
|
|
|
(1) |
The value realized
upon the exercise of options is the difference between the exercise or
base price and the market price of our common stock upon exercise. The
value realized was determined without considering any taxes that were owed
upon exercise. |
(2) |
The value realized
upon the vesting of stock awards is the number of shares multiplied by the
market value of the underlying shares on the vesting date. The value
realized was determined without considering any taxes that were owed upon
vesting. |
Nonqualified Deferred Compensation at
Fiscal Year-End - 2016
Name |
|
Executive Contributions(1) $ |
|
Registrant Contributions $ |
|
Aggregate Earnings $ |
|
Aggregate Withdrawals/ Distributions $ |
|
Aggregate Balance at
12/31/2016 $ |
J. Powell Brown |
|
239,500 |
|
|
|
101,504 |
|
|
|
1,087,750 |
R. Andrew Watts |
|
|
|
|
|
|
|
|
|
|
J. Scott Penny |
|
|
|
|
|
13,412 |
|
|
|
139,491 |
Anthony T. Strianese |
|
50,000 |
|
|
|
22,990 |
|
|
|
241,103 |
Chris L. Walker |
|
|
|
|
|
|
|
|
|
|
(1) |
In each instance, the
indicated executive contribution is included in the amounts reported for
that Named Executive Officer in the Summary Compensation Table for
2016. |
Table of Contents
Executive Compensation
Tables |
Potential Payments Upon Termination or
Change in Control - 2016
Name |
|
Benefit(1) |
|
Before Change in Control Termination w/o Cause
Resignation for Good Reason ($) |
|
After Change in Control Termination w/o Cause or
Resignation for Good Reason($) |
|
Voluntary Termination($) |
|
Death($) |
|
Disability($) |
|
Change in Control($)(2) |
J.
Powell Brown |
|
ISO |
|
|
|
2,769,900 |
|
|
|
|
|
|
|
|
|
|
PSP |
|
|
|
|
|
|
|
2,206,753 |
|
2,206,753 |
|
3,378,999 |
|
|
SIP(3) |
|
|
|
14,697,616 |
|
|
|
|
|
|
|
|
R.
Andrew Watts |
|
Employment |
|
836,774 |
|
836,774 |
|
|
|
836,774 |
|
836,774 |
|
836,774 |
|
|
Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIP(3) |
|
|
|
3,488,690 |
|
|
|
|
|
|
|
|
J.
Scott Penny |
|
ISO |
|
|
|
527,600 |
|
|
|
|
|
|
|
|
|
|
PSP |
|
|
|
|
|
|
|
1,720,291 |
|
1,720,291 |
|
2,634,125 |
|
|
SIP(3) |
|
|
|
5,722,665 |
|
|
|
|
|
|
|
|
Anthony T. Strianese |
|
ISO |
|
|
|
1,319,000 |
|
|
|
|
|
|
|
|
|
PSP |
|
|
|
|
|
|
|
1,089,919 |
|
1,089,919 |
|
1,668,893 |
|
|
SIP(3) |
|
|
|
6,161,763 |
|
|
|
|
|
|
|
|
Chris L. Walker |
|
ISO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIP(3) |
|
|
|
3,928,767 |
|
|
|
|
|
|
|
|
(1) |
All figures shown for the value of stock granted under
the PSP, SIP and the ISO Plan that would vest upon death, disability or
following a change in control are calculated based on the assumption that
the triggering event(s) for such vesting took place on December 31, 2016,
the last business day of the Companys last completed fiscal year, and
that the price per share of our common stock is $44.86, the closing market
price as of that date. Other than the amounts shown in the column
captioned Change of Control, all amounts payable may be subject to
reduction under Sections 280G and 4999 of the Internal Revenue Code. For
more detailed information concerning the change-in-control provisions of
the PSP, the ISO Plan and the SIP, please see the section titled
Compensation Discussion and Analysis - Payments Upon Termination or
Change in Control, above. |
(2) |
The figures shown in this column represent amounts that
would be paid pursuant to the terms of the PSP in the event of a change in
control as defined in the PSP and include the following excise tax
gross-up amount to be paid by the Company on PSP shares on behalf of the
participant in the event of change in control: Mr. Powell Brown
$1,172,246; Mr. Penny - $913,833 and Mr. Strianese - $578,974. The excise
tax gross-up amount has been calculated assuming the excise tax rate of
20% multiplied by the excess of the value of the change-in-control
payments over the executives average W-2 earnings for the last five
calendar years, and assuming a blended effective tax rate of approximately
40% for each executive. However, the excise tax gross-up is only
applicable if the sum of all payments equals or exceeds three times the
executives average W-2 earnings for the past five calendar years.
Further, the excise tax gross-up assumes no value is assigned to
non-competition and other restrictive covenants that may apply to the
participant. Such excise tax gross-up amounts also assume a change in
control date of December 31, 2016, at our closing market price of $44.86
as of that date. The excise tax gross-up provision is a legacy provision
that applies only to awards that were granted under the PSP prior to its
suspension in 2010, and does not apply to awards under the SIP or the ISO
Plan. No new agreements that contain excise tax gross-up provisions have
been entered into, and no previous agreements containing such legacy
provisions have been materially amended. |
(3) |
The figures shown in this row were determined as
follows: (a) for all grants, except those performance-based restricted
stock grants in March 2016, the amount contemplates 100% of all unvested
restricted stock grants or stock appreciation rights granted pursuant to
such SIP grants agreements, and (b) for those performance-based restricted
stock grants in March 2016, the amount contemplates the greater of: (i)
100% of such unvested restricted stock grants or (ii) the percentage of
unvested restricted stock grants determined in accordance with the
applicable performance schedule based upon the actual level of achievement
(up to the applicable maximum level of achievement) from the first day of
the performance period to December 31, 2016, the date on which the
Transfer of Control occurs. |
Table of Contents
Executive Compensation
Tables |
Proposal 5 |
An Amendment to the Companys 2010 Stock Incentive Plan to
Increase Shares Available for Issuance |
On March 14, 2017, the Compensation
Committee approved, pursuant to approval by the Board of Directors, an
additional amendment to the SIP, which provides for a 1,300,000 share
increase in the aggregate number of shares of the Companys common stock
that may be subject to future awards under the SIP, subject to shareholder
approval. Therefore, this amendment will not become effective if the
shareholders do not approve it.
✓The Board recommends a vote FOR this
proposal. |
This amendment is proposed in order to
give the Company flexibility to grant incentive and non-qualified stock options,
stock appreciation rights, and restricted stock and restricted stock units under
the SIP. As evidenced by our long-standing practice of granting
performance-based stock awards with additional time-based vesting conditions,
the Company believes that grants of stock-based awards help to motivate high
levels of performance, incentivize long-term employee retention, and provide an
effective means of recognizing employee contributions to the success of the
Company. Moreover, stock-based award grants align the interests of the employees
with the interests of the shareholders. When the Company performs well,
employees are rewarded along with other shareholders. The Company believes
that stock-based award grants are of great value
in recruiting and retaining highly qualified technical and other key personnel
who are in great demand. The Board of Directors believes that the ability to
grant stock-based awards will be important to the Companys future success by
allowing it to remain competitive in attracting and retaining such key
personnel.
If this amendment is approved by
shareholders, the shares available for future awards will increase to 5,029,566
based on the 3,729,566 shares remaining available for grant under the SIP as of
December 31, 2016. Of this amount, the payout for 321,955 shares may be
increased up to 200% of the target or decreased to zero, subject to the level of
performance attained.
Vote Required; Board Recommendation
In order to pass, this Proposal 5 must
receive the affirmative vote of a majority of the votes cast on the Proposal.
The Board of Directors believes that the approval of Proposal 5 is in the best
interests of the Company and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THIS
PROPOSAL. |
Summary of Outstanding Awards under Our
Equity Compensation Plans
A summary of the number of shares subject
to outstanding awards under the SIP, the PSP, and the ISO as of December 31,
2016, is as follows:
Unvested stock
options |
0 |
|
Vested stock options |
175,000 |
|
Restricted stock grants not yet
awarded |
3,726,762 |
(1) |
Unvested awarded restricted stock
grants |
3,404,569 |
|
Total number of shares subject to
outstanding awards |
7,306,331 |
|
(1) |
Of this amount, the payout for
321,955 shares may be increased up to 200% of the target or decreased to
zero, subject to the level of performance attained. The amount reflected
in the table includes all restricted stock grants at a target payout of
100%. |
With respect to the outstanding stock
options, as of December 31, 2016, the weighted average exercise price was
$18.48, and the weighted average remaining contractual term was 1.2 years. With
respect to the outstanding restricted stock grants, 68.43% are performance-based
grants that include additional time-based vesting conditions. The measurement
periods for the performance conditions that must be satisfied for the awarding
of these grants range from three to seven years,
and the additional time-based conditions require at least five years, and as
many as 20 years, of service for full vesting of the awarded grants. More than
one-third of the unvested awarded restricted stock grants are PSP grants that
have satisfied the performance condition required for awarding, but remain
unvested subject to the satisfaction of an additional 15-year service
condition.
Shareholder-Friendly Features of the
SIP
We endeavor to ensure that the design and
administration of the SIP, including the SIP amendment that is the subject of
this proposal, are consistent with the policies and limitations recommended by
independent shareholder advisory groups, such as
Institutional Shareholder Services (ISS). One of the most significant aspects
of the ISS evaluation of the proposed available share increase is
Table of Contents
Executive Compensation Tables |
the projected cost or shareholder value
transfer of the amended SIP relative to the Companys market and industry
peers. This shareholder value transfer evaluation takes into account all of the
Companys outstanding option and restricted stock grants under the SIP, the PSP,
and the ISO Plan, referred to as overhang. Under the ISS analysis, a high
overhang increases the projected shareholder value transfer cost of a proposed
increase in available shares under a plan like the SIP. As a result of the
relatively lengthy service conditions that the Company has applied to
performance-based awards granted under the PSP and the
SIP, our overhang is significantly higher than it would be if we granted shares
subject to shorter vesting periods, or granted shares that become vested
immediately upon satisfaction of performance conditions. Therefore, our emphasis
on both pay-for-performance and long-term employee retention in the design of
our restricted stock grants limits the number of additional shares that we are
able to propose to the shareholders within the policies recommended by
ISS.
|
|
|
|
Shareholder-Friendly Plan Features and Grant Practices under
the SIP |
|
|
● |
Double-trigger change in
control vesting provisions |
● |
Cliff vesting on all time-based
vesting conditions, except in limited circumstances |
|
|
|
|
|
|
|
|
● |
No excise tax gross-up
provisions |
● |
Majority of awards tied to both
time- and performance-based vesting conditions |
|
|
|
|
|
|
|
|
● |
No liberal share recycling of
awards |
● |
Lengthy service conditions on
all awards and that extend beyond measurement period for performance-based
awards |
|
|
|
|
|
|
|
|
● |
For awards with both time-and
performance-based vesting conditions, dividends and voting rights
entitlement only on shares that have achieved performance goals |
● |
Performance-based vesting
conditions tied to metrics that are aligned with long-term shareholder
interests, including adjusted earnings per share, organic revenue growth,
and stock price |
|
|
|
|
|
|
|
Shares Available for Future Grant under the
SIP
Based on the shares available for future
grants under the SIP and the outstanding awards under the SIP, the PSP, and the
ISO Plan as of December 31, 2016, if the shareholders approve the amendment to
the SIP, the number of shares subject to outstanding awards and available for
future grants would be as follows:
Shares subject to
outstanding awards under the SIP, PSP, and ISO Plan |
7,306,331 |
|
Shares available for future grants under the
SIP |
5,029,566 |
(1) |
Total shares |
12,335,897 |
|
(1) |
Of this amount, the payout for
321,955 shares may be increased up to 200% of the target or decreased to
zero, subject to the level of performance attained. The amount reflected
in the table is calculated assuming the maximum payout for all restricted
stock grants. |
Based on the 140,103,841 shares
outstanding on December 31, 2016, this total number of shares subject to
outstanding awards and available for future grants under the SIP, if the
shareholders approve the amendment to the SIP, would be 8.09% of the fully diluted
outstanding shares.
Calculation of our Average Burn
Rate
The Companys three-year average burn
rate, based upon the total number of options and restricted stock granted, is
shown below:
Year |
|
Options Granted |
|
Restricted Stock Granted |
|
|
Weighted Average Number of Common Shares
Outstanding - Basic |
|
Burn Rate |
2016 |
|
0 |
|
972,099 |
(1) |
|
139,779,106 |
|
0.70% |
2015 |
|
0 |
|
481,166 |
|
|
141,113,433 |
|
0.34% |
2014 |
|
0 |
|
422,572 |
|
|
144,567,574 |
|
0.29% |
Three-year average burn rate |
|
|
|
|
|
|
|
|
0.44% |
(1) |
Of this amount, the payout for
353,132 shares may be increased up to 200% of the target or decreased to
zero, subject to the level of performance attained. The amount reflected
in the table includes all restricted stock grants at a target payout of
100%. |
Table of Contents
Executive Compensation
Tables |
However, the Companys three-year average
burn rate, taking into consideration only time-based restricted stock and
performance-based restricted stock grants for which the performance conditions
have been satisfied, is shown below:
Year |
|
Options Granted |
|
Time-Based Restricted Stock Granted
and Performance-Based Restricted Stock Awarded |
|
Weighted Average Number of Common Shares Outstanding -
Basic |
|
Burn Rate |
2016 |
|
0 |
|
1,617,972 |
|
139,779,106 |
|
1.16% |
2015 |
|
0 |
|
164,646 |
|
141,113,433 |
|
0.12% |
2014 |
|
0 |
|
113,088 |
|
144,567,574 |
|
0.08% |
Three-year average burn rate |
|
|
|
|
|
|
|
0.45% |
Description of the SIP
The principal terms of the SIP are
summarized below. This summary is qualified in its entirety by the complete text
of the SIP, which is attached to this Proxy Statement as Appendix A, as amended
to reflect the amendment that is the subject of this Proposal 5.
Overview. The purpose of the
SIP is to attract, incentivize and retain our key employees by offering those
persons an opportunity to acquire or increase a direct proprietary interest in
our operations and future success.
Shares Subject to the
SIP. Subject to adjustment upon a change
in capitalization, the number of shares of the Companys common stock reserved
for issuance under the SIP (without giving effect to the proposed share increase
that is the subject of this Proposal 5) is 7,153,543, plus certain additional
shares recaptured from expired, terminated, canceled, or forfeited portions of
awards under the PSP. If any portion of an outstanding award under the SIP or
the PSP for any reason expires or is terminated or canceled or forfeited, the
shares allocable to the expired, terminated, canceled, or forfeited portion of
such SIP or PSP award shall be available for issuance under the SIP. However,
the following shares are not available for issuance under the SIP: shares
tendered as payment for option exercises, shares withheld to cover tax
withholding requirements and shares that have been repurchased by the Company
using stock option exercise proceeds. As of February 27, 2017, a total of
6,529,307 shares were subject to outstanding equity awards under the SIP,
assuming a target payout of all shares of 100%. Of these 6,529,307 shares, the
payout for 640,985 shares of our outstanding performance-based restricted stock
grants may be increased up to 200% of the target or decreased to zero, subject
to the level of performance attained. The shares issued by the Company under the
SIP may be, at the Companys option, evidenced by a share certificate delivered
to the grantee, or other physical or electronic evidence of share ownership,
including, without limitation, deposit of shares into a stock brokerage account
maintained for the grantee or credit to a book-entry account for the benefit of
the grantee maintained by the Companys stock transfer agent or its
designee.
Eligibility. All employees
of the Company and its subsidiaries, and all members of the Board, are eligible
to participate in the SIP. As of December 31, 2016, there were approximately
8,297 employees and 10 non-employee directors who were eligible to participate
in the SIP. The SIP includes a sub-plan as an appendix which is applicable to
Decus Insurance Brokers Limited, which, together with its parent company, Decus
Holdings (UK) Limited, is our only United Kingdom-based subsidiary. The Board
could adopt additional sub-plans applicable to other foreign subsidiaries we
might have in the future. The rules of such sub-plans may take precedence over
other provisions of the SIP.
Administration. The
Compensation Committee has authority to grant awards to employees under the SIP
and is responsible for the general administration and interpretation of the SIP.
The SIP provides that members of the Compensation Committee have a right to
indemnification with respect to claims arising against them individually as a
result of their administration of the SIP, except in the case of gross
negligence, bad faith or intentional misconduct. The Compensation Committee has
authority to establish the terms of each award, including the number of awards
granted, the vesting schedule and exercisability. The Compensation Committee may
establish performance goals as a prerequisite to exercisability or vesting, and
such goals and other terms need not be uniform among various participants. Each
employee or director granted awards under the SIP will be required to enter into
an award agreement with the Company setting forth the terms and conditions of
the grant, including any performance goals that are a prerequisite to exercising
or vesting of the grant.
Types of Awards Available for Grant under
the SIP
Options.
Options granted under the SIP may be either incentive
stock options, as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the Code), or non-qualified stock options.
As a general rule, the exercise price for
any stock option must be no less than the fair market value of the stock subject
to such option as of the date of grant, except for incentive stock options
granted to a grantee who owns 10% or more of the voting power of the
Company, in which case the exercise price must be at
least 110% of the fair market value of such stock as of the date of grant. To
the extent that the fair market value of that portion of any grant of incentive
stock options that is exercisable for the first time in any given year exceeds
$100,000, such options will be treated as non-qualified stock options. The
Compensation Committee shall not grant to any employee or director in any
calendar year options to purchase more than 500,000 shares.
