UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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   ☐

BROWN & BROWN, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

2016 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

March 24, 2016

Dear Shareholder:

You are invited to attend the Annual Meeting of Shareholders (the “Meeting”) of Brown & Brown, Inc. (the “Company”), which will be held in the Atlantic Room of The Shores Resort, 2637 South Atlantic Avenue, Daytona Beach, Florida 32118, on Wednesday, May 4, 2016 at 9:00 a.m. (EDT).

This year, we are again pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders via the Internet. We believe that this e-proxy process expedites shareholders’ receipt of proxy materials, while lowering the costs and reducing the environmental impact of the Meeting. On March 24, 2016, we mailed to our beneficial shareholders a notice containing instructions on how to access our Proxy Statement and Annual Report and how to vote online (the “Notice”). All other shareholders will continue to receive a paper copy of the Proxy Statement, Proxy Card and Annual Report by mail. The Proxy Statement contains instructions on how you can (i) receive a paper copy of the Proxy Statement, Proxy Card and Annual Report if you only received a Notice by mail, or (ii) elect to receive your Proxy Statement and Annual Report over the Internet if you received them by mail this year.

The Notice and Proxy Statement on the following pages cover the formal business of the Meeting. Whether or not you expect to attend the Meeting, please vote online or by phone as directed in the Notice, or sign and return your proxy card promptly in the enclosed envelope to assure that your stock will be represented at the Meeting. If you decide to attend the Meeting and vote in person, you will, of course, have that opportunity.

Your continuing interest in the business of the Company is gratefully acknowledged. We hope many shareholders will attend the Meeting.

Sincerely,

J. Powell Brown
Chief Executive Officer

BROWN & BROWN, INC.
220 South Ridgewood Avenue
Daytona Beach, Florida 32114

Notice of Annual Meeting
of Shareholders

May 4, 2016

The Annual Meeting of Shareholders (the “Meeting”) of Brown & Brown, Inc. (the “Company”) will be held in the Atlantic Room of The Shores Resort, 2637 South Atlantic Avenue, Daytona Beach, Florida 32118, on Wednesday, May 4, 2016 at 9:00 a.m. (EDT), for the following purposes:

1.

To elect twelve (12) nominees to the Company’s Board of Directors;

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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, 2016;

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3.

To approve, on an advisory basis, the compensation of named executive officers;

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4.

To reapprove the material terms of the performance goals under the Company’s 2010 Stock Incentive Plan pursuant to Internal Revenue Code Section 162(m);

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5.

To approve an amendment to the Company’s 2010 Stock Incentive Plan to increase the number of shares available for issuance under the plan; and

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6.

To transact such other business as may properly come before the Meeting or any adjournment thereof.

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The Board of Directors has fixed the close of business on February 29, 2016 as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting and any postponements or adjournments of the Meeting.

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 4, 2016, and continuing for 30 days thereafter.

Your vote is important. 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.

By Order of the Board of Directors

Robert W. Lloyd
Corporate Secretary

Daytona Beach, Florida
March 24, 2016

BROWN & BROWN, INC.
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION

On March 24, 2016, we mailed to our beneficial shareholders of record as of the close of business on February 29, 2016 a notice containing instructions on how to access this Proxy Statement and our Annual Report online and how to vote online (the “Notice”), and thereafter, we began mailing these proxy materials to all other shareholders. 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 4, 2016, and at any postponement or adjournment thereof  (the “Meeting”). The close of business on February 29, 2016 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 138,610,502 shares of  $0.10 par value common stock, entitled to one vote per share.

As permitted by the Securities and Exchange Commission (“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.

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 recommends a vote “FOR” the following five proposals:

➢

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➢

the ratification of the appointment of Deloitte & Touche LLP as Brown & Brown, Inc.’s independent registered public accountants for the fiscal year ending December 31, 2016;

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➢

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➢

the reapproval of the material terms of the performance goals under Brown & Brown, Inc.’s 2010 Stock Incentive Plan (“SIP”) pursuant to Internal Revenue Code Section 162(m); and

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➢

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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 rules of the New York Stock Exchange (the “NYSE”), 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.

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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 Company’s independent registered public accountants for the fiscal year ending December 31, 2016; “FOR” the advisory vote to approve named executive officer compensation; “FOR” the reapproval of the material terms of the performance goals under the Company’s 2010 Stock Incentive Plan (SIP) pursuant to Internal Revenue Code Section 162(m); 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 reapproval of the material terms of the performance goals under the SIP pursuant to Internal Revenue Code Section 162(m), 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.

Because this director election is an uncontested election, if a quorum is present, the nominees for election as directors who receive a number of  “FOR” votes that exceeds 50% of the votes cast will be elected as directors. Votes actually cast shall include votes where the authority to cast a vote for the director’s election is explicitly withheld and exclude abstentions with respect to that director’s election. If a nominee is not elected and no successor has been elected at the meeting, the director shall promptly tender his or her conditional resignation following certification of the vote. The Nominating/​Corporate Governance Committee shall consider the resignation offer and recommend to the Board of Directors whether to accept it. The Board of Directors will endeavor to act on the Nominating/Corporate Governance Committee’s recommendation within 90 days following the recommendation. For additional information regarding the majority voting standard, see “Majority Voting for Directors,” below.

In order to pass, each of Proposals 2, 3, 4 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, 3 and 4; 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.

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).

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth, as of February 29, 2016, 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.

*

Less than 1%.

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(1)

Unless otherwise indicated, the address of such person is c/o Brown & Brown, Inc., 220 South Ridgewood Avenue, Daytona Beach, Florida 32114.

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(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.

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(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 29, 2016: Mr. Powell Brown — 18,695; Mr. Watts — 0; Mr. Lydecker — 0; Mr. Penny — 24,377; Mr. Strianese — 0; Mr. Walker — 0; and all current directors and executive officers as a group — 71,939.

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The number and percentage of shares owned by the following persons also include the indicated number of shares which such persons have been granted under our Performance Stock Plan (“PSP”) as of February 29, 2016: Mr. Powell Brown — 70,332; Mr. Watts — 0; Mr. Lydecker — 59,588; Mr. Penny — 55,488; Mr. Strianese — 38,576; Mr. Walker —

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0; and all current directors and executive officers as a group — 182,032. The number and percentage of shares owned by Mr. Powell Brown also includes 344,357 shares which Mr. Powell Brown has been granted under our SIP. These PSP and, in the case of Mr. Powell Brown, SIP shares in some cases 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 include the indicated number of shares which such persons have been granted under our SIP in the form of Performance-Triggered Stock Grants (“PTSGs”) as of February 29, 2016: Mr. Powell Brown — 28,002; Mr. Watts — 35,558; Mr. Lydecker — 46,554; Mr. Penny — 46,554; Mr. Strianese — 50,506; Mr. Walker — 34,147; and all current directors and executive officers as a group — 213,377. These PTSGs 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. For further information concerning the terms of these grants please see the section titled, “Compensation Discussion and Analysis — 2015 SIP Awards,” below.

(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. Lydecker — 100,000; 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 29, 2016 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 — 70,000; Mr. Watts — 0; Mr. Lydecker — 0; Mr. Penny — 34,589; Mr. Strianese — 60,000; Mr. Walker — 0; and all current directors and executive officers as a group — 164,589; and therefore, the underlying shares are deemed to be beneficially owned.

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(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 31,527 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.

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(6)

Mr. Hugh Brown’s ownership includes 400 shares owned by his spouse, as to which he disclaims beneficial ownership.

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(7)

Mr. Powell Brown’s ownership includes 9,171 shares owned by children living in his household, as to which he disclaims beneficial ownership.

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(8)

Mr. Proctor’s ownership includes 224 shares owned by his spouse, as to which he disclaims beneficial ownership.

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(9)

Mr. Lydecker ceased to be an executive officer of the Company as of September 16, 2015, in connection with the Company’s realignment of its Retail Division, of which Mr. Lydecker presently serves as a Regional President.

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(10)

Mr. Penny’s ownership includes 96 shares owned by children living in his household, as to which he disclaims beneficial ownership, and 202,924 shares owned jointly with spouse.

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(11)

Includes amounts beneficially owned by all our current directors and executive officers as of February 29, 2016, as a group.

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(12)

The amount shown is derived from a Schedule 13G filed by BlackRock, Inc. (“BlackRock”) on or around January 25, 2016 reporting beneficial ownership as of December 31, 2015. According to the Schedule 13G, BlackRock has sole voting power over 7,765,893 shares and sole dispositive power over 8,225,168 shares.

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(13)

The amount shown is derived from a Schedule 13G filed by The Vanguard Group (“Vanguard”), as amended on or around February 10, 2016 reporting beneficial ownership as of December 31, 2015. According to the Schedule 13G, Vanguard has sole voting power over 90,544 shares and sole dispositive power over 8,793,128 shares.

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MANAGEMENT

Directors and Executive Officers

Set forth below is certain information concerning our current directors, all of whom are director nominees, and executive officers. All directors and officers hold office for one-year terms or until their successors are elected and qualified.

(1)

Ms. Jennings previously served on our Board of Directors from 1999 until April 2003.

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6

7

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Board and Board Committee Matters

During 2015, our Board of Directors held four regular meetings and four special meetings. The Board of Directors took action by unanimous written consent three times during 2015. Each incumbent director serving during 2015 attended at least 75% of the total number of Board meetings, and at least 75% of the total number of meetings of committees of which such director is a member, except that Timothy R.M. Main attended 62.5% of the total number of Board meetings during 2015. 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 2015 Annual Meeting of Shareholders. The Board conducts executive sessions of non-management directors in connection with each regularly scheduled meeting of the Board. Our Lead Director, Wendell S. Reilly, presides over these executive sessions.

The NYSE has adopted listing standards relating to director independence that require that directors satisfy certain “bright line” criteria to be deemed “independent,” as that term is defined in the NYSE listing standards. The Board has applied these standards in affirmatively determining that certain of the Company’s directors have no material relationship with the Company that would impair such directors’ independence, as explained more fully 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, both from the standpoint of the director and from that of persons or organizations with which the director has an affiliation.