Table of Contents
Executive Compensation
Tables |
Options granted under the SIP generally
will not be exercisable after the expiration of 10 years after the effective
date of the grant. In addition, no incentive stock option granted to a
beneficial owner of 10% or more of the Companys outstanding shares will be
exercisable after the expiration of five years after the effective date of the
grant. Each option granted under the SIP must include a minimum vesting period
of at least one year from the date of grant of the option.
Generally, options may be exercised only
while the award holder is an employee or director of the Company or within a
limited period after the award holder leaves employment or service with the
Company or after the award holders retirement, disability or death. During the
award holders lifetime, an award is exercisable only by the award holder.
Awards generally are not transferable except upon the death of the award holder.
If an award holders employment or service is terminated under certain
circumstances following a change of control of the Company, the award holder
will become 100% vested in the grant and may exercise the award for a period of
three months after the date of termination.
On the date of exercise, the award holder
may pay the full option price in cash, in shares of common stock previously
acquired by the award holder valued at fair market value or in any other form of
consideration approved by the Compensation Committee. The use of previously
acquired shares to pay the option price enables the award holder to avoid the
need to fund the entire purchase with cash. Upon exercise of an award, the
number of shares subject to the option and the number of shares available under
the SIP for future option grants will be reduced by the number of shares with
respect to which the option is exercised.
Stock Appreciation
Rights. The Compensation Committee also
may grant stock appreciation rights that will entitle the award recipient to
receive the excess of the fair market value of a share of the Companys common
stock over the exercise price for each share with respect to which the stock
appreciation right is exercised. Each stock appreciation right granted under the
SIP must include a minimum vesting period of at least one year from the date of
grant of the stock appreciation right. Payment upon exercise of a stock
appreciation right may be in cash, shares or a combination of cash and shares,
as determined by the Compensation Committee. The Compensation Committee shall
not grant to any employee or director, in any calendar year, stock appreciation
rights covering more than 500,000 shares.
Stock Grants.
The Compensation Committee also may grant
awards in the form of stock grants in such amounts and upon such terms and
conditions as the Compensation Committee specifies in the award agreement. A
stock grant may be made in shares of the Companys common stock, or in units
representing rights to receive shares. Stock grants denominated in shares are
known as grants of restricted stock, and stock grants denominated in units are
known as restricted stock units. The stock grant award agreement shall set forth
the conditions, if any, which will need to be timely satisfied before the stock
grant will be effective, and the conditions, if any, which will need to be
timely satisfied before the stock grant will be vested and settled, and the
conditions, if any, under which the grantees interest in the related shares or
units will be forfeited. Any such conditions for effectiveness or vesting and
settlement or nonforfeitability may be based upon the passage of time and
continued service by the Grantee, or the achievement of specified performance objectives, or both time-based and
performance-based conditions. The Compensation Committee shall not grant to any
employee or director, in any calendar year, stock grants of more than 500,000
shares.
To the extent the Compensation Committee
considers it desirable for compensation delivered pursuant to a stock grant to
be eligible to qualify for an exemption from the limit on tax deductibility of
compensation under Section 162(m) of the Code, the Compensation Committee may
provide that the lapsing of restrictions on the stock award and the distribution
of shares, as applicable, shall be subject to satisfaction of one, or more than
one, objective performance target(s). The Compensation Committee shall determine
the performance targets that will be applied with respect to each such stock
award at the time of grant, but in no event later than 90 days after the
commencement of the period of service to which the performance target(s) relate.
The performance criteria applicable to such stock awards will be one or more of
the following criteria:
● |
stock price; |
● |
sales; |
● |
earnings per share, core earnings
per share or variations thereof; |
● |
return on equity; |
● |
costs; |
● |
revenue; |
● |
days payables
outstanding; |
● |
days sales outstanding;
|
● |
cash flow; |
● |
operating income; |
● |
profit after tax; |
● |
profit before tax; |
● |
return on assets; |
● |
return on sales; |
● |
invested capital; |
● |
net operating profit after tax;
|
● |
return on invested capital;
|
● |
total shareholder return;
|
● |
earnings; |
● |
return on equity or average
shareowners equity; |
● |
total shareowner return;
|
● |
return on capital; |
● |
income or net income;
|
● |
operating income or net operating
income; |
● |
operating profit or net operating
profit; |
● |
operating margin; |
● |
growth in shareowner value relative
to the moving average of the Standard & Poors 500 Composite Stock
Index (S&P 500) or a peer group index; |
● |
and/or net cash provided by
operating activities. |
The Compensation Committee may adjust
performance targets and the related level of achievement if it determines that
events or transactions that are unusual in nature or infrequently occurring have
occurred after the date of grant that are unrelated to the performance of the
grantee and result in distortion of the performance targets or the related level
of achievement. The Compensation Committee may not increase the number of shares
granted pursuant to any such stock award, nor may it waive the achievement of
any performance target. Prior to the payment of any such stock award, the
Compensation Committee shall certify in writing that the applicable performance
target(s) was (were) met.
Table of Contents
Executive Compensation
Tables |
Adjustment for Certain
Events. If the Company undergoes certain
events or changes regarding its capital structure, such as a stock dividend,
stock split, reverse stock split, recapitalization, reclassification or a
similar event, appropriate adjustments will be made to the number and class of
shares available for issuance under the SIP and the number and class of shares
and, if applicable, exercise price relating to any outstanding awards.
Appropriate adjustments would also be made if a majority of the shares which are
the same class as the shares that are subject to outstanding awards are
exchanged for, converted into, or otherwise become shares of another
corporation. If such an event occurs, the Compensation Committee will amend the
outstanding awards to provide that such awards are exercisable or will be
settled for or with respect to such new shares.
Effect of Change in
Control. Involuntary or constructive
termination of an award holders employment after a change in control
transaction, as defined in the SIP, may cause the holders awards to become
vested.
No
Repricing. The Compensation Committee may
not modify or amend any outstanding option or stock appreciation right so as to
specify a lower exercise price or accept the surrender of an outstanding option
or stock appreciation right and authorize the granting of a new option or stock
appreciation right with a lower exercise price in substitution for such
surrendered option or stock appreciation right.
Application of
Clawback Policy to SIP Awards. In the
event of a restatement of the Companys financial results (other than a
restatement caused by a change in applicable accounting rules or
interpretations), if any performance-based award paid to a current or former
officer of the Company (as defined under Section 16(a) of the Exchange Act) in
the three years prior to the date of restatement would have been a lower amount
had it been calculated based on such restated results, the Compensation
Committee shall evaluate recovery of such award. If a recovery is determined to
be appropriate, then the Compensation Committee shall seek to recover for the
benefit of the Company, to the extent permitted by applicable law, the after-tax
portion of the difference between the awarded compensation and the actual
compensation. In determining whether to seek recovery under this policy, the
Compensation Committee shall take into account such considerations as it deems
appropriate, including, without limitation, whether the assertion of a claim may
violate applicable law or prejudice the interests of the Company in any related
proceeding or investigation, and the likelihood of success under applicable
law.
Amendment or
Termination of the SIP. Except as may be
required by law, the Compensation Committee may terminate or amend the SIP at
any time without further shareholder or regulatory approval. However, no
termination or amendment of the SIP may adversely affect any then outstanding
option without the consent of the award holder. Unless earlier terminated by the
Compensation Committee, the SIP will be in effect until options have been
granted and exercised with respect to all shares available for the SIP. However,
no award can be granted under the SIP more than 10 years after the SIP has been
approved by the Companys shareholders.
Tax Consequences
The federal income tax consequences of
participation in the SIP are complex and subject to change. The following
discussion is only a summary of the general tax rules applicable to the
SIP.
Options.
Options granted under the SIP may be
either incentive stock options or non-qualified stock options. Options that are
designated as incentive stock options are intended to qualify as such under
Section 422 of the Code. With respect to incentive stock options, neither the
grant nor the exercise of the option will subject the employee to taxable
income, other than under the Alternative Minimum Tax (Section 56(b)(3) of the
Code), which is not discussed in detail in this summary. There is no required
tax withholding in connection with the exercise of incentive stock options. Upon
the ultimate disposition of the stock obtained on an exercise of an incentive
stock option, the employees entire gain will be taxed at the rates applicable
to long-term capital gains, provided the employee has satisfied the prescribed
holding periods relating to incentive stock options and the underlying stock.
This treatment will apply to the entire amount of gain recognized on the sale of
the stock, including the portion of gain that reflects the spread on the date of
exercise between the fair market value of the stock at the time of grant and the
fair market value of the stock at the time of exercise.
The Company does not receive a
compensation deduction for tax purposes with respect to incentive stock options.
However, if the employee disposes of the stock purchased on exercise of the
incentive stock option prior to the expiration of the applicable holding periods
required by Section 422 of the Code, the Company will be entitled to a deduction
equal to the employees realization of ordinary income by virtue of the
employees disqualifying disposition.
Non-qualified stock options granted under
the SIP will not qualify for any special tax benefits to the option holder. An
option holder generally will not recognize any taxable income at the time he or
she is granted a non-qualified option. However, upon its exercise, the option
holder will recognize ordinary income for federal tax purposes measured by
the excess
of the fair market value of the shares at the time of exercise over the exercise
price. The income realized by the option holder will be subject to income and
other employee withholding taxes.
The option holders basis for
determination of gain or loss upon the subsequent disposition of shares acquired
upon the exercise of a non-qualified stock option will be the amount paid for
such shares plus any ordinary income recognized as a result of the exercise of
such option. Upon disposition of any shares acquired pursuant to the exercise of
a non-qualified stock option, the difference between the sale price and the
option holders basis in the shares will be treated as a capital gain or loss
and generally will be characterized as long-term capital gain or loss if the
shares have been held for more than one year at the time of their
disposition.
In general, there will be no federal
income tax deduction allowed to the Company upon the grant or termination of a
non-qualified stock option or a sale or disposition of the shares acquired upon
the exercise of a non-qualified stock option. However, upon the exercise of a
non-qualified stock option by a holder, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
that an option holder is required to recognize as a result of the exercise,
provided that the deduction is not otherwise disallowed under the
Code.
Table of Contents
Executive Compensation
Tables |
Stock Grants and Stock Appreciation
Rights. With respect to stock grants and stock
appreciation rights that may be settled either in cash or in shares that are
either transferable or not subject to a substantial risk of forfeiture, the
grantee will realize ordinary taxable income, subject to tax withholding, equal
to the amount of the cash or the fair market value of the shares received. The
Company will be entitled to a deduction in the same amount and at the same time
as the compensation income is received by the grantee. With respect to
restricted stock award shares that are both nontransferable and subject to a
substantial risk of forfeiture, the award recipient will realize ordinary
taxable income equal to the fair market value of the shares at the first time
the shares are either transferable or not subject to a substantial risk of
forfeiture. The Company will be entitled to a deduction in the same amount and
at the same time as the ordinary taxable income realized by the
grantee.
Some awards, such as restricted stock unit
awards, may be considered to be deferred compensation subject to special federal
income tax rules under Section 409A of the Code. Failure to satisfy the
applicable requirements under Section 409A of the Code for such awards would
result in the acceleration of income and additional income tax liability to the
grantee, including certain penalties. The SIP and awards under the SIP are
intended to be designed and administered so that any awards that are considered
to be deferred compensation will not result in negative tax consequences to the
grantees under Section 409A of the Code.
All of the above-described deductions are
subject to the limitations on deductibility described in Section 162(m) of the
Code. Although the Company intends that options and stock appreciation rights
and performance-based stock grants under the SIP will satisfy the
performance-based compensation exception under Section 162(m) of the Code and
will be fully deductible by the Company, several requirements must be satisfied
for an award to qualify for this exception. Therefore, there can be no assurance
that compensation attributable to SIP awards will be fully deductible under all
circumstances. In addition, some awards under the SIP, such as
non-performance-based stock grants, generally will not qualify for the
performance-based compensation exception and therefore may not be deductible
by the Company as a result of the limitations of Section 162(m) of the Code. In
addition, as a result of the provisions of Section 280G of the Code,
compensation paid to certain employees resulting from vesting of awards in
connection with a change in control of the Company also may not be deductible.
The foregoing is only a summary of the effect of federal income taxation upon
the award recipient and the Company with respect to the grant and exercise of
awards under the SIP, does not purport to be complete and does not discuss the
tax consequences of the recipients death or the income tax laws of any
municipality, state or foreign country in which a recipient may
reside.
Past Grants Under the SIP
The only grants made under the SIP are
performance stock and restricted stock grants to eligible employees, and annual
grants of stock to non-employee directors as described in this Proxy Statement
in the section titled, Director Compensation. No stock options or stock
appreciation rights have been granted under the SIP.
All awards under the SIP are made at the
discretion of the Compensation Committee. Therefore, the benefits and amounts
that will be received or allocated under the SIP in the future are not
determinable at this time. The stock grants made under the SIP during 2016,
which would not have changed if the proposed SIP amendment to increase the
number of shares authorized for issuance under Proposal 5 had been in place,
were as follows:
Name and Position |
Dollar Value(1) |
|
Number of Shares(2) |
J. Powell Brown, Chief Executive Officer
and President |
$1,249,963 |
|
35,240 |
R. Andrew Watts, Chief Financial Officer,
Executive Vice President and Treasurer |
$499,985 |
|
14,096 |
J. Scott Penny, Executive Vice President
and Chief Acquisitions Officer |
$319,975 |
|
9,021 |
Anthony T. Strianese,
Executive Vice
President and President Wholesale Brokerage Division |
$499,985 |
|
14,096 |
Chris L. Walker, Executive Vice President
and President Programs Division |
$499,985 |
|
14,096 |
Current executive officers as a group |
$3,319,885 |
|
93,597 |
Current non-employee directors as a group |
$499,730 |
|
16,860 |
Employees other than executive officers as a
group |
$31,211,801 |
|
878,502 |
(1) |
Amounts reflect the aggregate
grant date fair value of awards computed in accordance with Statement of
Financial Accounting Standards ASC Topic 718 (formerly SFAS
123(R)). |
(2) |
Certain performance-based
restricted stock granted to our employees in 2016 may be increased up to
200% of the target or decreased to zero, subject to the level of
performance attained. The amount reflected in the table includes all
restricted stock grants at a target payout of
100%. |
A vote in favor of Proposal 5 constitutes
an approval of an amendment to the SIP to increase the total number of shares
available for awards under the SIP.
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information
as of December 31, 2016, with respect to compensation plans under which the
Companys equity securities are authorized for issuance:
Plan Category |
|
Number of securities to be issued
upon exercise of outstanding options, warrants and
rights(a)(1) |
|
Weighted-average exercise price
of outstanding options, warrants
and rights(b)(2) |
|
Number of securities remaining
available for future issuance under equity compensation
plans (excluding securities reflected in column
(a))(c)(3) |
Equity compensation
plans approved by shareholders: |
|
|
|
|
|
|
|
Brown & Brown, Inc. 2000
Incentive Stock Option Plan |
|
175,000 |
|
$18.48 |
|
|
|
Brown & Brown, Inc. 2010 Stock
Incentive Plan |
|
N/A |
|
N/A |
|
3,729,566 |
(4) |
Brown & Brown, Inc. 1990 Employee
Stock Purchase Plan |
|
N/A |
|
N/A |
|
4,680,263 |
|
Brown & Brown, Inc. Performance
Stock Plan |
|
N/A |
|
N/A |
|
|
|
Total |
|
175,000 |
|
$18.48 |
|
8,409,829 |
|
Equity compensation
plans not approved by shareholders |
|
|
|
|
|
|
|
(1) |
In addition to the number of
securities listed in this column, 3,404,569 shares are issuable upon the
vesting of restricted stock granted under the Brown & Brown, Inc.
Performance Stock Plan and the Brown & Brown, Inc. 2010 Stock
Incentive Plan, which represents the maximum number of shares that can
vest based on the achievement of certain performance
criteria. |
(2) |
The weighted-average exercise
price excludes outstanding restricted stock as there is no exercise price
associated with these equity awards. |
(3) |
All of the shares available for
future issuance under the Brown & Brown, Inc. 2000 Incentive Stock
Option Plan, the Brown & Brown, Inc. Performance Stock Plan, and the
Brown & Brown, Inc. 2010 Stock Incentive Plan may be issued in
connection with options, warrants, rights, restricted stock, or other
stock-based awards. |
(4) |
The payout for 321,955 shares of
our outstanding performance-based restricted stock grants may be increased
up to 200% of the target or decreased to zero, subject to the level of
performance attained. The amount reflected in the table is calculated
assuming the maximum payout for all restricted stock
grants. |
ADDITIONAL EQUITY COMPENSATION
PLAN INFORMATION
The following is the Companys overhang
information, which measures the number of shares subject to equity-based awards
outstanding but unexercised or unvested, as of February 27, 2017, for all of the
Companys existing equity compensation plans, as well as certain other
information relating to outstanding awards under the plans:
● |
Stock options outstanding: 175,000 |
● |
Weighted average exercise price of outstanding stock options:
$18.48 |
● |
Weighted average remaining contractual term of outstanding
stock options: 1.0 years |
● |
Restricted stock grants not yet awarded:
4,074,810(1) |
● |
Unvested awarded restricted stock grants: 3,374,132 |
● |
Shares available for future grants under the SIP:
2,800,440(2) |
● |
Total
shares of common stock shares outstanding:
140,269,009 |
(1) |
Of the 4,074,810 shares of
restricted stock grants not yet awarded, the payout for 640,985 shares may
be increased up to 200% of the target or decreased to zero, subject to the
level of performance attained. The amount reflected in the table includes
all restricted stock grants at a target payout of 100%. |
(2) |
The payout for 640,985 shares of
our outstanding performance-based restricted stock grants may be increased
up to 200% of the target or decreased to zero, subject to the level of
performance attained. The amount reflected in the table is calculated
assuming the maximum payout for all restricted stock
grants. |
Table of Contents
OTHER IMPORTANT INFORMATION
Security Ownership of Management and
Certain Beneficial Owners
The following table sets forth, as of
February 27, 2017, the record date for the Meeting, information as to our common
stock beneficially owned by (1) each of our directors, all of whom are director
nominees, (2) each Named Executive Officer named in the Summary Compensation Table, (3) all of our
directors and current executive officers as a group and (4) any person or entity
whom we know to be the beneficial owner of more than five percent of the
outstanding shares of our common stock.