The Board has considered the independence in light of NYSE standards applied to each director nominee and to such nominees’ immediate family members, 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. Among other things, the Board considered the relationships described below in “Certain Relationships and Related Transactions.” 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 Evercore Partners, of which Mr. Main is a Senior Managing Director, consulted with the Company concerning certain potential acquisitions in 2013, and worked with the Company on certain financing transactions in 2014. The Board concluded that the relationship,

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and the compensation paid to Evercore Partners during 2014 with respect to services rendered to the Company, which in the aggregate comprises less than one percent of the revenue of the Company and less than one percent of the revenue of Evercore Partners, were not material. 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 2015 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.

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.

Audit Committee.   The current members of the Audit Committee are James S. Hunt (Chair), Hugh M. Brown, Theodore J. Hoepner and Toni Jennings, each of whom is independent as defined in the NYSE listing standards. 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. The Audit Committee held four regular meetings and five special meetings during 2015, and includes at least one audit committee financial expert, James S. Hunt, among its members. The Audit Committee took no action by unanimous written consent during 2015.

Compensation Committee.   The Compensation Committee currently consists of Toni Jennings (Chair), Samuel P. Bell, III, Theodore J. Hoepner, James S. Hunt and H. Palmer Proctor, Jr., each of whom is independent as defined in the NYSE listing standards. The Compensation Committee sets the base salary levels and bonuses for our Chief Executive Officer, and reviews and approves the salary levels and bonuses 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, 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. The Compensation Committee held four regular meetings and five special meetings in 2015. The Compensation Committee took no action by unanimous written consent during 2015.

Beginning in 2013 and continuing through 2014 and early 2015, the Compensation Committee engaged Pearl Meyer & Partners (“PMP”), an independent outside compensation consulting firm, to assist with a review of the components, structure and design of compensation arrangements with our executive officers and other key employees to ensure that such compensation continues to be competitive and aligned with shareholder interests. The Compensation Committee considers PMP to be independent because PMP performed no services for the Company’s 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 PMP, directly or indirectly, for the Compensation Committee during fiscal 2013, 2014 or 2015.

In August 2015, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FWC”), an independent outside compensation consulting firm, 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. The Compensation Committee considers FWC to be independent because FWC performed no services for the Company’s 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 FWC, directly or indirectly, for the Compensation Committee during fiscal year 2015.

Nominating/Corporate Governance Committee.   The Nominating/Corporate Governance Committee currently consists of Wendell S. Reilly (Chair), Hugh M. Brown, Bradley Currey, Jr. and Chilton D. Varner, each of whom is independent as defined in the NYSE listing standards. This Committee’s 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. The Nominating/​Corporate Governance Committee held four regular meetings and one special meeting in 2015. The Nominating/Corporate Governance Committee took no action by unanimous written consent during 2015.

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The Nominating/Corporate Governance 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 such proposed candidate as required by the SEC’s proxy rules, must address the manner in which the proposed candidate meets the criteria described below, and must be accompanied by the consent of such proposed candidate to serve as a director, if elected. The Nominating/Corporate Governance Committee has not established “minimum qualifications” for director nominees, because it is the view of the Nominating/Corporate Governance Committee that the establishment of rigid “minimum qualifications” might preclude the consideration of otherwise desirable candidates for election to the Board. The Nominating/Corporate Governance Committee will evaluate 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 Company’s principal operational and financial objectives, plans and strategies, results of operations and financial condition, and relative standing in relation to the Company’s 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 Nominating/Corporate Governance 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 Nominating/Corporate Governance Committee has nominated those twelve (12) persons named in “Proposal 1 —  Election of Directors” below to stand for election to the Board of Directors at the 2016 Annual Meeting of Shareholders.

Majority Voting for Directors

In February 2012, the Board amended our Bylaws to change the voting standard for the election of our directors in uncontested elections from a plurality standard to a majority voting standard. In contested director elections, the plurality standard will apply, which means the nominees receiving the greatest numbers of votes will be elected to serve as directors.

To be elected in an uncontested election, the votes “FOR” a director must exceed 50% of the votes actually cast with respect to the director’s election. Votes actually cast include votes where the authority to cast a vote for the director’s election is explicitly withheld and exclude abstentions with respect to that director’s election, so abstentions and any broker non-votes will have no effect on the election of directors. If an incumbent director does not receive more than 50% of the votes actually cast with respect to such director’s election, and no successor has been elected at the meeting, such director shall promptly tender his or her conditional resignation following certification of the vote. The Nominating/Corporate Governance Committee shall consider the resignation offer and recommend to the Board whether to accept such offer, and the Board will endeavor to act on the recommendation within 90 days. Thereafter, the Board will promptly disclose its decision concerning whether to accept the director’s resignation offer (and, if applicable, the reasons for rejecting the offer) in a Report on Form 8-K or a press release. 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 or until such director’s earlier death, resignation or removal. If the Board accepts the resignation, then the Board, in its discretion, may fill any resulting vacancy or may decrease the size of the Board.