Name of Beneficial
Owner(1) |
|
Amount and Nature of Beneficial
Ownership(2)(3)(4) |
|
Percent of Total |
J. Hyatt
Brown(5) |
|
20,983,965 |
|
14.96% |
Samuel P. Bell, III |
|
34,421 |
|
* |
Hugh M. Brown(6) |
|
19,521 |
|
* |
J. Powell
Brown(7) |
|
1,529,229 |
|
1.09% |
Bradley Currey, Jr. |
|
308,621 |
|
* |
Theodore J. Hoepner |
|
52,421 |
|
* |
James S. Hunt |
|
5,378 |
|
* |
Toni Jennings |
|
20,086 |
|
* |
Timothy R.M. Main |
|
9,340 |
|
* |
H. Palmer Proctor,
Jr.(8) |
|
10,702 |
|
* |
Wendell S. Reilly |
|
110,371 |
|
* |
Chilton D. Varner |
|
31,511 |
|
* |
J. Scott
Penny(9) |
|
332,733 |
|
* |
Anthony T. Strianese |
|
192,827 |
|
* |
R. Andrew Watts |
|
39,203 |
|
* |
Chris L. Walker |
|
44,491 |
|
* |
All current directors and executive officers
as a group (18 persons)(10) |
|
23,816,559 |
|
16.98% |
BlackRock Inc.(11) |
|
8,963,807 |
|
6.39% |
55 East 52nd Street |
|
|
|
|
New
York, NY 10022 |
|
|
|
|
The
Vanguard Group, Inc.(12) |
|
9,937,365 |
|
7.08% |
100 Vanguard Boulevard |
|
|
|
|
Malvern, PA 19355 |
|
|
|
|
* Less than 1%.
(1) |
Unless otherwise indicated, the
address of such person is c/o Brown & Brown, Inc., 220 South Ridgewood
Avenue, Daytona Beach, Florida 32114. |
(2) |
Beneficial ownership of shares,
as determined in accordance with applicable SEC rules, includes shares as
to which a person has or shares voting power and/or investment power, or
as to which a person has the right to acquire beneficial ownership within
the next 60 days. We have been informed that all shares shown are held of
record with sole voting and investment power, except as otherwise
indicated. |
(3) |
The number and percentage of
shares owned by the following persons include the indicated number of
shares owned through our 401(k) plan as of February 27, 2017: Mr. Powell
Brown 19,128; Mr. Watts 0; Mr. Penny 9,437; Mr. Strianese 0; Mr.
Walker 0; and all current directors and executive officers as a group
28,565. |
|
The number and percentage of
shares owned by the following persons also include the indicated number of
unvested shares which such persons have been granted under our PSP as of
February 27, 2017: Mr. Powell Brown 49,192; Mr. Watts 0; Mr. Penny
31,028; Mr. Strianese 24,296; Mr. Walker 0; and all current directors
and executive officers as a group 117,936. These PSP shares have voting
and dividend rights due to satisfaction of the first condition of vesting
based on stock price performance, but the holders thereof currently have
no power to sell or dispose of the shares, and the shares are subject to
forfeiture. |
|
In addition, the number and
percentage of shares owned by the following persons also include the
indicated number of unvested shares which such persons have been granted
under our SIP as of February 27, 2017 and for which the first condition of
vesting has been satisfied: Mr. Powell Brown 182,702; Mr. Watts 0; Mr.
Penny 27,849; Mr. Strianese 27,849; Mr. Walker 0; and all current
directors and executive officers as a group 107,060. These SIP shares
have voting and dividend rights due to satisfaction of the first condition
of vesting, but the holders thereof currently have no power to sell or
dispose of the shares, and the shares are subject to
forfeiture. |
Table of Contents
Other
Important Information |
|
In addition, the number and
percentage of shares owned by the following persons include the indicated
number of unvested shares which such persons have been granted under our
SIP in the form of time-based only grants as of February 27, 2017: Mr.
Powell Brown 45,502; Mr. Watts 25,931; Mr. Penny 50,662; Mr.
Strianese 56,926; Mr. Walker 40,567; and all current directors and
executive officers as a group 241,408. These time-based only grants have
voting and dividend rights, but the holders thereof have no power to sell
or dispose of the shares, and the shares are subject to forfeiture in the
event that the recipient does not continue to be employed with us for a
specified number of years following the date of grant. |
(4) |
On February 27, 2008, the
indicated number of options was granted to the following persons under the
2000 Incentive Stock Option (ISO) Plan: Mr. Powell Brown 175,000; Mr.
Watts 0; Mr. Penny 100,000; Mr. Strianese 100,000; Mr. Walker 0;
and all current directors and executive officers as a group 375,000. Of
these granted amounts, the indicated number of options were exercisable by
the following persons under the ISO Plan as of February 27, 2017 or within
60 days thereafter (excluding options that are subject to vesting to the
extent that performance-based conditions are satisfied during such
period): Mr. Powell Brown 105,000; Mr. Watts 0; Mr. Penny 20,000;
Mr. Strianese 50,000; Mr. Walker 0; and all current directors and
executive officers as a group 175,000; and therefore, the underlying
shares are deemed to be beneficially owned. |
(5) |
Of the shares beneficially owned
by Mr. Hyatt Brown, 20,886,328 are held of record by Ormond Riverside,
Limited Partnership, of which Swakopmund, Inc. is the General Partner that
has voting and investment power over such shares. Swakopmund, Inc. is 100%
owned by the Swakopmund Trust of 2009, a revocable trust created by Mr.
Hyatt Brown, who is the sole trustee thereof and retains the sole voting
and investment powers with respect to all the shares of Swakopmund, Inc.
An additional 29,637 shares are beneficially owned jointly with Mr. Hyatt
Brown's spouse, and these shares have shared voting and investment power,
and an additional 68,000 shares are held in an IRA account. |
(6) |
Mr. Hugh Brown's ownership
includes 400 shares owned by his spouse, as to which he disclaims
beneficial ownership. |
(7) |
Mr. Powell Brown's ownership
includes 10,587 shares owned by children living in his household, as to
which he disclaims beneficial ownership. |
(8) |
Mr. Proctors ownership includes
224 shares owned by his spouse, as to which he disclaims beneficial
ownership. |
(9) |
Mr. Pennys ownership includes 96
shares owned by children living in his household, as to which he disclaims
beneficial ownership, and 148,989 shares owned jointly with
spouse. |
(10) |
Includes amounts beneficially
owned by all our current directors and executive officers as of February
27, 2017, as a group. |
(11) |
The amount shown is derived from
a Schedule 13G/A filed by BlackRock, Inc. (BlackRock) on January 19,
2017 reporting beneficial ownership as of December 31, 2016. According to
the Schedule 13G/A, BlackRock has sole voting power over 8,532,209 shares
and sole dispositive power over 8,963,807 shares. |
(12) |
The amount shown is derived from
a Schedule 13G/A filed by The Vanguard Group (Vanguard) on February 10,
2017 reporting beneficial ownership as of December 31, 2016. According to
the Schedule 13G/A, Vanguard has sole voting power over 74,521 shares and
sole dispositive power over 9,937,365 shares. |
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires our directors, executive officers, and persons
who own more than ten percent (10%) of our outstanding shares of common stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Directors, executive officers and 10% shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
reports they file.
Based solely on our review of such reports
and written representations from reporting persons, we believe that during 2016,
our directors, officers and 10% beneficial owners timely complied with all
applicable filing requirements.
Annual Meeting and Proxy Solicitation
Information
These proxy materials are made available
to shareholders in connection with the solicitation of proxies by the Board of
Directors of Brown & Brown, Inc. to be voted at the Annual Meeting of
Shareholders, to be held in the Atlantic Room of The Shores Resort, 2637 South
Atlantic Avenue, Daytona Beach, Florida 32118 at 9:00 a.m. (EDT) on Wednesday,
May 3, 2017, and at any postponements or adjournments. The close of
business on February 27, 2017 has been fixed as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting. At the close of business on the record date, we had
outstanding 140,269,009 shares of $0.10 par value common stock, entitled to one
vote per share. These proxy materials were first mailed to shareholders of
record on March 22, 2017.
Notice of Internet Delivery
As permitted by SEC rules, Brown &
Brown, Inc. is making this Proxy Statement and its Annual Report available to
its shareholders electronically via the Internet. If you received a Notice by
mail, you will not receive a printed copy of the proxy materials in the mail
(unless you request them, as described below and explained in the Notice).
Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy
Statement and Annual Report. The Notice also instructs you on how you may vote
online. If you received a Notice by mail and would like to receive a printed
copy of our proxy materials, you should follow the instructions in the Notice
for requesting the materials.
Table of Contents
Other Important
Information |
Voting Your Shares; Required
Votes
Shares represented by duly executed
proxies in the accompanying form that we receive prior to the Meeting will be
voted at the Meeting. If you specify in the proxy a choice with respect to any
matter to be acted upon, the shares represented by such proxy will be voted as
specified. If your proxy card is signed and returned without specifying a vote
or an abstention, the shares represented by such proxy will be voted according
to the recommendation of the Board of Directors.
The Board of Directors knows of no other
matters that may be brought before the Meeting. However, if any other matters
are properly presented for action, it is the intention of the named proxies to
vote on them according to their best judgment.
If your shares are held in a
stock brokerage account, or by a bank or other nominee, you have the right to
provide instructions on voting as requested by your broker, bank or nominee.
Under the NYSEs rules, your broker, bank or nominee is permitted to vote your
shares on the second proposal concerning the ratification of the appointment of
Deloitte & Touche LLP as our independent registered public accountants for
the fiscal year ending December 31, 2016 even if your broker, bank or nominee
has not been given specific voting instructions as to this matter. Your broker,
bank or nominee is not permitted to vote your shares on the first, third, fourth
or fifth proposals.
After you have returned a proxy, you may
revoke it at any time before it is voted by taking one of the following actions:
(i) giving written notice of the revocation to our Corporate Secretary at 220 S.
Ridgewood Ave., Daytona Beach, Florida 32114, or by email to annualmeeting@bbins.com;
(ii) executing and delivering a proxy with a later date; or (iii) voting in
person at the Meeting. Votes cast by proxy or in person at the Meeting will be
tabulated by Alliance Advisors, LLC, and by one or more inspectors of election
appointed at the Meeting, who will also determine whether a quorum is present
for the transaction of business. A quorum is present when a majority in interest
of all the common stock outstanding is represented by shareholders present in
person or by proxy.
Shares of the common stock represented by
proxies received by the Company (whether through the return of the enclosed
proxy card, by telephone or over the Internet), where the shareholder has
specified his or her choice with respect to the proposals described in this
Proxy Statement (including the election of directors), will be voted in
accordance with the specification(s) so made. If your proxy is properly executed
but does not contain voting instructions, or if you vote via telephone or the
Internet without indicating how you want to vote with respect to any item, your
shares will be voted FOR the election of all nominees for the Board of
Directors; FOR the ratification of the appointment of Deloitte & Touche
LLP as the Companys independent registered public accountants for the fiscal
year ending December 31, 2017; FOR the advisory vote to approve Named
Executive Officer compensation; ONE YEAR, on an advisory basis, as the desired
frequency of holding an advisory vote on the compensation of the Named Executive
Officers; and FOR the approval of the amendment of the SIP.
A valid proxy also gives the individuals
named as proxies authority to vote in their discretion when voting the shares on
any other matters that are properly presented for action at the
Meeting.
If the shares you own are held in street
name by a broker or other nominee entity and you provide instructions to the
broker or nominee as to how to vote your shares, your broker or other nominee
entity, as the record holder of your shares, is required to vote your shares
according to your instructions. Under the NYSE rules, certain proposals, such as
the ratification of the appointment of the Company's registered public
accountants, are considered routine matters, and brokers and other nominee
entities generally may vote on such matters on behalf of beneficial owners who
have not furnished voting instructions. For non-routine matters, such as the
election of directors, the say on pay advisory vote, the advisory vote on the
desired frequency of holding an advisory vote on the compensation of the Named
Executive Officers, and the approval of an amendment to the SIP, brokers and
other nominee entities may not vote unless they have received voting
instructions from the beneficial owner. A broker non-vote occurs when a broker
or other nominee entity does not vote on a particular proposal because it does
not have authority under the NYSE rules to vote on that particular proposal
without receiving voting instructions from the beneficial owner.
Broker non-votes, as well as properly
executed proxies marked ABSTAIN, will be counted for purposes of determining
whether a quorum is present at the Meeting.
In order to pass, each of Proposals 2, 3,
and 5 must receive the affirmative vote of a majority of the votes cast on the
Proposal. A broker non-vote will not have an effect on these proposals. An
abstention will not have an effect on Proposals 2 and 3; however, pursuant
to NYSE rules applicable to Proposal 5, an abstention will be considered a vote
cast and therefore have the effect of a negative vote on the
Proposal.
With respect to Proposal 4, the frequency
receiving the greatest number of votes (one, two or three years) will be
considered the frequency approved by shareholders. Abstentions and broker
non-votes will have no effect on the vote.
Proxies may be solicited by our officers,
directors, and regular supervisory and executive employees, none of whom will
receive any additional compensation for their services. Also, Alliance Advisors,
LLC may solicit proxies on our behalf at an approximate cost of $5,000, plus
reasonable expenses. Such solicitations may be made personally or by mail,
facsimile, telephone, messenger or via the Internet. We will pay persons holding
shares of common stock in their names or in the names of nominees, but not
owning such shares beneficially, such as brokerage houses, banks, and other
fiduciaries, for the expense of forwarding solicitation materials to their
principals. We will pay all of the costs of solicitation of proxies.
Our executive office is located at 220
South Ridgewood Avenue, Daytona Beach, Florida 32114 (telephone number (386)
252-9601).
Table of Contents
Proposals of Shareholders
Pursuant to applicable requirements of the
Securities Exchange Act of 1934, proposals of shareholders intended to be
presented at the 2018 Annual Meeting of Shareholders must be received by us no
later than November 22, 2017, in order to be considered for inclusion in our
Proxy Statement and form of proxy/voting instruction related to that meeting.
Such proposals will need to be in writing and comply with SEC regulations
regarding the inclusion of shareholder proposals in Company-sponsored proxy
materials. In addition, the proxy solicited by the Board of Directors for the
2018 Annual Meeting of Shareholders will confer discretionary authority to vote
on any shareholder proposal presented at that Meeting, unless we are provided
with written notice of such proposal by February 5, 2018.
In addition, the Companys By-Laws require
that for any shareholder proposal or director nomination to be properly
presented at the 2018 Annual Meeting of Shareholders, whether or not also
submitted for inclusion in the Companys proxy statement, the shareholder
proposal or director nomination must comply with the requirements set forth in
the By-Laws, and the Company must receive written notice of the matter no
earlier than January 3, 2018 and no later than February 2, 2018. Each such
written notice must contain the information set forth the By-Laws.
Any shareholder proposals or nominations
should be sent to our Corporate Secretary at 220 S. Ridgewood Ave., Daytona
Beach, Florida 32114.
OTHER MATTERS
Our 2016 Annual Report to Shareholders
(the Annual Report) accompanies this Proxy Statement. We will provide to any
shareholder, upon the written request of such person, a copy of our Annual
Report on Form 10-K, including the financial statements and the exhibits
thereto, for the fiscal year ended December 31, 2016, as filed with the SEC
pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, as amended.
Any such request should be directed to Brown & Brown, Inc., 220 S. Ridgewood
Ave., Daytona Beach, Florida 32114 Attention: Corporate Secretary. No charge
will be made for copies of such Annual Report on Form 10-K; however, a
reasonable charge will be made for copies of the exhibits.
Only one copy of this Proxy Statement and
the accompanying Annual Report is being delivered to shareholders who share an
address, unless we have received contrary instructions from one or more of such
shareholders. We will promptly deliver a separate copy of this Proxy Statement
and the accompanying Annual Report to any shareholder at a shared address to
which a single copy of these documents has been delivered upon our receipt of a
written or oral request from that shareholder directed to the address shown
above, or to us at (386) 252-9601. Any shareholder sharing a single copy of the
Proxy Statement and Annual Report who wishes to receive a separate mailing of
these materials in the future, or any shareholders sharing an address and receiving multiple copies of these materials who
wish to share a single copy of these documents in the future, should also notify
us at the address shown above.
The material referred to in this Proxy
Statement under the captions Compensation Discussion and Analysis,
Compensation Committee Report and Report of the Audit Committee shall not be
deemed soliciting material or otherwise deemed filed, and shall not be deemed to
be incorporated by any general statement of incorporation by reference in any
filings made under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.
By Order of the Board of
Directors |
|
Robert W. Lloyd |
Corporate Secretary |
|
Daytona Beach, Florida |
March 22,
2017 |
Table of Contents
ANNEX A
INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES
This Proxy Statement contains references
to Organic Revenue, Organic Revenue growth, Adjusted EBITDAC Margin, and
Adjusted EPS, which are non-GAAP financial measures. These measures are not in
accordance with, or an alternative to the GAAP information provided in the
financial statements contained in our Annual Report on Form 10-K. A
reconciliation of this non-GAAP financial information to our GAAP information is
contained in this Annex A.
Organic Revenue and Organic Revenue
Growth. We view Organic Revenue and Organic
Revenue growth as important indicators when assessing and evaluating our
performance on a consolidated basis and for each of our divisions because they
allow us to determine a comparable, but non-GAAP, measurement of revenue growth
that is associated with the revenue sources that were a part of our business in
both the current and prior year and that are expected to continue in the future.
We believe that presenting these non-GAAP financial measures allows readers of
our financial statements to measure, analyze and compare our consolidated
growth, and the growth of each of our divisions, in a meaningful and consistent
manner.
Adjusted EBITDAC
Margin. We view Adjusted EBITDAC Margin as an
important indicator when assessing and evaluating our performance because it
allows us to determine a comparable, but non-GAAP, measurement of our operating
margins in a meaningful and consistent manner.
Adjusted EPS. Adjusted EPS means our earnings per share, excluding the
impact of the change in estimated acquisition earn-out payables and any other
items (for example, extraordinary, nonrecurring items) that the Compensation
Committee determines to be appropriately disregarded for all grants subject to a
vesting condition of Adjusted EPS. We believe that Adjusted EPS provides a
meaningful representation of our operating performance and is also presented to
improve the comparability of our results between periods by eliminating the
impact of certain items that have a high degree of variability.
We present such non-GAAP supplemental
financial information, as we believe such information provides additional
meaningful methods of evaluating certain aspects of our operating performance
from period to period on a basis that may not be otherwise apparent on a GAAP
basis. Our industry peers may provide similar supplemental non-GAAP information
with respect to one or more of these measures, although they may not use the
same or comparable terminology and may not make identical adjustments. This
supplemental financial information should be considered in addition to, not in
lieu of, our Consolidated Financial Statements.
Reconciliation of Total Commissions and
Fees to Organic Revenue
The reconciliation of total commissions
and fees, included in the Consolidated Statement of Income, to Organic Revenue
for the years ended December 31, 2016, and
2015, is as follows:
|
|
For the Year
Ended December 31, |
(in
thousands) |
|
2016 |
|
2015 |
Total commissions and fees |
|
$1,762,787 |
|
$1,656,951 |
Less profit-sharing
contingent commissions |
|
54,000 |
|
51,707 |
Less guaranteed
supplemental commissions |
|
11,479 |
|
10,026 |
Total core commissions and fees |
|
1,697,308 |
|
1,595,218 |
Less acquisition
revenues |
|
61,713 |
|
|
Less divested
business |
|
|
|
6.669 |
Organic Revenue |
|
$1,635,595 |
|
$1,588,549 |
Table of Contents
Annex A Information Regarding Non-Gaap
Financial Measures |
The growth rates for Organic Revenue,
which is a non-GAAP financial measure, for the year ended December 31, 2016, by division, are as
follows:
(in thousands, except percentages) |
|
Total Commissions and Fees |
|
Total Net Change |
|
Total Net Growth % |
|
Contingents |
|
GSCs |
|
Total
Core Commissions and Fees (2) |
|
Acquisition Revenues |
|
Divested Business |
|
Organic |
|
Revenue (3) |
|
Organic Revenue Growth |
|
Organic Revenue Growth % |
|
|
2016 |
|
2015 |
|
|
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
Retail (1) |
|
916,084 |
|
866,465 |
|
49,619 |
|
5.7% |
|
25,207 |
|
22,051 |
|
9,787 |
|
8,291 |
|
881,090 |
|
836,123 |
|
31,151 |
|
1,926 |
|
849,939 |
|
834,197 |
|
15,742 |
|
1.9% |
National |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programs |
|
447,808 |
|
428,473 |
|
19,335 |
|
4.5% |
|
17,306 |
|
15,558 |
|
23 |
|
30 |
|
430,479 |
|
412,885 |
|
1,680 |
|
1,296 |
|
428,799 |
|
411,589 |
|
17,210 |
|
4.2% |
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage |
|
242,813 |
|
216,638 |
|
26,175 |
|
12.1% |
|
11,487 |
|
14,098 |
|
1,669 |
|
1,705 |
|
229,657 |
|
200,835 |
|
20,164 |
|
- |
|
209,493 |
|
200,835 |
|
8,658 |
|
4.3% |
Services |
|
156,082 |
|
145,375 |
|
10,707 |
|
7.4% |
|
- |
|
- |
|
- |
|
- |
|
156,082 |
|
145,375 |
|
8,718 |
|
3,447 |
|
147,364 |
|
141,928 |
|
5,436 |
|
3.8% |
Total |
|
1,762,787 |
|
1,656,951 |
|
105,836 |
|
6.4% |
|
54,000 |
|
51,707 |
|
11,479 |
|
10,026 |
|
1,697,308 |
|
1,595,218 |
|
61,713 |
|
6,669 |
|
1,635,595 |
|
1,588,549 |
|
47,046 |
|
3.0% |
The reconciliation of total commissions
and fees, included in the Consolidated Statement of Income, to Organic Revenue
for the years ended December 31, 2015 and 2014, is as follows:
|
|
For the Year
Ended December 31, |
(in
thousands) |
|
2015 |
|
2014 |
Total commissions and fees |
|
$1,656,951 |
|
$1,567,460 |
Less
profit-sharing contingent commissions |
|
51,707 |
|
57,706 |
Less
guaranteed supplemental commissions |
|
10,026 |
|
9,851 |
Total core commissions and
fees |
|
1,595,218 |
|
1,499,903 |
Less
acquisition revenues |
|
76,632 |
|
|
Less divested
business |
|
|
|
19,336 |
Organic Revenue |
|
$1,518,586 |
|
$1,480,567 |
The growth rates for Organic Revenue,
which is a non-GAAP financial measure, for the year ended December 31, 2015 by division,
are as follows:
(in thousands, except percentages) |
|
Total Commissions and Fees |
|
Total Net Change |
|
Total Net Growth % |
|
Contingents |
|
GSCs |
|
Total
Core Commissions and Fees (2) |
|
Acquisition Revenues |
|
Divested Business |
|
Organic |
|
Revenue (3) |
|
Organic Revenue Growth |
|
Organic Revenue Growth % |
|
|
2015 |
|
2014 |
|
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
Retail (1) |
|
866,465 |
|
822,140 |
|
44,325 |
|
5.4% |
|
22,051 |
|
21,616 |
|
8,291 |
|
7,730 |
|
836,123 |
|
792,794 |
|
35,644 |
|
3,291 |
|
800,479 |
|
789,503 |
|
10,976 |
|
1.4% |
National |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programs |
|
428,473 |
|
397,326 |
|
31,147 |
|
7.8% |
|
15,558 |
|
20,822 |
|
30 |
|
21 |
|
412,885 |
|
376,483 |
|
38,519 |
|
8,811 |
|
374,366 |
|
367,672 |
|
6,694 |
|
1.8% |
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage |
|
216,638 |
|
211,512 |
|
5,126 |
|
2.4% |
|
14,098 |
|
15,268 |
|
1,705 |
|
2,100 |
|
200,835 |
|
194,144 |
|
2,469 |
|
6,887 |
|
198,366 |
|
187,257 |
|
11,109 |
|
5.9% |
Services |
|
145,375 |
|
136,482 |
|
8,893 |
|
6.5% |
|
- |
|
- |
|
- |
|
- |
|
145,375 |
|
136,482 |
|
- |
|
347 |
|
145,375 |
|
136,135 |
|
9,240 |
|
6.8% |
Total |
|
1,656,951 |
|
1,567,460 |
|
89,491 |
|
5.7% |
|
51,707 |
|
57,706 |
|
10,026 |
|
9,851 |
|
1,595,218 |
|
1,499,903 |
|
76,632 |
|
19,336 |
|
1,518,586 |
|
1,480,567 |
|
38,019 |
|
2.6% |
(1) |
The Retail Segment includes
commissions and fees reported in the Other column of the Segment
Information in Note 15 of the Notes to the Consolidated Financial
Statements, which includes corporate and consolidation items. |
(2) |
Total core commissions and fees,
which is a non-GAAP financial measure, is defined as total commissions and
fees, less (i) profit-sharing contingent commissions (revenues from
insurance companies based upon the volume and the growth and/or
profitability of the business placed with such companies during the prior
year (Contingents), and less (ii) guaranteed supplemental commissions
(commissions from insurance companies based solely upon the volume of the
business placed with such companies during the current year
(GSCs). |
(3) |
Organic Revenue, which is a
non-GAAP financial measure, is defined as total core commissions and fees,
less (i) the first twelve months of net commission and fee revenues
generated from acquisitions, and less (ii) divested business (net
commissions and fees generated from offices or books of business sold by
the Company) with the associated revenue removed from the corresponding
period of the prior year. |
Table of Contents
Annex A Information Regarding
Non-Gaap Financial Measures |
Reconciliation of Income Before Income
Taxes Margin to Adjusted EBITDAC Margin
The reconciliation of income before income
taxes, included in the Consolidated Statement of Income, to Adjusted EBITDAC
Margin for the years ended December 31, 2016, and
2015, is as follows:
|
|
For the Year Ended December
31, |
(in thousands,
unaudited) |
|
2016 |
|
|
2015 |
|
Income Before Income Taxes |
|
423,499 |
|
|
402,559 |
|
Amortization |
|
86,663 |
|
|
87,421 |
|
Depreciation |
|
21,003 |
|
|
20,890 |
|
Interest |
|
39,481 |
|
|
39,248 |
|
Change in estimated
acquisition earn-out payables |
|
9,185 |
|
|
3,003 |
|
EBITDAC(1) |
|
579,831 |
|
|
553,121 |
|
Income Before Income Taxes
Margin(2) |
|
24.0% |
|
|
24.2% |
|
EBITDAC Margin(3) |
|
32.8% |
|
|
33.3% |
|
Loss/(Gain) on
disposal |
|
(1,291 |
) |
|
(619 |
) |
Adjusted EBITDAC(4) |
|
578,540 |
|
|
552,502 |
|
Adjusted EBITDAC Margin(4) |
|
32.7% |
|
|
33.3% |
|
(1) |
EBITDAC, which is a non-GAAP
financial measure, is defined as income before interest, income taxes,
depreciation, amortization and the change in estimated acquisition
earn-out payables. |
(2) |
Income before income taxes margin
is calculated as the Companys income before income taxes, as reported,
divided by total revenues, as reported. |
(3) |
EBITDAC Margin, which is a
non-GAAP financial measure, is defined as EBITDAC divided by total
revenues |
(4) |
Adjusted EBITDAC and Adjusted
EBITDAC Margin, which are both non-GAAP financial measures, are defined
as EBITDAC and EBITDAC Margin, respectively, in each case adjusted to
excluded any gains or losses on sales of books of
business. |
Reconciliation of Diluted Earnings per
Share to Adjusted EPS
The reconciliation of diluted earnings per
share, included in the Consolidated Statement of Income, to Adjusted EPS for the
years ended December 31, 2015, 2014, 2013, 2012, and 2011 is as follows:
(in thousands,
except for diluted earnings per share and Adjusted EPS,
unaudited)
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
Calendar Year |
|
Diluted Earnings Per Share |
|
Weighted Average Number of
Shares Outstanding- Diluted |
|
Net Income Attributable to
Common Shares |
|
Change
in Estimated Acquisition Earnout Payables (Pre-Tax) |
|
Loss
on Discontinued Operations (Pre-Tax)(1) |
|
After-Tax Effect
of Adjustments(2) |
|
Adjusted Net Income Attributable to
Common Shares(3) |
|
Adjusted EPS(3)(4) |
2011 |
|
$1.13 |
|
140,264 |
|
$158,896 |
|
(2,206) |
|
|
|
$(1,337) |
|
$157,559 |
|
$1.12 |
2012 |
|
$1.26 |
|
142,010 |
|
$178,732 |
|
1,418 |
|
|
|
$856 |
|
$179,588 |
|
$1.27 |
2013 |
|
$1.48 |
|
142,624 |
|
$211,666 |
|
2,533 |
|
|
|
$1,538 |
|
$213,204 |
|
$1.50 |
2014 |
|
$1.41 |
|
142,891 |
|
$201,710 |
|
9,938 |
|
47,425 |
|
$34,932 |
|
$236,642 |
|
$1.65 |
2015 |
|
$1.70 |
|
140,112 |
|
$237,623 |
|
3,003 |
|
|
|
$1,815 |
|
$239,438 |
|
$1.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$7.24 |
(1) |
Loss on Discontinued Operations
represents the pretax loss on disposal related to the sale of the Axiom Re
business in 2014. |
(2) |
After-tax effect of adjustments
calculated using the Companys effective tax rate for the respective
year. |
(3) |
A non-GAAP financial
measure. |
(4) |
Due to rounding, the numbers
presented in this column do not add up precisely to the total
provided. |
Table of Contents
Appendix A 2010 Stock Incentive
Plan |
APPENDIX A
BROWN & BROWN, INC.
2010 STOCK INCENTIVE PLAN
1. Establishment,
Purpose and Term of Plan.
1.1 Establishment. Brown & Brown, Inc. 2010 Stock Incentive Plan (the Plan) was
established effective as of March 9, 2010 (the Effective Date). The Plan was
subsequently amended as follows: (i) effective December 15, 2015, the Plan was
amended to permit the use of methods in addition to the delivery of share
certificates in order to issue shares of Stock pursuant to awards granted under
the Plan; (ii) effective January 20, 2016, the Plan was amended to authorize the
grant of restricted stock units; (iii) effective February 19, 2016, the Plan was
amended to add minimum vesting requirements for Options and Stock Appreciation
Rights and modify the provision for adjustment of performance targets and the
related level of achievement under certain Stock Grants; (iv) effective March
23, 2016, the Plan was amended to increase the number of shares authorized to be
issued under the Plan and expressly state that shares acquired by the
Corporation under certain circumstances will not again be available for issuance
under the Plan; and (v) effective March 14, 2017, the Plan was amended to
increase the number of shares authorized to be issued under the Plan. This
restatement of the Plan incorporates the Plan amendments from the Effective Date
to March 14, 2017.
1.2 Purpose. The purpose of the Plan is to promote the success of the Corporation and
its stockholders by attracting and retaining Employees and Directors by
supplementing their cash compensation and providing a means for them to increase
their holdings of Stock of the Corporation. The opportunity so provided and the
receipt of Awards as compensation are intended to foster in participants a
strong incentive to put forth maximum effort for the continued success and
growth of the Corporation for the benefit of customers and stockholders, to aid
in retaining individuals who put forth such efforts, and to assist in attracting
the best available individuals in the future. Awards granted under the Plan may
be Incentive Stock Options, Nonqualified Stock Options, Stock Grants, and Stock
Appreciation Rights. Such Awards will be granted to certain Employees and
Directors to recognize and reward outstanding individual performance.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance
under the Plan have been issued. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date. Notwithstanding the
foregoing, if the maximum number of shares of Stock issuable pursuant to the
Plan as provided in Section 4.1 has been increased at any time, all Awards shall
be granted, if at all, within ten (10) years from the date such amendment was
adopted by the Board.
2. Definitions and
Constructions; Sub-Plans.
2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a)
Award means an Option, Stock Appreciation Right or Stock
Grant.
(b)
Award
Agreement means a written or
electronic agreement between the Corporation and a Grantee setting forth the
terms, conditions and restrictions of an Award granted to the
Grantee.
(c)
Board means the Board of Directors of the Corporation.
(d)
Code means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.
(e)
Committee
means the Compensation Committee of the Board or such
other committee of the Board duly appointed to administer the Plan, and being
composed and having such powers as are specified in the Plan or by the Board as
generally provided for in the Plan.
(f)
Corporation
means Brown & Brown, Inc., a Florida corporation, or
any successor corporation thereto.
(g)
Director
means a member of the Board.
(h)
Disability
means, with respect to a particular Grantee, that he or
she is entitled to receive benefits under the long-term disability plan of the
Corporation or a Subsidiary, as applicable, or, in the absence of such a plan,
the complete and permanent inability by reason of illness or accident to perform
the duties of the persons occupation at the time when such disability
commenced, or, if the Grantee was retired when such disability commenced, the
inability to engage in any substantial gainful activity, in either case as
determined by the Committee based upon medical evidence acceptable to
it.
(i)
Employee
means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the records of the
Corporation or its Subsidiaries.
(j)
Exchange Act
means the Securities Exchange Act of 1934, as
amended.
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
(k) Fair Market Value means, as of any date, the closing price of the Stock on the
New York Stock Exchange, Inc. (as published by The Wall Street Journal, if published)
on such date, or if the Stock was not traded on such day, on the next preceding
day on which the Stock was traded.
(l) Grantee means a person who has been granted one or more Awards under this
Plan.