The election of directors at the Meeting is an uncontested election and thus the majority voting standard applies.

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.

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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 Brown’s extensive business and industry experience, knowledge of our company, current and past service on boards of other publicly traded companies and proven leadership ability.

Risk Oversight

Our business involves assisting our customers with issues related to risk, and we believe that the insight gained from this activity helps us to more effectively manage our risks. Our leadership is aware that risks are associated with all enterprises, and that varying degrees of risk are acceptable, and indeed desirable, in different endeavors.

The Board has an active role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board and its Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee receive regular reports from members of 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.

At the committee level, our Audit Committee regularly reviews our financial statements, and our financial and other internal controls. Our Compensation Committee regularly reviews our executive compensation policies and practices, and employee benefits, and the risks associated with each. 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 committee reports about such risks.

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 financials, control environment, data security and selected general information technology controls. Our Insurance Operations Review Team is responsible for the day-to-day 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.

Additionally, our independent registered public accountants regularly identify and discuss with our Audit Committee risks and related mitigation measures that may arise during their regular reviews of the Company’s financial statements, audit work and executive compensation policies and practices, as applicable.

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 Company’s executive officers, including our division leaders.

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 further believe that the Board’s approach to risk oversight, as described above, helps assess various risks, make informed decisions, and valuate emerging risks in a proactive manner for the Company. We do not believe that our compensation policies and principles are reasonably likely to have a material adverse effect on the Company.

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.

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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 Director of the non-management directors, 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.

Compensation of Directors

During 2015, directors who are not employees of ours were paid an annual retainer of  $80,000, payable in quarterly installments. If the total number of meetings during the year would have exceeded 12, each director would have been paid an additional $1,500 for each meeting attended by such director in excess of 12. In addition, the Chair of the Audit Committee was paid $5,000 in April 2015 and the Chairpersons of the Compensation, Nominating/Corporate Governance and Acquisition Committees each received $3,000 in April 2015 for services associated with those offices. Also, each director who is not an employee of ours received in January 2015 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 as additional compensation for such director’s services.

All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board. No director who is an employee of ours receives separate compensation for services rendered as a director.

The following table sets forth cash and other compensation earned during 2015 by directors who are not Named Executive Officers.

2015 DIRECTOR COMPENSATION

(1)

Mr. Hyatt Brown received compensation of  $213,068, consisting of  $180,000 for services rendered to the Company in 2015, including assistance with acquisitions and recruitment, $7,380 in matching and profit-sharing contributions made by the Company to his 401(k) Plan account, $23,357 for reimbursement of amounts earned by the Company for personal lines insurance he purchased through the Company or its subsidiaries, and $2,331 for the cost of certain club membership dues.

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Hedging and Pledging Policies; Stock Ownership Requirements; Clawback Policy

The Board has adopted policies prohibiting the “hedging” 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. Our stock ownership requirements provide that members of the Company’s Senior Leadership Team must accumulate Company stock in the following specified amounts 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:

➢

Chief Executive Officer — six times base salary

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➢

Senior Leadership Team members who are “officers” pursuant to Section 16 of the Securities Exchange Act of 1934 —  three times base salary

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Senior Leadership Team members who are not “officers” pursuant to Section 16 of the Securities Exchange Act of 1934  — one times base salary

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In May 2015, the Board adopted a policy that provides for the clawback of certain performance-based compensation in the event of a restatement of the Company’s financial results, other than a restatement caused by a change in applicable accounting rules or interpretations. Under the new 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 Board’s 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 Company’s 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.

Related Party Transactions 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. Under our Related Party Transactions Policy (the “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 director’s 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.

Certain Relationships and Related Transactions

J. Hyatt Brown, who is one of our directors and the father of J. Powell Brown, received compensation of  $213,068, consisting of  $180,000 for services rendered to the Company in 2015, including assistance with acquisitions and

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recruitment, $7,380 in matching and profit-sharing contributions made by the Company to his 401(k) Plan account, $23,357 for reimbursement of amounts earned by the Company for personal lines insurance he purchased through the Company or its subsidiaries, and $2,331 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 Company’s Retail Division, and is responsible for oversight of various Retail Division operations and certain aspects of  “Brown & Brown University,” a training program offering technical and sales courses for new producers, profit center leaders, and other groups within our organization. He received compensation of  $857,075, including relocation expenses totaling $21,475, for services rendered in 2015, as well as a grant under our SIP in March 2016 with value of  $599,975. 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 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 and received compensation of $278,643 for services rendered in 2015. Pursuant to a Transition Agreement, dated as of January 19, 2016, between Ms. Brown and the Company, Ms. Brown’s employment with the Company terminated on January 31, 2016. Effective February 1, 2016, Ms. Brown entered into a Consulting Agreement (the “Consulting Agreement”) with the Company to provide legal services to the Company as an independent contractor for a term of one year. Pursuant to the Consulting Agreement, the Company will pay Ms. Brown a monthly retainer fee of  $15,035, against which an hourly rate of  $250 will apply for services provided to the Company. In any month in which the monthly retainer fee is exhausted, any work conducted in excess of the retainer will be billed at an hourly rate not to exceed $150.