(m) Incentive Stock
Option means an Option so denominated
in the Award Agreement and which qualifies as an incentive stock option within
the meaning of Section 422(b) of the Code.
(n) Nonqualified Stock Option means an Option so denominated or which does not qualify as an
Incentive Stock Option.
(o) Option means a right to purchase Stock (subject to adjustment as provided in
Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be
either an Incentive Stock Option or a Nonqualified Stock Option.
(p) Ownership Change Event shall mean the occurrence of any of the following with respect
to the Corporation:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Corporation of more
than fifty percent (50%) of the voting stock or beneficial ownership of the
Corporation;
(ii) a merger or consolidation in which the Corporation is a party;
or
(iii) the sale, exchange, or transfer of all or substantially all of the
assets of the Corporation.
(q) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
(r) Stock means the Corporations common stock, $.10 par value, as adjusted from
time to time in accordance with Section 4.2.
(s) Stock Appreciation Right or
SAR has the meaning set forth in Section 7 of the Plan.
(t) Stock Grant means shares of Stock or units representing rights to receive shares of
Stock that are granted to a Grantee pursuant to Section 8 of the
Plan.
(u) Subsidiary means any present or future subsidiary corporation of the Corporation,
as defined in Section 424(f) of the Code.
(v) Ten Percent Owner Grantee means a Grantee who, at the time an Option is granted to the
Grantee, owns stock constituting more than ten percent (10%) of the total
combined voting power of all classes of stock of Corporation within the meaning
of Section 422(b)(6) of the Code. For the purpose of determining under any
provision of this Plan whether a Grantee owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Corporation, attribution rules contained in Section 424(d) of the Code shall
apply.
(w) Transfer of Control shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the Transaction) wherein the
stockholders of the Corporation immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Corporations voting stock immediately before
the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock
of the Corporation or the corporation or corporations to which the assets of the
Corporation were transferred (the Transferee
Corporation(s)), as the case may be. For purposes of
the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Corporation or
the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Committee shall have the right to
determine whether multiple sales or exchanges of the voting stock of the
Corporation or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
2.2 Construction. Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of the Plan. Except
when otherwise indicated by the context, the singular shall include the plural,
the plural shall include the singular, and the term or shall include the
conjunctive as well as the disjunctive.
2.3 Sub-Plans for Foreign
Subsidiaries. The Board may adopt
sub-plans applicable to particular foreign Subsidiaries. All Awards granted
under such sub-plans shall be treated as grants under the Plan. The rules of
such sub-plans may take precedence over other provisions of the Plan, with the
exception of Section 4, but unless otherwise superseded by the terms of such
sub-plan, the provisions of the Plan shall govern the operation of such
sub-plan.
3. Administration.
3.1 Administration. The Plan shall be administered by the Committee which shall be
duly appointed by the Board. All questions of interpretation of the Plan or of
any Award shall be determined by the Committee, and such determination shall be
final and binding upon all persons having an interest in the Plan or such Award.
The composition of the Committee shall at all times comply with the requirements
of Rule 16b-3 under the Exchange Act and with the requirements of Section 162(m)
of the Code, and all members of the Committee shall be non-employee directors
as defined by Rule 16b-3 and outside directors as referred to in Section
162(m).
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
3.2 Powers of the Committee. The Committee shall have full power and authority with respect
to the Plan, except those specifically reserved to the Board, and subject at all
times to the terms of the Plan and any applicable limitations imposed by law. In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Committee shall have the full and final power and authority, in
its sole discretion:
(a) to grant Awards in the forms of Options, Stock
Appreciation Rights and Stock Grants, and to determine the persons to whom, and
the time or times at which, Awards shall be granted and the types and amounts of
such Award, which determination need not be uniform among persons similarly
situated and may be made selectively among Employees and Directors;
(b) to
designate Options as Incentive Stock Options or Nonqualified Stock Options;
(c)
to determine the terms, conditions and restrictions applicable (which need not
be identical) to each Award, including, without limitation, (i) the exercise
price of an Option or SAR, (ii) the method of payment for shares purchased upon
the exercise of an Option, (iii) the method for satisfaction of any tax
withholding obligations arising in connection with an Award, including by the
withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability of Options and SARs, (v) the time of the
expiration of an Award, (vi) the effect of the Grantees termination of
employment or service with Corporation on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to an Award or such shares
not inconsistent with the terms of the Plan;
(d) to approve one or more forms of
Award Agreement;
(e) to amend the exercisability of any Option or SAR, including
with respect to the period following a Grantees termination of employment or
service with the Corporation;
(f) to prescribe, amend or rescind rules,
guidelines and policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, as the
Committee deems necessary or desirable to comply with the laws of, or to
accommodate the tax policy or custom of, foreign jurisdictions whose citizens
may be granted Awards;
(g) to correct any defect, supply any omission, or
reconcile any inconsistency in the Plan or any Award Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Award as the Committee may deem advisable to the extent consistent with the Plan
and applicable law;
(h) to establish performance goals on which the vesting of
the Awards are based;
(i) to certify in writing that such performance goals
referred to in subsection (h) above have been met; and
(j) to modify or amend
each Award, provided however that the Committee may not modify or amend any
outstanding Option or SAR so as to specify a lower exercise price, or accept the
surrender of an outstanding Option or SAR and authorize the granting of a new
Option or SAR with a lower exercise price in substitution for such surrendered
Option or SAR, or buy out, for a payment in cash or shares of Stock, an
outstanding Option or SAR.
4. Shares Subject
to Plan.
4.1 Shares Issuable. Subject to adjustment as provided in Section 4.2 and this
Section 4.1, the aggregate number of shares of Stock that are authorized to be
issued under the Plan is 8,453,543, which consists of (i) the 5,953,543 shares of Stock
that were authorized to be issued under the Brown & Brown, Inc. Performance
Stock Plan (the Performance Stock Plan) and that were not subject to awards
granted under the Performance Stock Plan and outstanding as of the Effective
Date, plus (ii) an additional 1,200,000 shares of Stock provided by a Plan
amendment on March 23, 2016, plus (iii) an additional 1,300,000 shares of Stock provided by a Plan
amendment on March 14, 2017. If any portion of an outstanding Award for any
reason expires or is terminated or canceled or forfeited, the shares of Stock
allocable to the expired, terminated, canceled, or forfeited portion of such
Award shall again be available for issuance under the Plan. In addition, if any
portion of an outstanding award that was granted prior to the Effective Date
under the Performance Stock Plan for any reason expires or is terminated or
canceled or forfeited on or after the Effective Date, the shares of Stock
allocable to the expired, terminated, canceled, or forfeited portion of such
Performance Stock Plan award shall be available for issuance under the Plan.
Awards made in connection with the assumption of, or substitution for,
outstanding awards previously granted to individuals who become Employees of the
Corporation or a Subsidiary as a result of any merger, consolidation,
acquisition of property or stock, or reorganization, shall not count against the
limitations set forth in this Section 4. All of the shares of Stock available
for Awards under the Plan shall be available for issuance pursuant to the
exercise of Incentive Stock Options granted under the Plan. With respect to
Stock Appreciation Rights, if the payment upon exercise of a SAR is in the form
of shares of Stock, the shares of Stock subject to the SAR shall be counted
against the available shares as one share for every share subject to the SAR,
regardless of the number of Shares used to settle the SAR upon exercise.
Similarly, in the event that any Option or other Award is exercised through the
tendering of shares of Stock or by the withholding of shares of Stock by the
Corporation, or withholding tax liabilities arising from such Option or other
Award are satisfied by the tendering of shares of Stock or by the withholding of
shares of Stock by the Corporation, the shares of Stock subject to such Option
or other Award shall be counted against the available shares as one share for
every share subject to the Option or other Award, regardless of the number of
shares of Stock issued upon exercise of the Option or other Award. In the event
that (i) any Option or other Award granted under the Plan or any other plan
maintained by the Corporation is exercised through the tendering of shares of
Stock or by the withholding of shares of Stock by the Corporation, or (ii)
withholding tax liabilities arising from such Options or Awards are satisfied by
the tendering of shares of Stock or by the withholding of shares of Stock by the
Corporation, or (iii) shares of Stock
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
are repurchased by the Corporation using
Option exercise proceeds, then the shares so tendered or withheld or repurchased
shall not again be available for issuance under the Plan. The shares of Stock
issued by the Corporation under this Plan may be, at the Corporations option,
evidenced by a share certificate delivered to the Grantee, or other physical or
electronic evidence of Stock ownership, including, without limitation, deposit
of shares into a stock brokerage account maintained for the Grantee or credit to
a book-entry account for the benefit of the Grantee maintained by the
Corporations stock transfer agent or its designee.
4.2 Adjustments for Changes in Capital
Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar event or change in the capital structure of the
Corporation, appropriate adjustments shall be made in the number and class of
shares available for issuance under the Plan as set forth in Section 4.1, and in
the number and class of shares of any outstanding Awards, and in the annual
limits set forth in Sections 6, 7, and 8. If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the New Shares), the
Committee shall amend the outstanding Options and SARs to provide that such
Options and SARs are exercisable for or with respect to New Shares. In the event
of any such amendment, the number of shares subject to, and any exercise price
per share of, the outstanding Awards shall be adjusted in a fair and equitable
manner as determined by the Committee, in its sole discretion. Notwithstanding
the foregoing, any fractional share resulting from an adjustment pursuant to
this Section 4.2 shall be rounded down to the nearest whole number, as
determined by the Committee, and in no event may the exercise price be decreased
to any amount less than the par value, if any, of the stock subject to an Option
or SAR. The adjustments determined by the Committee pursuant to this Section 4.2
shall be final, binding and conclusive.
5. Eligibility and
Limitations.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees and Directors,
as designated by the Committee in its sole discretion. Only Employees shall be
eligible to receive grants of Incentive Stock Options. The Committees
designation of a person as a participant in any year does not require the
Committee to designate that person to receive an Award under this Plan in any
other year or, if so designated, to receive the same Award as any other
participant in any year. The Committee may consider such factors as it deems
pertinent in selecting participants and in determining the amount of their
respective Awards, including, but without being limited to: (a) the financial
condition of the Corporation or a Subsidiary; (b) expected profits for the
current or future years; (c) the contributions of a prospective participant to
the profitability and success of the Corporation or a Subsidiary; and (d) the
adequacy of the prospective participants other compensation. The Committee, in
its discretion, may grant Awards to a participant under this Plan, even though
stock, stock options, stock appreciation rights and other benefits previously
were granted to him or her under this or another plan of the Corporation or a
Subsidiary, whether or not the previously granted benefits have been exercised,
but the participant may hold such Awards only on the terms and subject to the
restrictions hereafter set forth. A person who has participated in another
benefit plan of the Corporation or a Subsidiary may also participate in this
Plan.
5.2 Fair Market Value Limitation. To the extent that the aggregate Fair Market Value of
stock with respect to which Options designated as Incentive Stock Options are
exercisable by a Grantee for the first time during any calendar year (under all
stock option plans of the Corporation, including this Plan) exceeds One Hundred
Thousand Dollars ($100,000), that portion of such Options which exceeds such
amount shall be treated as Nonqualified Stock Options. For purposes of this
Section 5.2, Options designated as Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
Stock shall be determined as of the time the Option with respect to such Stock
is granted. If the Code is amended to provide for a different limitation from
that set forth in this Section 5.2, such different limitation shall be deemed
incorporated herein, effective as of the date of and with respect to such
Options as required or permitted by, such amendment to the Code. If an Option is
treated as an Incentive Stock Option in part and as a Nonqualified Stock Option
in part by reason of the limitation set forth in this Section 5.2, the Grantee
may designate which portion of such Option the Grantee is exercising and may
request that separate stock certificates (or other applicable evidence of Stock
ownership, in accordance with Section 4.1 of the Plan) representing each such
portion be issued upon the exercise of the Option. In the absence of such
designation, the Grantee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first.
5.3 No Right of Grant or
Employment. No Employee or
Director shall have any claim or right to be granted an Award under the Plan,
or, having been selected for the grant of an Award, to be selected for a grant
of any other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Grantee any right to be retained in the employ or
service of the Corporation or a Subsidiary, or interfere in any way with the
right of the Corporation or its Subsidiaries to terminate such Grantees
employment or service at any time.
6. Terms and Conditions of Options. Options shall be evidenced by Award Agreements specifying the number of
shares of Stock covered thereby, in such form as
the Committee shall from time to time establish. No Employee or Director shall
be granted in any calendar year Options to purchase more than five hundred
thousand (500,000) shares of Stock. The limitation described in this Section 6
shall be adjusted proportionately in connection with any change in the
Corporations capitalization as described in Section 4.2 of the Plan. If an
Option is canceled in the same calendar year in which it was granted, the
canceled Option will be counted against the limitation described in this Section
6. Award Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions.
6.1 Exercise Price. The exercise price for each Option shall be established in the
sole discretion of the Committee and, except as otherwise provided in this
Section 6.1 or a sub-plan applicable to a particular foreign Subsidiary, shall
be no less than the Fair Market Value of a share of Stock on the effective date
of grant of the Option; provided, however, that an Incentive Stock Option
granted to a Ten
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
Percent Owner Grantee shall have an
exercise price per share that is no less than one hundred ten percent (110%) of
the Fair Market Value of a share of Stock on the effective date of grant of such
Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonqualified Stock Option) may be granted with an exercise price
lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.
6.2 Exercise Period. An Option shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance
criteria, and restrictions as shall be determined by the Committee and set forth
in the Award Agreement evidencing such Option; provided, however, that (a) no
Option shall be exercisable after the expiration of ten (10) years after the
effective date of grant of such Option; (b) no Incentive Stock Option granted to
a Ten Percent Owner Grantee shall be exercisable after the expiration of five
(5) years after the effective date of grant of such Option; and (c) the terms of
the Award Agreement evidencing each Option shall include a minimum vesting
period of at least one (1) year from the date of grant of such
Option.
6.3 Payment of Option Exercise
Price.
(a) Forms of Consideration Authorized.
Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to the
exercise of any Option shall be made (i) in cash, by check, or by cash
equivalent, (ii) subject to the approval of the Committee, by tender to the
Corporation of shares of Stock owned by the Grantee having a Fair Market Value
(as determined by the Corporation without regard to any restrictions on
transferability applicable to such Stock by reason of federal or state
securities laws or agreements with an underwriter for the Corporation) not less
than the exercise price, (iii) subject to the approval of the Committee, by
directing the Corporation to retain all or a portion of the shares of Stock
otherwise issuable to the Grantee under the Plan pursuant to such exercise
having a Fair Market Value equal to the aggregate exercise price, (iv) by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of stock being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a Cashless
Exercise), (v) by such other consideration
as may be approved by the Committee from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof. The Committee may at any
time or from time to time, by adoption of or by amendment to the standard forms
of Award Agreement described in Section 6.5 hereof, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of considerations.
(b) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Corporation of shares of Stock to the extent such tender would constitute
a violation of the provisions of any law, regulation or agreement restricting
the redemption of the Corporations Stock.
(c) Cashless Exercise. The Corporation reserves, at any and all times, the right, in the
Corporations sole and absolute discretion, to establish, decline to approve or
terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise.
6.4 Tax Withholding. The Corporation shall have the right, but not the obligation,
to deduct from the shares of Stock issuable upon the exercise of an Option, a
number of whole shares of Stock having a Fair Market Value, as determined by the
Corporation, equal to all or any part of the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Corporation with respect to
such Option. Alternatively, or in addition, in its sole discretion, the
Corporation shall have the right to require the Grantee, through payroll
withholding, cash payment or otherwise, including by means of a Cashless
Exercise, to make adequate provision for any such tax withholding obligations of
the Corporation arising in connection with the exercise. The Corporation shall
have no obligation to deliver shares of Stock or cash, or to release shares of
Stock from an escrow established pursuant to the Award Agreement, until the
Corporations tax withholding obligations have been satisfied by the
Grantee.
6.5 Standard Forms of Award
Agreement.
(a) Incentive
Stock Options. Unless otherwise provided by the
Committee at the time the Option is granted, an Option designated as an
Incentive Stock Option shall comply with and be subject to the terms and
conditions set forth in the appropriate form of Incentive Stock Option Award
Agreement as adopted by the Committee and as amended from time to
time.
(b) Nonqualified Stock
Options. Unless otherwise provided by the Committee at the time
the Option is granted, an Option designated as a Nonqualified Stock Option
shall comply with and be subject to the terms and conditions set forth in the
appropriate form of Nonqualified Stock Option Award Agreement as adopted by the
Committee and as amended from time to time.
(c) Standard
Term of Options. Except as otherwise provided by
the Committee in the grant of an Option, any Option granted hereunder shall have
a term of ten (10) years from the effective date of grant of the
Option.
(d) Standard
Vesting Provisions. Except as otherwise provided by
the Committee in the grant of an Option, and subject to the minimum vesting
requirement described in Section 6.2 of the Plan, any Option granted hereunder
shall become vested based upon the attainment of certain performance levels as
described in the Award Agreement executed in connection with such
Option.
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
(e) Authority
to Vary Terms. The Committee shall have the
authority from time to time to vary the terms of any of the standard forms of
Award Agreement described in this Section 6.5 either in connection with the
grant or amendment of any individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the terms
and conditions of any such new, revised or amended standard form or forms of
Award Agreement shall be in accordance with the terms of the Plan. Subject to
the minimum vesting requirement described in Section 6.2 of the Plan, the
Committee, may in its discretion, provide for the extension of the exercise
period of an Option, accelerate the vesting of an Option, eliminate or make less
restrictive any restrictions contained in an Award Agreement, or waive any
restriction or provision of this Plan or an Award Agreement in any manner that
is either (i) not adverse to the Grantee or (ii) consented to by the
Grantee.