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 2015, the Company paid Zambezi $109,484 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 $163,272 to the Company for such personal use of the Aircraft in 2015. 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 2015, Zambezi paid the Company $19,170 for the lease of hangar space for the Aircraft, and $56,280 for the services of pilots and mechanics employed by the Company and for parts, equipment, and supplies related to the Aircraft’s 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  $262,261 for services rendered in 2015, as well as a grant under our SIP in March 2016 with value of  $49,977.

Hugh M. Brown is a member of the Advisory Board of Directors of SunTrust Bank of Orlando, and during 2015, Robert W. Lloyd served as a member of the Advisory Board of SunTrust Bank/East Central Florida. SunTrust is one of the banks involved in the financing facility memorialized in a credit agreement in the amount of  $1,350 million entered into in April 2014. SunTrust also acts as escrow agent with respect to accounts related to certain acquisitions we have made. We expect to continue to use SunTrust during 2016 for a portion of our cash management requirements. Three of our subsidiaries provide insurance-related services to subsidiaries of SunTrust, and a number of our offices facilitate access for our clients to premium financing services offered by a subsidiary of SunTrust. Payments made to, and received from, SunTrust in 2015 totaled less than one percent of our or SunTrust’s total consolidated revenues.

Chris L. Walker was a shareholder and employee of Arrowhead General Insurance Agency Superholding Corporation (“Arrowhead”) prior to the Company’s 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

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Mr. Walker received $1,181,152. The Company will either pay to the Earn-Out Equityholders, or otherwise retain, the remaining $2.5 million earn-out payment, pending resolution of an indemnification claim it has asserted in connection with the Arrowhead acquisition. Mr. Walker presently serves as an Executive Vice President of the Company and the President of the National Programs Division.

For additional information concerning transactions with related persons, see “Executive Compensation — Compensation Committee Interlocks and Insider Participation.”

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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 2015, our directors, officers and 10% beneficial owners timely complied with all applicable filing requirements, with the following exceptions: Anthony T. Strianese, Executive Vice President and President — Wholesale Brokerage Division, was three days late reporting a transaction effective June 4, 2015, and three days late reporting a transaction involving automatic annual vesting of a portion of an equity grant that was effective February 22, 2015; and Richard A. Freebourn, Sr., Executive Vice President — Internal Operations and People Officer, was late reporting transactions effective June 13, 2015, May 18, 2015, July 24, 2015, November 30, 2015 and November 26, 2014, respectively, in connection with the sale of shares by an irrevocable trust of which Mr. Freebourn is a co-trustee.

COMPENSATION DISCUSSION AND ANALYSIS

Our overall compensation philosophy is as follows:

➢

Attract and retain high-quality people that are crucial to both the short-term and long-term success of the Company;

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➢

Compensate for performance linked to our strategic objectives through the use of incentive compensation programs; and

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Create a mutuality of interest between our executive officers and shareholders through compensation structures that promote the sharing of the rewards and risks of strategic decision-making.

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Our compensation system is designed to drive results and has traditionally been tied to increases in net income, pre-tax earnings, organic revenue growth, earnings per share and our stock price. We seek to provide an executive compensation package that is driven by our overall financial performance, increases in shareholder value, the success of the business divisions that are directly impacted by the executive’s performance and the performance of the individual executive.

We strive to provide a combination of pay elements with the goal of aligning executive incentives with shareholder value. Our executive compensation program includes both short- and long-term compensation, with an emphasis on compensation that is tied to corporate financial performance and stock price performance. Historically, in the case of our PSP and the bulk of awards under our SIP, stock price appreciation and growth in our earnings per share, respectively, have been fundamental to the realization of an equity compensation benefit. In early 2016, the Compensation Committee approved certain modifications to our executive compensation program applicable to new SIP awards granted in 2016, including the performance criteria and other vesting conditions. For additional information regarding the changes to our SIP award program in 2016, please refer to the section captioned “2016 SIP Awards” below.

In this section, we discuss certain aspects of our compensation program as it pertains to our principal executive officer, our principal financial officer, our three other most highly-compensated executive officers in 2015, and Charles H. Lydecker, who served as an executive officer in 2015 until the Company’s realignment of its Retail Division, of which Mr. Lydecker presently serves as a Regional President, as of September 16, 2015 (collectively, the “Named Executive Officers”). Our discussion focuses primarily on compensation and practices relating to our most recently completed fiscal year.

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Compensation Components

Our compensation philosophy is reflected in the following short-term and long-term compensation components:

Comparative Market Assessment

The Compensation Committee does not target compensation decisions or levels to any specific percentiles 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 Company’s executive compensation program remains competitive. In April 2013, as part of an engagement that began in 2013 and concluded in 2015, PMP, an independent outside compensation consulting firm retained by the Compensation Committee, conducted a comprehensive analysis of the Company’s pay practices and executive compensation levels as compared to a group of publicly held insurance intermediaries, publicly traded insurance carriers and surveys, as described below.

Proxy Comparison Group

This group was focused on our direct competitors for executive talent rather than companies of comparable size. The members of this group were selected from insurance intermediaries and carriers in the insurance industry.

The other insurance intermediaries for which compensation data was publicly available — Aon plc, Arthur J. Gallagher & Co, Marsh & McLennan Companies Inc. and Willis Group Holdings PLC — compete with us the most directly for talent.

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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, PMP also reviewed the compensation practices of 11 publicly traded insurance carriers to supplement the data it considered for the study. The proxy comparison group was as follows:

Survey Comparison Group

As part of PMP’s engagement, the Compensation Committee reviewed and considered data from two published surveys: (i) the Executive Compensation Survey conducted by Mercer, and (ii) the Top Management Industry Compensation Survey conducted by Towers Watson. PMP’s analysis also included the results of two other confidential surveys from the financial services industry.

Results of the Comparative Market Assessment

Based upon the results of PMP’s analysis, the Compensation Committee concluded that, among other things, the overall compensation paid to the Company’s executive officers was generally below the amounts offered by the proxy comparison group, particularly the Company’s insurance intermediary peers, but was more competitively positioned versus the survey comparison data. The Compensation Committee noted that the annual salaries for certain executive officers were below the median for both the proxy comparison group and the survey comparison data. In order to ensure that Mr. Powell Brown’s compensation remains competitive with that of chief executive officers of other publicly held insurance intermediaries and similarly sized companies, in 2013, the Compensation Committee determined, based upon the recommendation of PMP, to effectuate a two-step plan to increase Mr. Powell Brown’s base salary in 2014 and 2015. For additional information concerning compensation determinations for the Chief Executive Officer, please refer to the section captioned “CEO Compensation” below.

2015 Compensation

Consideration of Last Year’s “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 provided our shareholders with the opportunity to vote at our May 2014 and our May 2015 annual meetings to approve, on a nonbinding, advisory basis, the compensation for our fiscal year 2013 and 2014, respectively, of named executive officers. In both 2014 and 2015, our shareholders voted to approve this compensation by a significant margin.

When we developed our 2015 compensation policies in January 2015, last year’s “say-on-pay” vote, which occurred in May 2015, had not yet occurred, and therefore, we could not consider the results in determining our January 2015 executive compensation decisions and policies. We did, however consider the results of the May 2014 vote in determining our January 2015 executive compensation decisions and policies. Because of, among other things (including, but not limited to, currently applicable regulatory requirements, market considerations, and company and individual performance), the favorable May 2014 and May 2015 “say-on-pay” votes, we continued certain of our January 2014 and 2015 executive compensation policies in January 2016.

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2015 Base Salaries

In January 2015, the Compensation Committee did not increase the 2015 base salaries for the Named Executive Officers, other than for Mr. Powell Brown, whose base salary for 2015 increased to $1,000,000, and for Mr. Walker, whose base salary for 2015 increased to $500,000. The increase to Mr. Powell Brown’s base salary was the second step of a two-step plan to effectuate an upward compensation adjustment for Mr. Powell Brown recommended by the independent compensation consultant retained by the Compensation Committee, as approved by the Compensation Committee in 2013, with the goal of ensuring his compensation remains competitive with that of chief executive officers of other publicly held insurance intermediaries and similarly sized companies. For additional information concerning compensation determinations for the Chief Executive Officer, please refer to the section captioned “CEO Compensation” below. The decision to increase Mr. Walker’s base salary was based upon his increased responsibilities resulting from his promotion from Regional Executive Vice President to Programs Division President during 2014. As described further in the section captioned “2016 Base Salaries” below, the base salaries for the Named Executive Officers did not increase for 2016.

2015 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 components, consisting of financial performance measures and personal objectives for each executive officer, including the relative weighting and thresholds, against which performance is measured and payouts are determined for such fiscal year.

Target Amounts.   In January 2015, the Compensation Committee did not increase the 2015 target cash incentive amounts for the Named Executive Officers, other than for Mr. Powell Brown, whose target cash incentive amount for 2015 increased to $1,400,000, and for Mr. Walker, whose target cash incentive amount for 2015 increased to $800,000. The decision to increase Mr. Powell Brown’s target cash incentive amount was based upon the performance of the Company as reflected by the increase in earnings per share in 2014 over 2013, without regard to the effect of change in acquisition earn-out payables and adjusted to exclude the net after-tax effect of those sales of offices that occurred during the fourth quarter of 2014. The decision to increase Mr. Walker’s target cash incentive amount was based upon his increased responsibilities resulting from his promotion from Regional Executive Vice President to Programs Division President during 2014.

For 2015, the aggregate target cash incentive amounts were: for Mr. Powell Brown, $1,400,000; for Mr. Watts, $350,000; for Mr. Lydecker, $1,000,000; for Mr. Penny, $800,000; for Mr. Strianese, $900,000 and for Mr. Walker, $800,000. 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.