6.6 Nontransferability of
Options. During the lifetime of the Grantee, an Option shall be
exercisable only by the Grantee or the Grantees guardian or legal
representative. No Option shall be assignable or transferable by the Grantee,
except by will or by the laws of descent and distribution. Following a Grantees
death, the Option shall be exercisable to the extent provided in Section 6.7
below.
6.7 Effect of Termination of Service on Option
Exercisability.
(a) Time of Service. No Option granted under this Plan may be exercised before the Grantees
completion of such period of service as may be specified by the Committee in the
Award Agreement. Thereafter, or if no such period is specified, subject to the
provisions of subsections (b), (c), (d), (e) and (f) of this Section 6.7 and the
minimum vesting requirement described in Section 6.2 of the Plan, the Grantee
may exercise the Option in full or in part at any time until expiration of the
Option.
(b) Continued Employment. A Grantee cannot exercise an Option granted under this Plan
unless, at the time of exercise, he has been continuously employed by the
Corporation since the date such Option was granted. The Committee may decide in
each case to what extent bona fide leaves of absence for illness, temporary
disability, government or military service, or other reasons will not be deemed
to interrupt continuous employment.
(c) Termination of Service. If a Grantee ceases to be an Employee or Director, except as
provided in subsections (d), (e), (f) and (g) of this Section 6.7, the Option,
to the extent unexercised and exercisable on the date of his or termination of
employment or service, may be exercised by the Grantee within such period of
time as is determined by the Committee and specified in the Award Agreement (but
no later than the stated expiration date of the Option).
(d) Retirement. Except as otherwise provided by the Committee in the grant of an Option,
if a Grantee ceases to be an Employee or Director as a result of retirement, the
Option, to the extent unexercised and exercisable on the date of his or her
retirement, may be exercised by the Grantee at any time prior to the expiration
of three (3) months after the date on which he or she ceases to be an Employee
or Director (but no later than the stated expiration date of the Option). An
Employee or Director shall be regarded as retired if he terminates employment or
service after his or her sixty-fifth (65th) birthday.
(e) Disability. Except as otherwise provided by the Committee in the grant of an Option,
if the Grantees employment or service with the Corporation is terminated
because of the Disability of the Grantee, the Option, to the extent unexercised
and exercisable on the date on which the Grantees employment or service
terminated, may be exercised by the Grantee (or the Grantees guardian or legal
representative) at any time prior to the expiration of twelve (12) months after
the date on which the Grantees service terminated, but in any event not later
than the stated expiration date of the Option.
(f) Death. Except as otherwise provided by the Committee in the grant of an Option,
if the Grantees employment or service with the Corporation is terminated
because of the death of the Grantee, the Option, to the extent unexercised and
exercisable on the date on which the Grantees employment or service terminated,
may be exercised by the Grantees legal representative or other person who
acquired the right to exercise the Option by reason of the Grantees death at
any time prior to the expiration of twelve (12) months after the date on which
the Grantees employment or service terminated, but in any event no later than
the stated expiration date of the Option.
(g) Termination After Transfer of
Control. Except as otherwise provided
by the Committee in the grant of an Option, if the Grantees employment or
service with the Corporation terminates by reason of Termination After Transfer
of Control (as defined in Section 6.8 hereof), (i) the Option may be exercised
by the Grantee at any time prior to the expiration of three (3) months from the
date on which the Grantees employment or service terminated, but in any event
no later than the stated expiration date of the Option, and (ii) notwithstanding
any other provision of the Award Agreement or this Plan to the contrary, the
Grantee shall be deemed to have vested one hundred percent (100%) as of the date
of such Termination After Transfer of Control.
6.8 Termination After Transfer of
Control.
(a) Termination After Transfer of
Control shall mean either of the
following events occurring after a Transfer of Control:
(i) termination by the Corporation of the
Grantees employment or service with Corporation, within twelve (12) months
following a Transfer of Control, for any reason other than Termination for Cause
(as defined below); or
(ii) upon Grantees Constructive
Termination (as defined below), the Grantees resignation from employment or
service with the Corporation within twelve (12) months following the Transfer of
Control.
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
Notwithstanding any provision herein to
the contrary, Termination After Transfer of Control shall not include any
termination of the Grantees employment or service with the Corporation which:
(i) is a Termination for Cause (as defined below); (ii) is a result of the
Grantees death or Disability; (iii) is a result of the Grantees voluntary
termination of employment or service other than upon Constructive Termination
(as defined below); or (iv) occurs prior to the effectiveness of a Transfer of
Control.
(b) Termination for Cause shall mean termination by the Corporation of the Grantees
employment or service with the Corporation for any of the following reasons: (i)
theft, dishonesty, or falsification of any employment or Corporation records;
(ii) improper use or disclosure of the Corporations confidential or proprietary
information; (iii) the Grantees failure or inability to perform any reasonable
assigned duties after written notice from the Corporation of, and a reasonable
opportunity to cure, such continued failure or inability; (iv) any material
breach by the Grantee of any employment agreement between the Grantee and
Corporation, which breach is not cured pursuant to the terms of such agreement;
or (v) the Grantees conviction of any criminal act which, in the Corporations
sole discretion, impairs Grantees ability to perform his or her duties with
Corporation. Termination for Cause pursuant to the foregoing shall be determined
in the sole but reasonably exercised discretion of the Corporation.
(c) Constructive Termination shall mean any one or more of the following:
(i) without the Grantees express written
consent, the assignment to the Grantee of any duties, or any limitation of the
Grantees responsibilities, substantially inconsistent with the Grantees
positions, duties, responsibilities and status with the Corporation immediately
prior to the date of a Transfer of Control;
(ii) without the Grantees express written
consent, the relocation of the principal place of the Grantees employment to a
location that is more than fifty (50) miles from the Grantees principal place
of employment immediately prior to the date of a Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Grantee
than such travel requirements existing immediately prior to the date of a
Transfer of Control;
(iii) any failure by the Corporation to
pay, or any material reduction by the Corporation of, (A) the Grantees base
salary in effect immediately prior to the date of the Transfer of Control
(unless reductions comparable in amount and duration are concurrently made for
all other employees of the Corporation with responsibilities, organizational
level and title comparable to the Grantees), or (B) the Grantees bonus
compensation, if any, in effect immediately prior to the date of the Transfer of
Control (subject to applicable performance requirements with respect to the
actual amount of bonus compensation earned by the Grantee); or
(iv) any failure by the Corporation to (A)
continue to provide the Grantee with the opportunity to participate, on terms no
less favorable than those in effect for the benefit of any employee group which
customarily includes a person holding the employment position or a comparable
position with Corporation then held by the Grantee, in any benefit or
compensation plans and programs, including, but not limited to, the
Corporations life, disability, health, dental, medical, savings, profit
sharing, stock purchase and retirement plans, if any, in which the Grantee was
participating immediately prior to the date of the Transfer of Control, or their
equivalent, or (B) provide the Grantee with all other fringe benefits (or their
equivalent) from time to time in effect for the benefit of any employee group
which customarily includes a person holding the employment position or a
comparable position with the Corporation then held by the Grantee.
7. Stock
Appreciation Rights (SARs).
7.1 General. SARs shall be evidenced by Award Agreements specifying the number of
shares of Stock covered thereby, in such form as the Committee shall from time
to time establish. No Employee or Director shall be granted in any calendar year
SARs covering more than five hundred thousand (500,000) shares of Stock. The
limitation described in this Section 7 shall be adjusted proportionately in
connection with any change in the Corporations capitalization as described in
Section 4.2 of the Plan. If a SAR is canceled in the same calendar year in which
it was granted, the canceled SAR will be counted against the limitation
described in this Section 7. Award Agreements may incorporate all or any of the
terms of the Plan by reference, and shall include such terms and conditions as
shall be determined by the Committee in its sole discretion, including, without
limitation, provisions relating to exercise price, vesting and exercisability;
provided, however, that the terms of the Award Agreement evidencing each SAR
shall include a minimum vesting period of at least one (1) year from the date of
grant of such SAR. Upon exercise of a SAR, the Grantee shall be entitled to
receive payment from the Corporation in an amount determined by
multiplying:
(a) |
the excess of the Fair Market
Value of a share of Stock on the date of exercise over the SAR exercise
price; by |
|
(b) |
the number of shares of Stock
with respect to which the SAR is exercised; |
provided, that the Committee may provide
in the Award Agreement that the benefit payable on exercise of an SAR shall not
exceed such percentage of the Fair Market Value of a Share on the effective date
of grant of such SAR as the Committee shall specify. As determined by the
Committee, the payment upon exercise of an SAR may be in cash, in shares of
Stock that have an aggregate Fair Market Value (as of the date of exercise of
the SAR) equal to the amount of the payment, or in some combination thereof, as
set forth in the Award Agreement.
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
7.2 Effect of Termination of Service on SAR
Exercisability.
(a) Time of Service. No SAR granted under this Plan may be exercised before the Grantees
completion of such period of service as may be specified by the Committee in the
Award Agreement. Thereafter, or if no such period is specified, subject to the
provisions of subsections (b), (c), (d), (e) and (f) of this Section 7.2 and the
minimum vesting requirement described in Section 7.1 of the Plan, the Grantee
may exercise the SAR in full or in part at any time until expiration of the
SAR.
(b) Continued Employment. A Grantee cannot exercise a SAR granted under this Plan
unless, at the time of exercise, he has been continuously employed by the
Corporation since the date such SAR was granted. The Committee may decide in
each case to what extent bona fide leaves of absence for illness, temporary
disability, government or military service, or other reasons will not be deemed
to interrupt continuous employment.
(c) Termination of Service. If a Grantee ceases to be an Employee or Director, except as
provided in subsections (d), (e), (f) and (g) of this Section 7.2, the SAR, to
the extent unexercised and exercisable on the date of his or termination of
employment or service, may be exercised by the Grantee within such period of
time as is determined by the Committee and specified in the Award Agreement (but
no later than the stated expiration date of the SAR).
(d) Retirement. Except as otherwise provided by the Committee in the grant of a SAR, if a
Grantee ceases to be an Employee or Director as a result of retirement, the SAR,
to the extent unexercised and exercisable on the date of his or her retirement,
may be exercised by the Grantee at any time prior to the expiration of three (3)
months after the date on which he or she ceases to be an Employee or Director
(but no later than the stated expiration date of the SAR). An Employee or
Director shall be regarded as retired if he terminates employment or service
after his or her sixty-fifth (65th) birthday.
(e) Disability. Except as otherwise provided by the Committee in the grant of a SAR, if
the Grantees employment or service with the Corporation is terminated because
of the Disability of the Grantee, the SAR, to the extent unexercised and
exercisable on the date on which the Grantees employment or service terminated,
may be exercised by the Grantee (or the Grantees guardian or legal
representative) at any time prior to the expiration of twelve (12) months after
the date on which the Grantees service terminated, but in any event not later
than the stated expiration date of the SAR.
(f) Death. Except as otherwise provided by the Committee in the grant of a SAR, if
the Grantees employment or service with the Corporation is terminated because
of the death of the Grantee, the SAR, to the extent unexercised and exercisable
on the date on which the Grantees employment or service terminated, may be
exercised by the Grantees legal representative or other person who acquired the
right to exercise the SAR by reason of the Grantees death at any time prior to
the expiration of twelve (12) months after the date on which the Grantees
employment or service terminated, but in any event no later than the stated
expiration date of the SAR.
(g) Termination After Transfer of
Control. Except as otherwise provided
by the Committee in the grant of a SAR, if the Grantees employment or service
with the Corporation terminates by reason of Termination After Transfer of
Control (as defined in Section 6.8 hereof), (i) the SAR may be exercised by the
Grantee at any time prior to the expiration of three (3) months from the date on
which the Grantees employment or service terminated, but in any event no later
than the stated expiration date of the SAR, and (ii) notwithstanding any other
provision of the Award Agreement or this Plan to the contrary, the Grantee shall
be deemed to have vested one hundred percent (100%) as of the date of such
Termination After Transfer of Control.
8. Stock
Grants.
8.1 Authorization to Grant Stock
Grants. Subject to the terms and conditions of the Plan, the Committee
may grant Stock Grants to Employees or Directors from time to time. A Stock
Grant may be made in shares of Stock or denominated in units representing rights
to receive shares of Stock. Each Stock Grant shall be evidenced by an Award
Agreement that shall set forth the conditions, if any, which will need to be
timely satisfied before the Stock Grant will be effective, and the conditions,
if any, which will need to be timely satisfied before the Stock Grant will be
vested and settled, and the conditions, if any, under which the Grantees
interest in the related shares of Stock or units will be forfeited. Any such
conditions for effectiveness or vesting and settlement or nonforfeitability may
be based upon the passage of time and continued service by the Grantee, or the
achievement of specified performance objectives, or both time-based and
performance-base conditions. A Stock Grant that is made in shares of Stock that
are subject to forfeiture and/or other conditions may be designated as an Award
of Restricted Stock. A Stock Grant that is denominated in units that are
subject to forfeiture and/or other conditions may be designated as an Award of
Restricted Stock Units. No Grantee may be granted Stock Grants relating to
more than five hundred thousand (500,000) shares of Stock in any calendar year.
Subject to any additional conditions set forth in the Award Agreement that
evidences a Stock Grant, and subject to the applicable requirements of Section
409A of the Code, if the Grantees employment or service with the Corporation
terminates by reason of Termination After Transfer of Control (as defined in
Section 6.8 hereof), the Stock Grant shall be deemed to have vested one hundred
percent (100%) as of the date of such Termination After Transfer of
Control.
8.2 Code Section 162(m)
Provisions.
(a) Notwithstanding any
other provision of the Plan, if the Compensation Committee of the Board (the
Compensation Committee) determines at the time a Stock Grant is granted to a
Grantee that such Grantee is, or may be as of the end of the tax year for which
the Company would claim a tax deduction in connection with such Stock Grant, a
covered employee within the meaning of Section 162(m)(3) of the Code, and to
the extent the Compensation Committee considers it desirable for compensation
delivered
Table
of Contents
Appendix A 2010
Stock Incentive Plan |
pursuant to such Stock Grant to be
eligible to qualify for an exemption from the limit on tax deductibility of
compensation under Section 162(m) of the Code, then the Compensation Committee
may provide that this Section 8.2 is applicable to such Stock Grant under such
terms as the Compensation Committee shall determine.
(b) If a Stock Grant is subject to this
Section 8.2, then the lapsing of restrictions thereon and the distribution of
shares of Stock pursuant thereto or payment, as applicable, shall be subject to
satisfaction of one, or more than one, objective performance targets. The
Compensation Committee shall determine the performance targets that will be
applied with respect to each Stock Grant subject to this Section 8.2 at the time
of grant, but in no event later than ninety (90) days after the commencement of
the period of service to which the performance target(s) relate. Performance
targets may be described in terms of Corporation-wide objectives or objectives
that are related to the performance of the individual Grantee or the Subsidiary,
division, department or function within the Corporation or Subsidiary in which
the Grantee is employed. Performance may be measured on an absolute or relative
basis. The performance criteria applicable to Stock Grants subject to this
Section 8.2 will be one or more of the following criteria: (A) stock price; (B)
market share; (C) sales; (D) earnings per share, core earnings per share or
variations thereof; (E) return on equity; (F) costs; (G) revenue; (H) cash to
cash cycle; (I) days payables outstanding; (J) days of supply; (K) days sales
outstanding; (L) cash flow; (M) operating income; (N) profit after tax; (O)
profit before tax; (P) return on assets; (Q) return on sales; (R) inventory
turns; (S) invested capital; (T) net operating profit after tax; (U) return on
invested capital; (V) total shareholder return; (W) earnings; (X) return on
equity or average shareowners equity; (Y) total shareowner return; (Z) return
on capital; (AA) return on investment; (BB) income or net income; (CC) operating
income or net operating income; (DD) operating profit or net operating profit;
(EE) operating margin; (FF) return on operating revenue; (GG) contract awards or
backlog; (HH) overhead or other expense reduction; (II) growth in shareowner
value relative to the moving average of the S&P 500 Index or a peer group
index; (JJ) credit rating; (KK) strategic plan development and implementation;
(LL) net cash provided by operating activities; (MM) gross margin; (NN) economic
value added; (OO) customer satisfaction; (PP) financial return ratios; and/or
(QQ) market performance.
(c) Notwithstanding any contrary provision
of the Plan, the Compensation Committee may not increase the number of shares
granted pursuant to any Stock Grant subject to this Section 8.2, nor may it
waive the achievement of any performance target established pursuant to this
Section 8.2. The Compensation Committee may adjust performance targets and the
related level of achievement if, in the sole judgment of the Compensation
Committee, events or transactions that are unusual in nature or infrequently
occurring have occurred after the date of grant that are unrelated to the
performance of the Grantee and result in distortion of the performance targets
or the related level of achievement.
(d) Prior to the payment of any Stock
Grant subject to this Section 8.2, the Compensation Committee shall certify in
writing that the performance target(s) applicable to such Stock Grant was
met.