2015 Annual Cash Incentive Components.   For 2015, the Compensation Committee selected the following components and weightings for the annual cash incentives for the Named Executive Officers:

(1)

“Organic Revenue” is total commissions and fees less (i) the first twelve months of net commission and fee revenues generated from acquisitions accounted for as purchases less (ii) profit-sharing contingent commissions (revenues from

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insurance companies based upon the volume and the growth and/or profitability of the business placed with such companies during the prior year), less (iii) guaranteed supplemental commissions (commissions from insurance companies based solely upon the volume of the business placed with such companies during the current year), and less (iv) divested business (net commissions and fees generated from offices, books of business or niche businesses sold by the Company) with the associated revenue removed from the corresponding period of the prior year. See Annex A for additional information regarding organic revenue and organic revenue growth.

(2)

Earnings per share is calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except that the Compensation Committee may, at its discretion, adjust such calculations to exclude the effect of certain non-recurring items of gain or loss, including extraordinary items, the cumulative effect of accounting changes, acquisition earn-out liability adjustments, new accounting pronouncements, discontinued or sold operations, severance costs, share repurchases, asset impairment charges, and litigation. In January 2016, the Compensation Committee determined not to make any adjustment to the calculation of earnings per share under U.S. GAAP for the purposes of calculating the 2015 annual cash incentive amounts.

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(3)

The personal objectives for each of our Named Executive Officers were approved by the Compensation Committee in March 2015.

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The target amounts for each financial performance measure were reviewed and approved by the Compensation Committee in January 2015 and were based our 2015 budget, which was approved by the Board in January 2015. At that time, the Compensation Committee determined that in order to further incentivize our executive officers to deploy our capital in the best interests of shareholders, including making internal investments, pursuing quality acquisitions and engaging in Board-approved repurchases of the Company’s common stock, the target earnings per share amount was adjusted upwards from the underlying budget in order to foster prudent capital allocation to the benefit of shareholders during 2015.

For each financial performance measure, we make no payout for performance below the threshold. For 2015, the threshold for each of Company’s Organic Revenue growth and earnings per share was 25% of target performance, and the threshold for each division’s Organic Revenue growth was 20% of target performance. Payout percentages based on a percentage of target performance for each financial performance measure were calculated based on the following table:

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Determination of 2015 Annual Cash Incentive Payouts.   In January 2016 the Compensation Committee reviewed actual 2015 performance of each financial performance measure against the target performance for each such measure established in January 2015 as set forth in the following table:

With respect to the achievement of personal objectives by each of the Named Executive Officers, which accounts for 20% of the 2015 cash incentive amount, the Compensation Committee evaluated the level of achievement for each Named Executive Officer’s personal objectives in January 2016. 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 Officer’s personal objectives in their totality instead of assigning a weight to each particular personal objective.

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For Mr. Powell Brown, our Chief Executive Officer, the Compensation Committee considered his achievement of the following personal objectives during 2015: his identification and implementation of opportunities to leverage the full capabilities of the Company for the benefit of its customers; his implementation and leveraging of the Company’s preferred purchasing program to deliver meaningful savings to the Company; his continued development and augmentation of the senior leadership team and maintenance of the core of the Company’s culture; his contribution to the Company’s evolving capital allocation to further increase shareholder returns; and his contribution to the Company’s performance of its annual plan related to revenues, earnings per share and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 100%. For additional information concerning compensation determinations for the Chief Executive Officer, please refer to the section captioned “CEO Compensation,” below.

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For Mr. Watts, our Chief Financial Officer, the Compensation Committee considered his achievement of the following personal objectives during 2015: his continued contribution to the Company’s evolving capital allocation and treasury management strategies to further increase shareholder returns; his implementation and leveraging of the preferred purchasing program to deliver meaningful savings to the Company; his development and implementation of a Company-wide technology plan; his further development of the finance leadership team and the Company’s finance and technology talent; and his contribution to monitoring and helping drive delivery of the Company’s performance of its annual plan related to revenues, earnings per share and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 100%.

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For Mr. Lydecker, a Regional President or our Retail Division, the Compensation Committee considered his achievement of the following personal objectives during 2015: his implementation and leveraging of the preferred purchasing program to deliver meaningful savings to the Company; the growth of the employee benefits business in the Retail Division; the increased collaboration between the Company’s Retail Division through the Company’s Wholesale Brokerage and National Programs Divisions; his continued efforts to recruit, train and retain high-caliber talent across Retail Division network; and his contibution to the Retail Division’s performance of its annual plan related to revenues, pre-tax income and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 167%.

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For Mr. Penny, our Chief Acquisitions Officer, the Compensation Committee considered his achievement of the following personal objectives during 2015: his agumentation of the current acquisition resource team; his efforts in targeting an acquisition in each of our Divisions; and his contribution to the Company’s performance of its annual plan related to revenues, earnings per share and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 149%.

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For Mr. Strianese, the President of our Wholesale Brokerage Division, the Compensation Committee considered his achievement of the following personal objectives during 2015: his implementation and leveraging of the preferred purchasing program to deliver meaningful savings to the Company; his further development of the Wholesale Brokerage Division’s leadership team; his development of exclusive products for the Wholesale Brokerage Division; and

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his contribution to the Wholesale Brokerage Division’s performance of its annual plan related to revenues, pre-tax income and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 140%.