(e) The Compensation Committee shall have
the power to impose such other restrictions on Stock Grants subject to this
Section 8.2 as it may deem necessary or appropriate to ensure that such Stock
Grants satisfy all requirements for performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code, the regulations promulgated
thereunder, and any successors thereto.
8.3 Dividends, Voting, and Other Ownership
Rights.
(a) Restricted Stock Awards. Unless otherwise provided by the Committee in the Award
Agreement, an Award of Restricted Stock shall entitle the Grantee to dividend,
voting and other ownership rights during the period for which the share(s) of
Stock remain subject to forfeiture and/or other conditions, provided, however,
that in the case of an Award of Restricted Stock that is conditioned on the
attainment of performance goals, the Grantee shall not receive payment of any
dividends unless and not earlier than such time as the Restricted Stock becomes
earned or awarded based on the attainment of the performance goals.
(b) Restricted Stock Unit Awards. Unless otherwise provided by the Committee in the Award
Agreement, a Grantee shall not have any rights as a shareholder with respect to
shares of Stock underlying an Award of Restricted Stock Units until such time,
if any, as the Restricted Stock Units are settled and the underlying shares of
Stock are actually issued to the Grantee. The Committee may provide in the Award
Agreement for the payment of Dividend Equivalents (as defined below) to the
Grantee at such times as paid to shareholders generally or at the time of
vesting or other payout of the Restricted Stock Units, provided, however, that
in the case of such an Award that is conditioned on the attainment of
performance goals, the Grantee shall not receive payment of any Dividend
Equivalents unless and not earlier than such time as the Restricted Stock Units
become earned or awarded based on the attainment of the performance goals, and
provided further, that if the payment or crediting of Dividend Equivalents is in
respect of an Award that is subject to Section 409A of the Code, then the
payment or crediting of such dividends or Dividend Equivalents shall conform to
the requirements of Section 409A of the Code. Dividend Equivalent means a
right to receive a payment equal to the amount of cash dividends and value of
other distributions that would have been payable on shares of Stock subject to
an Award during a period of time had such shares of Stock been issued to the
Grantee during such period of time.
8.4 Deferral of Receipt of Payment.
The Committee may permit or require a Grantee to defer
receipt of the delivery of Shares that would otherwise be due by virtue of the
grant of or the lapse or waiver of restrictions with respect to Awards of
Restricted Stock Units. If any such deferral is required or permitted, the
Committee shall establish such rules and procedures for such deferral, including
rules and procedures implemented pursuant to Section 17 of the Plan for
compliance with Section 409A of the Code.
Table of
Contents
Appendix A 2010 Stock
Incentive Plan |
9. Indemnification.
In addition to such other rights of indemnification as they may have as members
of the Board or a committee thereof or as officers or employees of the
Corporation, members of the Board, the Committee and any officers or employees
of the Corporation to whom authority to act for the Board or Committee is
delegated shall be indemnified by the Corporation against all reasonable
expenses, including attorneys fees, incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan, Award, or any right granted
hereunder, and against all amounts in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Corporation)
or paid in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within
sixty (60) days after the institution of such action, suit or proceeding, such
person shall offer to the Corporation, in writing, the opportunity at its own
expense to handle and defend the same. Without limiting the generality of the
foregoing, the Corporation shall pay the expenses (including reasonable
attorneys fees) of defending any such claim, action, suit or proceeds in
advance of its final disposition, upon receipt of such persons written
agreement to repay all amounts advanced if it should ultimately be determined
that such person is not entitled to be indemnified under this Section
9.
10. Termination or Amendment of Plan. The Committee, without further approval of the stockholders
of the Corporation, may terminate or amend this Plan at any time in any respect
as the Committee deems advisable, subject to any required shareholder or
regulatory approval and to any conditions established by the terms of such
amendment. In any event, no termination or amendment of the Plan may adversely
affect any then outstanding Award or any unexercised portion thereof without the
consent of the Grantee, unless such termination or amendment is required to
enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any applicable law or
government regulation.
11. Dissolution of Corporation. Upon the dissolution of the Corporation, the Plan shall
terminate and any and all Awards previously granted hereunder shall lapse on the
date of such dissolution.
12. Rights as Stockholders. No Grantee, nor any beneficiary or other person claiming through a
Grantee, shall have any interest in any shares of Stock allocated for the
purposes of the Plan or that are subject to an Award until such shares of Stock
shall have been issued to the Grantee or such beneficiary or other person.
Furthermore, the existence of the Awards shall not affect the right or power of
the Corporation or its stockholders to make adjustments, or to effect any
recapitalization, reorganization, or other changes in the Corporations capital
structure or its business; to issue bonds, debentures, preferred or prior
preference stocks affecting the Stock of the Corporation or the rights thereof;
to dissolve the Corporation or sell or transfer any part of its assets or
business; or to do any other corporate act, whether of a similar character or
otherwise.
13. Application of Funds. The proceeds received by the Corporation from the sale of Stock pursuant
to Options granted under this Plan will be used for general corporate
purposes.
14. Choice of Law.
The validity, interpretation, and administration of the Plan and of any rules,
regulations, determinations, or decisions made thereunder, and the rights of any
and all person having or claiming to have any interest therein or thereunder,
shall be determined exclusively in accordance with the internal laws of the
State of Florida. Without limiting the generality of the foregoing, the period
within which any action in connection with Plan must be commenced shall be
governed by the internal laws of the State of Florida without regard to the
place where the act or omission complained of took place or the resident of any
party to such action. Any action in connection with the Plan must be brought in
the State of Florida, County of Hillsborough.
15. Number and Gender. Unless otherwise clearly indicated in this Plan, words in the singular
or plural shall include the plural and singular, respectively, where they would
so apply, and words in the masculine or neuter gender shall include the
feminine, masculine or neuter gender where applicable.
16. Shareholder Approval. The Plan or any increase in the maximum number of shares of Stock
issuable thereunder as provided in Section 4.1 hereof (the Maximum Shares) shall be
approved by the stockholders of the Corporation within twelve (12) months of the
date of adoption thereof by the Board. Awards granted prior to shareholder
approval of the Plan or in excess of the Maximum Shares previously approved by
the stockholders shall become exercisable no earlier than the date of
shareholder approval of the Plan or such increase in the Maximum Shares, as the
case may be.
17. Code Section 409A. It is
intended that the Plan and all Awards hereunder be administered in a manner that
will comply with Section 409A of the Code. The Committee is authorized to adopt
rules or regulations deemed necessary or appropriate to qualify for an exception
from or to comply with the requirements of Section 409A of the Code. Without
limiting the generality of the foregoing, if any amount shall be payable with
respect to any Award hereunder as a result of a Grantees separation from
service at such time as the Grantee is a specified employee (as those terms
are defined for purposes of Section 409A of the Code), and such amount
constitutes a deferral of compensation subject to Section 409A of the Code, then
no payment shall be made, except as permitted under Section 409A of the Code,
prior to the date six months after the Grantees separation from service (or the
date of his or her earlier death). The Corporation may adopt a specified
employee policy that will apply to identify the specified employees for all
deferred compensation plans subject to Section 409A of the Code; otherwise,
specified employees will be identified using the default standards contained in
the regulations under Section 409A of the Code.
Table of
Contents
Appendix A UK Stock
Performance Plan |
BROWN & BROWN, INC.
UK STOCK PERFORMANCE PLAN
Brown &
Brown, Inc., a corporation organized under the laws of the State of Florida,
establishes, as a sub-plan of the Brown & Brown, Inc. 2010 Stock Incentive
Plan, this UK Stock Performance Plan for the purposes of attracting and
retaining Key Employees in the UK, providing an incentive for Key Employees in
the UK to achieve long-range performance goals, and enabling Key Employees in
the UK to share in the successful performance of the stock of Brown & Brown,
Inc., as measured against pre-established performance goals.
ARTICLE I DEFINITIONS
AND INTERPRETATION
1.01 Award means a conditional
right to acquire Stock granted pursuant to Article VI of this Plan under which
the Key Employee shall not have any beneficial interest in that Stock until such
time as the Award is Released to the Key Employee pursuant to Section 6.06 of
this Plan.
1.02 Award Certificate means a
certificate confirming an Award made to a Key Employee under this
Plan.
1.03 Award Effective Date means
the date on which an Award to a Key Employee becomes effective. An Award shall
be effective (i) as of the date set by the Committee when the Award is granted
or, (ii) if the Award is made subject to one, or more than one, condition under
Section 6.03 of this Plan, as of the date that such condition or conditions are
satisfied.
1.04 Award Release Date means
the date on which Vested Stock is Released to the Key Employee.
1.05 Board
means the Board of Directors of Brown & Brown, Inc.
1.06 Bonus means a cash amount
in sterling equal to the aggregate of the dividends that would have been
declared during the period between the Award Effective Date and the Award
Release Date and payable to the Key Employee in respect of the Stock Released to
the Key Employee pursuant to the relevant Award had that Stock been Released to
the Key Employee on the Award Effective Date rather than the Award Release Date.
Where such dividends would have been paid in US dollars the Committee shall
convert such amounts into a sterling amount by reference to the exchange rate on
the Award Release Date, such rate on that date to be determined by the Committee
in its sole and absolute discretion.
1.07 Change in Control means
(i) the acquisition of the power to direct, or cause the direction of, the
management and policies of the Company by a person not previously possessing
such power, acting alone or in conjunction with others, whether through
ownership of Stock, by contract or otherwise, or (ii) the acquisition, directly
or indirectly, of the power to vote twenty percent or more of the outstanding
Stock by a person or persons. For purposes of this Section 1.07, the term
person means a natural person, corporation, partnership, joint venture, trust,
government or instrumentality of a government. Also for purposes of this Section
1.07, customary agreements with or among underwriters and selling group members
with respect to a bona fide public offering of Stock shall be
disregarded.
1.08 Code means the Internal
Revenue Code of 1986, as amended.
1.09 Committee means the
Compensation Committee of the Board or, if the Compensation Committee at any
time has less than three members, a committee that shall have at least three
members, each of whom shall be appointed by and shall serve at the pleasure of
the Board.
1.10 Company means Brown &
Brown, Inc., a corporation organized under the laws of the State of
Florida.
1.11 Disability means a
physical or mental condition of a Key Employee resulting from bodily injury,
disease or mental disorder that renders him or her incapable of engaging in any
occupation or employment for wage or profit. Disability does not include any
physical or mental condition resulting from the Key Employees engagement in a
felonious act, self-infliction of an injury, or performance of military service.
Disability of a Key Employee shall be determined by a properly qualified doctor
selected by the Committee in its sole and absolute discretion.
1.12 Grant Date means the date
on which the Award is granted, subject to the discretion of the Committee to
determine that the Grant Date of an Award granted to an Original Employee in
2010 shall be April 30, 2008.
1.13 Group Company means the
Company and any subsidiary of the Company (as defined in section 1159 of the
Companies Act 2006).
1.14 Key Employee means a full
time, salaried employee (including an executive director) of a Group Company
who, in the judgment of the Committee acting in its sole and absolute
discretion, is a key to the successful operation of the Company.
1.15 Original Employee means a
Key Employee who was employed by a Group Company as of April 30,
2008.
Table of
Contents
Appendix A UK Stock
Performance Plan |
1.16 Ownership Change Event
means the occurrence of any of the following with respect to the
Company:
(a) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
or beneficial ownership of the Company;
(b) a merger or
consolidation in which the Company is a party; or
(c) the sale, exchange,
or transfer of all or substantially all of the assets of the Company.
1.17 Plan means this UK Stock
Performance Plan.
1.18 Proportionate Number means
the result of A x (B ÷ 15) where A is the aggregate number of shares of Stock in
respect of which the Award has become effective and B is the number of Years of
Vesting Service for a Group Company which have been completed by the Key
Employee.
1.19 Release means the issue or
transfer of Vested Stock to the Key Employee pursuant to Section 6.06 and
Released shall be construed accordingly.
1.20 Stock means the common
stock, $0.10 par value, of the Company.
1.21 Tax means all forms of
taxation, charge, duty, withholding or deduction in the nature of tax (including
without limitation primary Class 1 national insurance contributions and, if so
determined by the Committee, secondary Class 1 national insurance contributions)
whatsoever and whenever created, enacted or imposed and whether of the United
Kingdom or elsewhere and any amount whatever payable to any Tax Authority as a
result of any enactment relating to tax together with all related fines,
penalties, interest and surcharges.
1.22 Tax Authority means any
statutory or governmental authority or body (whether of the United Kingdom or
elsewhere) involved in the collection or administration of Tax.
1.23 Tax Liability means the
liability of a Group Company or the trustee or trustees of any relevant employee
share ownership trust to account for any amount of Tax in relation to the
Vesting or Release of an Award.
1.24 Transfer of Control means
an Ownership Change Event or a series of related Ownership Change Events
(collectively, the Transaction) wherein the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Companys voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company
were transferred (the Transferee Corporation(s)), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Committee shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
1.25 Vest means the Key
Employee becoming entitled to have the Vested Stock Released to him or her and
Vesting and Vested shall be construed accordingly.
1.26 Vested Stock means those
shares of Stock in respect of which an Award has Vested.
1.27 Year of Vesting Service means, with respect to each Award, a twelve consecutive month period
measured from the Grant Date of the Award and each successive twelve consecutive
month period measured from each anniversary of such Grant Date for that
Award.
Any reference in
this Plan to any enactment includes a reference to that enactment as from time
to time modified, extended or re-extended.
ARTICLE II -
ELIGIBILITY
Only Key
Employees shall be eligible to receive Awards under this Plan. The Committee, in
its sole and absolute discretion, shall determine the Key Employees to whom
Awards shall be granted. A member of the Committee is not eligible to be granted
an Award during the period he or she serves on the Committee.
ARTICLE III - STOCK
AVAILABLE FOR AWARDS
The Company
shall reserve 5,953,543 shares of Stock for use under this Plan. All such shares
of Stock shall be reserved to the extent that the Company deems appropriate from
authorized but unissued shares of Stock and from shares of Stock that have been
reacquired by the Company. Furthermore, any shares of Stock that are subject to
an Award which is forfeited under Section 6.02, 6.03 or 6.04 of this Plan shall
again become available for use under this Plan.
Table of
Contents
Appendix A UK Stock
Performance Plan |
ARTICLE IV - EFFECTIVE
DATE
This Plan shall
be effective on the date it is adopted by the Board, subject to the approval of
the shareholders of the Company within twelve months after the date of adoption
of this Plan by the Board. Any Award granted under this Plan before the date of
such shareholder approval shall be awarded expressly subject to such
approval.
ARTICLE V -
ADMINISTRATION
This Plan shall
be administered by the Committee. The Committee, acting in its sole and absolute
discretion, shall exercise such powers and take such action as expressly called
for under this Plan. Furthermore, the Committee shall have the power to
interpret this Plan and to take such other action in the administration and
operation of this Plan as the Committee deems equitable under the circumstances,
which action shall be binding on the Company with respect to each affected Key
Employee and each other person directly or indirectly affected by such action.
Nothing in this Article V shall affect or impair the Boards power to take the
actions reserved to it in this Plan.
ARTICLE VI - STOCK
AWARDS
6.01 Committee Action.
The Committee shall have the right to grant Awards to Key Employees under this
Plan. Each Award shall be evidenced by an Award Certificate, and each Award
Certificate shall set forth the Grant Date of the Award, the conditions under
which the Award will become effective and the conditions under which the Award
shall Vest.
6.02 No Transfer of Awards. An
Award granted to a Key Employee shall not be transferred, assigned, pledged,
charged or otherwise disposed of by the Key Employee (except on his or her death
to his or her personal representatives) and shall immediately be forfeited if
the Key Employee purports to so transfer, assign, pledge, charge or otherwise
dispose of the Award or if the Key Employee is declared bankrupt, or enters into
any arrangement with his or her creditors under any formal insolvency
procedure.
6.03 Conditions for Awards. The
Committee shall make Awards to Key Employees effective only upon the
satisfaction of one, or more than one, objective performance targets. The
Committee shall determine the performance targets which will be applied with
respect to each grant of an Award at the time of grant of such Award, but in no
event later than ninety (90) days after the commencement of the period of
service to which the performance targets relate. The performance criteria
applicable to Awards will be one or more of the following criteria:
(a) Stock
price;
(b) average annual growth in earnings per share;
(c) increase in shareholder value;
(d) earnings per share;
(e) net income;
(f) return on assets;
(g) return on shareholders equity;
(h) increase in cash flow;
(i) operating profit or operating margins;
(j) revenue growth of the Company; and
(k) operating expenses.
For the
avoidance of doubt, the Committee shall have the discretion to determine the
performance targets applicable to an Award granted to an Original Employee in
2010 as if the Award had been granted on April 30, 2008.
The related
Award Certificate shall set forth each such target and the deadline for
satisfying each such target. Where a target is satisfied the Committee shall
certify in writing that such target has been satisfied. The shares of Stock
underlying an Award shall be unavailable under Article III of this Plan as of
the date on which such Award is granted. If an Award fails to become effective
under this Section 6.03, the underlying shares of Stock subject to such Award
shall again become available under Article III of this Plan as of the date of
such failure to become effective. An Award or Awards may not be granted to a Key
Employee in any calendar year over more than 500,000 shares of Stock in
aggregate provided that the relevant limit in respect of an Award or Awards
granted to an Original Employee in 2010 shall be 40,000 shares of Stock in
aggregate.
Table of
Contents
Appendix A UK Stock
Performance Plan |
6.04 Conditions for Vesting of Awards. Subject to the provisions of Article IX and Article XII of this Plan, an
Award which has become effective upon the satisfaction of any conditions for the
grant specified by the Committee pursuant to Section 6.03 shall Vest upon the
Key Employees completion of fifteen Years of Vesting Service for a Group
Company. Subject to the provisions of Article IX of this Plan, if the Key
Employees employment with a Group Company terminates to the effect that he or
she is no longer employed by any Group Company before his or her completion of
fifteen Years of Vesting Service for a Group Company, the Key Employees Award
shall be forfeited unless:
(a) the Key Employees
employment with the Group Company terminates on or after the Award Effective
Date in circumstances where the Committee is satisfied that the Key Employee has
no intention of taking paid employment elsewhere at any time in the future in
which case, subject to the provisions of Article XII of this Plan, the Award
shall Vest on the date of termination in respect of the Proportionate Number of
shares of Stock and shall be forfeited in respect of the remaining shares of
Stock subject to the Award;
(b) the Key Employees
employment with the Group Company terminates as a result of his or her death or
Disability in which case, subject to the provisions of Article XII of this Plan,
the Award shall Vest in full on the date of termination; or
(c) the Committee, in
its sole and absolute discretion, waives the conditions described in this
Section 6.04 in which case, subject to the provisions of Article XII of this
Plan, the Award shall Vest in accordance with the Committees determination in
its sole and absolute discretion.
6.05 Dividends and Voting Rights. For the avoidance of doubt, a Key Employee shall not be entitled to
receive dividends declared or paid, or to exercise voting rights or any other
right, in relation to Stock subject to an Award in respect of any period prior
to the Release of the Stock to the Key Employee.
6.06 Release of Stock. On or as
soon as reasonably practicable after an Award has Vested the Company will issue,
transfer or procure the transfer to the Key Employee the relevant number of
shares of Stock in respect of which the Award has Vested. The certificate
representing shares of Stock Released pursuant to the Award shall be transferred
to the Key Employee as soon as practicable after the Award Release Date. For the
avoidance of doubt, the Key Employee shall have no entitlement in relation to
rights attaching to the shares of Stock until the shares have been issued or
transferred to the Key Employee pursuant to this Section 6.06.
6.07 Cash Bonus Representing Dividends. Within 30 days of the Release of an Award the Company or another Group
Company shall pay the Bonus to the relevant Key Employee, subject to deduction
of any applicable Tax (which, for the avoidance of doubt, shall not include
secondary Class 1 national insurance contributions for this purpose).
ARTICLE VII -
SECURITIES REGISTRATION
Each Award
Certificate shall provide that, upon the receipt of shares of Stock pursuant to
the Release of an Award, the Key Employee shall, if so requested by the Company,
hold such shares of Stock for investment and not with a view of resale or
distribution to the public and, if so requested by the Company, shall deliver to
the Company a written statement signed by the Key Employee satisfactory to the
Company to that effect. With respect to Stock issued pursuant to this Plan, the
Company at its expense shall take such action as it deems necessary or
appropriate to register the original issuance of such Stock to a Key Employee
under the Securities Act of 1933 or under any other applicable securities laws
or to qualify such Stock for an exemption under any such laws prior to the
issuance of such Stock to a Key Employee. Notwithstanding the foregoing, the
Company shall have no obligation whatsoever to take any such action in
connection with the transfer, resale or other disposition of such Stock by a Key
Employee.
ARTICLE VIII -
ADJUSTMENT
The Board, in
its sole and absolute discretion, may, but shall not be required to, adjust the
number of shares of Stock reserved under Article III of this Plan, the annual
grant limit set forth in Section 6.03 of this Plan (to the extent permitted by
the rules relating to the qualified performance-based compensation exemption
from the limit on tax deductibility of compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code)), and shares of
Performance Stock theretofore granted in an equitable manner to reflect any
change in the capitalization of the Company, including, but not limited to, such
changes as Stock dividends or Stock splits. If any adjustment under this Article
VIII would create a fractional share of Stock, such fractional share shall be
disregarded and the number of shares of Stock reserved or granted under this
Plan shall be the next lower number of shares of Stock, rounding all fractions
downward. An adjustment made under this Article VIII by the Board shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of shares reserved under Article III within
the meaning of Article X(a) of this Plan.
Table of
Contents
Appendix A UK Stock
Performance Plan |
ARTICLE IX
TERMINATION AFTER TRANSFER OF CONTROL
9.01 Termination After Transfer of Control. If the Key Employees employment with the Group Company
terminates by reason of Termination After Transfer of Control (as defined in
Section 9.02) then, subject to the provisions of Article XII of this Plan, the
Award shall Vest in full on the date of such Termination After Transfer of
Control.
9.02 Definitions.
(a) Termination After Transfer of Control
shall mean either of the following events
occurring after a Transfer of Control:
(i) termination by a Group Company of the Key Employees employment with
the Group Company, within twelve (12) months following a Transfer of Control,
for any reason other than Termination for Cause (as defined below); or
(ii) upon the Key Employees Constructive Termination (as defined below),
the Key Employees resignation from employment with a Group Company within
twelve (12) months following the Transfer of Control.
Notwithstanding
any provision herein to the contrary, Termination After Transfer of Control
shall not include any termination of the Key Employees employment with a Group
Company which: (i) is a Termination for Cause (as defined below); (ii) is a
result of the Key Employees death or Disability; (iii) is a result of the Key
Employees voluntary termination of employment other than upon Constructive
Termination (as defined below); or (iv) occurs prior to the effectiveness of a
Transfer of Control.
(b) Termination for Cause shall mean termination by a Group Company of the Key Employees
employment with the Group Company for any of the following reasons: (i) theft,
dishonesty, or falsification of any employment or Group Company records; (ii)
improper use or disclosure of a Group Companys confidential or proprietary
information; (iii) the Key Employees failure or inability to perform any
reasonable assigned duties after written notice from a Group Company of, and a
reasonable opportunity to cure, such continued failure or inability; (iv) any
material breach by the Key Employee of any employment agreement between the Key
Employee and a Group Company, which breach is not cured pursuant to the terms of
such agreement; or (v) the Key Employees conviction of any criminal act which,
in the Group Companys sole discretion, impairs the Key Employees ability to
perform his or her duties with the Group Company. Termination for Cause pursuant
to the foregoing shall be determined in the sole but reasonably exercised
discretion of the Committee.
(c) Constructive Termination shall mean any one or more of the following:
(i) without the Key Employees express written consent, the assignment to
the Key Employee of any duties, or any limitation of the Key Employees
responsibilities, substantially inconsistent with the Key Employees positions,
duties, responsibilities and status with the relevant Group Company immediately
prior to the date of a Transfer of Control;
(ii) without the Key Employees express written consent, the relocation
of the principal place of the Key Employees employment to a location that is
more than fifty (50) miles from the Key Employees principal place of employment
immediately prior to the date of a Transfer of Control, or the imposition of
travel requirements substantially more demanding of the Key Employee than such
travel requirements existing immediately prior to the date of a Transfer of
Control;
(iii) any failure by the relevant Group Company to pay, or any material
reduction by the relevant Group Company of, (A) the Key Employees base salary
in effect immediately prior to the date of the Transfer of Control (unless
reductions comparable in amount and duration are concurrently made for all other
employees of the relevant Group Company with responsibilities, organizational
level and title comparable to the Key Employees), or (B) the Key Employees
bonus compensation, if any, in effect immediately prior to the date of the
Transfer of Control (subject to applicable performance requirements with respect
to the actual amount of bonus compensation earned by the Key Employee); or
(iv) any failure by the relevant Group Company to (A) continue to provide
the Key Employee with the opportunity to participate, on terms no less favorable
than those in effect for the benefit of any employee group which customarily
includes a person holding the employment position or a comparable position with
the relevant Group Company then held by the Key Employee, in any benefit or
compensation plans and programs, including, but not limited to, the relevant
Group Companys life, disability, health, dental, medical, savings, profit
sharing, stock purchase and retirement plans, if any, in which the Key Employee
was participating immediately prior to the date of the Transfer of Control, or
their equivalent, or (B) provide the Key Employee with all other fringe benefits
(or their equivalent) from time to time in effect for the benefit of any
employee group which customarily includes a person holding the employment
position or a comparable position with the relevant Group Company then held by
the Key Employee.
Table of
Contents
Appendix A UK Stock
Performance Plan |
ARTICLE X - AMENDMENT
OR TERMINATION
This Plan may be
amended by the Board from time to time to the extent that the Board in its sole
and absolute discretion deems necessary or appropriate. Notwithstanding the
foregoing, no amendment of this Plan shall be made absent the approval of the
shareholders of the Company if the effect of the amendment is:
(a) to increase the
number of shares of Stock reserved under Article III of this Plan;
(b) to change the class
of employees of the Company eligible for Awards or to otherwise materially
modify the requirements as to eligibility for participation in this Plan; or
(c) to modify the
material terms of this Plan that must be approved by shareholders of the Company
under the rules relating to the qualified performance-based compensation
exemption from the limit on tax deductibility of compensation under Section
162(m) of the Code.
The Board in its sole and absolute
discretion may suspend the granting of Awards under this Plan at any time and
may terminate this Plan at any time. Notwithstanding the foregoing, the Board
shall not have the right to modify, amend or cancel any subsisting Award granted
before such suspension or termination unless the Key Employee to whom the Award
was granted consents in writing to such modification, amendment or cancellation,
or there is a dissolution or liquidation of the Company or a transaction
described in Article VIII or IX of this Plan.
ARTICLE XI - TERM OF
PLAN
No Awards will
be granted under this Plan on or after the earlier of:
(a) the twentieth
anniversary of the effective date of this Plan, as determined under Article IV
of this Plan, in which event this Plan otherwise thereafter shall continue in
effect until all Awards granted under this Plan have been forfeited or have
Vested and any Vested Stock has been Released; or
(b) the date on which
all of the Stock reserved under Article III of this Plan has, as a result of the
Release of Awards, been issued or no longer is available for use under this
Plan, in which event this Plan also shall terminate on such date.
ARTICLE XII -
MISCELLANEOUS
12.01 Costs of the Plan. The
cost of establishing and operating the Plan shall be borne by the Company but
may be recharged to the relevant Group Companies on such arms length basis as
is considered appropriate from time to time.
12.02 No Contract of Employment. Participation in the Plan is a matter separate from any contract of
employment or other agreement and any benefit conferred by the Plan shall not be
counted for pension or any other purpose. The rights and obligations of any
individual under the terms of his office or employment with any Group Company
will not be affected by his participation in the Plan and the Plan does not form
part of any contract of employment between any individual and any Group Company.
A Key Employee shall have no entitlement by way of compensation or damages
resulting from the termination of the office or employment (for any reason and
whether lawful or not) by virtue of which he is or may be eligible to
participate in the Plan or for the loss or reduction of any right or benefit or
prospective right or benefit under the Plan which he might otherwise have
enjoyed whether the compensation is claimed for wrongful dismissal or
otherwise.
12.03 Withholding. No Award
shall Vest unless the following conditions have been satisfied:
(a) if the Vesting or Release of the Award would result in a Tax
Liability then the Key Employee must have entered into arrangements satisfactory
to the Committee to ensure that the relevant Group Company will receive the
amount of such Tax Liability (including but not limited to the Key Employee
authorizing the Group Company (or other person) upon the Release of the Award to
sell or procure the sale of a sufficient number of Vested Stock subject to the
Award to ensure that an appropriate sum is raised in order to discharge any Tax
Liability); and
(b) where the Committee
determines that an election should be made pursuant to Section 431 of the Income
Tax (Earnings and Pensions) Act 2003 in respect of the shares of Stock Released
to the Key Employee, such election has been made or the Committee is satisfied
that such election will be made within the applicable time limit.
12.04 Governing Law. The
provisions of this Plan and any Award shall be governed by and interpreted in
accordance with the laws of England and Wales and any Group Company and Key
Employees shall submit to the exclusive jurisdiction of the Courts of England
and Wales.
Table of
Contents
Table of
Contents
ANNUAL MEETING OF
SHAREHOLDERS
BROWN & BROWN,
INC.
The Shores Resort, Atlantic Room,
2637 South Atlantic Avenue, Daytona Beach, Florida 32118
THIS PROXY IS BEING SOLICITED BY THE
BOARD OF DIRECTORS FOR
THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2017, 9:00 A.M. (EDT)
The undersigned hereby
appoints Robert W. Lloyd and R. Andrew Watts and each of them as proxies with
full power of substitution, with all the powers the undersigned would possess if
personally present, to vote all shares of Common Stock of Brown & Brown,
Inc. which the undersigned is entitled to vote at the Annual Meeting of
Shareholders and any adjournment(s) thereof.
(Continued and to be signed
on the reverse side) |
▲
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE
PROVIDED. ▲ |
ANNUAL MEETING OF
SHAREHOLDERS
BROWN & BROWN,
INC.
The Shores Resort, Atlantic Room,
2637 South Atlantic Avenue, Daytona Beach, Florida 32118
MAY 3, 2017, 9:00
A.M. (EDT)
NOTICE OF INTERNET AVAILABILITY OF PROXY
MATERIAL:
The Notice of Meeting, Proxy
Statement and Annual Report to Shareholders
are available at
www.viewproxy.com/bbinsurance/2017
Table of
Contents
The Board of
Directors recommends a vote FOR all director nominees, FOR Proposals 2, 3, and 5
and for ONE YEAR on Proposal 4:
1. |
Election of
Directors. |
|
|
|
|
|
|
01 J. Hyatt
Brown |
|
05 Bradley
Currey, Jr. |
|
09 Timothy R.M. Main |
|
02 Samuel P.
Bell, III |
|
06 Theodore J.
Hoepner |
|
10 H. Palmer Proctor,
Jr. |
|
03 Hugh M.
Brown |
|
07 James S.
Hunt |
|
11 Wendell S. Reilly |
|
04 J. Powell
Brown |
|
08 Toni
Jennings |
|
12 Chilton D.
Varner |
☐
|
|
FOR
ALL |
☐
|
|
WITHHOLD |
☐
|
|
FOR
ALL EXCEPT |
|
|
NOMINEES |
|
|
AUTHORITY
FOR |
|
|
(SEE
INSTRUCTIONS |
|
|
|
|
|
ALL
NOMINEES |
|
|
BELOW) |
(Instructions: To withhold
authority to vote for any indicated nominee, mark FOR ALL EXCEPT and
write the number(s) of the nominee(s) in the box provided to the
right.) |
2. |
To
ratify the appointment of Deloitte & Touche LLP as Brown & Brown,
Inc.s independent registered public accountants for the fiscal year
ending December 31, 2017. |
☐ FOR ☐ AGAINST ☐ ABSTAIN |
|
|
3. |
To approve, on an advisory basis, the compensation
of named executive officers. |
☐
FOR ☐ AGAINST ☐
ABSTAIN |
Address Change/Comments:
(If you noted any Address Changes and/or Comments above, please mark box.) ☐ |
|
Please indicate if you plan to attend the Annual Meeting
☐ |
|
|
|
|
CONTROL NUMBER |
|
|
|
|
|
|
|
|
|
|
|
4. |
To
conduct an advisory vote on the desired frequency of holding an advisory
vote on the compensation of named executive officers. |
☐
ONE YEAR ☐ TWO YEARS
☐ THREE YEARS ☐
ABSTAIN |
|
|
5. |
To
approve an amendment to Brown & Brown, Inc.s 2010 Stock Incentive
Plan to increase the number of shares available for issuance under the
plan. |
☐
FOR ☐ AGAINST ☐
ABSTAIN |
|
In their discretion the Proxies are
authorized to vote upon such other business as may properly come before
the Annual Meeting or any adjournment(s) thereof. |
|
Persons who do not indicate attendance at the Annual Meeting on this proxy card may be required to present proof of stock ownership to attend.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR the election of all of the director nominees listed on this proxy card and FOR Proposals 2, 3, and 5, and for ONE YEAR for Proposal 4. |
|
|
|
|
Date |
|
|
|
|
|
|
|
Signature |
|
|
|
|
|
Signature |
|
|
(Joint Owners) |
|
Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should each sign personally.
All holders must sign. If a corporation or partnership, please sign in
full corporate or partnership name, by authorized
officer. |
▲ PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN
THE ENVELOPE PROVIDED.
▲ |
|
CONTROL NUMBER |
|
|
PROXY VOTING
INSTRUCTIONS
Please have your
11-digit control number ready when voting by Internet or Telephone
|
|
|
|
|
|
|
|
|
|
INTERNET |
|
TELEPHONE |
|
MAIL |
Vote Your Proxy
on the Internet: |
|
Vote Your Proxy
by Phone: |
|
Vote Your Proxy
by Mail: |
Go to
www.AALvote.com/BRO |
|
Call 1 (866)
804-9616 |
|
|
Have your proxy
card available |
|
Use any touch-tone
telephone to |
|
Mark, sign, and
date your proxy |
when you
access the above |
|
vote your proxy.
Have your proxy |
|
card, then detach
it, and return |
website. Follow
the prompts to |
|
card available
when you call. |
|
it in the
postage-paid envelope |
vote your
shares. |
|
Follow the voting
instructions to |
|
provided. |
|
|
vote your
shares. |
|
|
This regulatory filing also includes additional resources:
bro_courtesy-pdf.pdf
Brown and Brown (NYSE:BRO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Brown and Brown (NYSE:BRO)
Historical Stock Chart
From Apr 2023 to Apr 2024