➢

For Mr. Walker, the President of our National Programs Division, the Compensation Committee considered his achievement of the following personal objectives during 2015: his implementation and leveraging of the preferred purchasing program to deliver meaningful savings to the Company; his further development of the National Program Division’s leadership team; his contribution to the evaluation, consolidation and expansion of the National Programs Division platform; his successfully onboarding and integration of the Wright business within the Company and the National Programs Division’s platform; and his contribution to the National Program Division’s performance of its annual plan related to revenues, pre-tax income and acquired revenues. Based on this performance, the Compensation Committee approved the personal objective portion of his 2015 cash incentive amount at 179%.

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As illustrated in the table below, the final 2015 cash incentive amounts were calculated by combining the payout amounts for each of the components discussed above and, then, in some cases, rounding the resulting number up or down to the nearest thousand dollars:

The 2015 cash incentive payouts are also shown in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.

While not exercised in 2015, 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.

2015 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 2015.

2015 SIP Awards

In 2010, the Company adopted, and the shareholders approved, the SIP, including a sub-plan currently applicable only to Decus Insurance Brokers Limited, which, together with its parent company, Decus Holdings (UK) Limited, is our only United Kingdom-based subsidiary. Prior to the SIP’s adoption, the only equity incentive plan under which grants could be made was the PSP. The SIP enables the Compensation Committee to make grants of options and stock appreciation rights, as well as performance-based and time-based restricted stock and restricted stock units, including grants with vesting conditions identical or similar to those associated with past PSP grants. Following the approval of the SIP by our shareholders, the PSP was suspended (provided that prior grants under the PSP would remain outstanding for the duration of their terms), and the number of shares available for issuance under the SIP became that number of shares that shareholders had previously approved for future issuance under the PSP, plus any granted PSP or SIP shares forfeited thereafter.

We have historically used Performance-Triggered Stock Grants (“PTSGs”) to recognize and reward our executive officers’ specific achievements and/or performance during the previous year. In January 2015, the following Named Executive Officers received PTSGs under the SIP with a cliff vesting condition requiring five years of continuous employment from the date of grant, with the indicated grant-date fair values: Mr. Powell Brown — $399,993, Mr. Lydecker — $199,996,

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Mr. Penny — $199,996, Mr. Strianese —  $324,998, Mr. Walker — $199,996 and Mr. Watts — $349,986. The Compensation Committee awarded these PTSGs to our Named Executive Officers based on the following performance factors:

➢

​

➢

With respect to Messrs. Lydecker, Strianese and Walker, the organic revenue growth during 2014 of the division over which each such Named Executive Officer had oversight responsibility.

​

➢

With respect to Mr. Penny, the organic revenue growth of the Company during 2014 and his individual performance related to certain key acquisitions and dispositions during 2014.

​

➢

With respect to Mr. Watts, the organic revenue growth of the Company during 2014 and his exemplary individual performance during his first year of employment with the Company.

​

PTSG recipients in 2015 acquired voting and dividend rights with respect to the granted shares at the time of grant, but do not currently have the right to dispose of the shares, which are generally forfeited in the event that the grantee separates from employment with the Company within five years after the grant date.

CEO Compensation

Mr. Powell Brown’s base salary increased in 2015 in recognition of the results of operations and acquisitions of the Company in 2014 and as the second step of a two-step plan to effectuate an upward compensation adjustment recommended by the independent compensation consultant retained by the Compensation Committee and approved by the Compensation Committee in an effort to ensure that Mr. Powell Brown’s compensation remains competitive with that of chief executive officers of other publicly held insurance intermediaries and similarly sized companies. With respect to the 2015 target cash incentive amount approved for Mr. Powell Brown, the Compensation Committee considered his performance and the general operating performance of the Company. The performance criteria examined by the Compensation Committee included the annual Board evaluations of the performance of the Chief Executive Officer, which were completed with respect to Mr. Powell Brown for 2014, as well as the performance of the Company as reflected in the increase in earnings per share in 2014 over 2013, without regard to the effect of change in acquisition earn-out payables and adjusted to exclude the net after-tax effect of those sales of offices that occurred during the fourth quarter of 2014.

Mr. Powell Brown’s 2015 base salary of  $1,000,000 represented an increase over his 2014 salary, and his 2015 target cash incentive amount increased to $1,400,000 in recognition of the Company’s performance as reflected in the increase in earnings per share in 2014 over 2013. The 2015 cash incentive amount for Mr. Powell Brown, which totaled $958,000, was calculated as described in the section labeled “Annual Cash Incentives” above.

As described more fully in the section labeled “2015 SIP Awards” and the Summary Compensation Table, in January 2015, Mr. Powell Brown received a Performance-Triggered Stock Grant with a grant-date fair value of  $399,993 subject to a cliff vesting condition requiring five years of continuous employment from the date of grant.

The Compensation Committee reported the salary amount approved for Mr. Powell Brown to the full Board of Directors in January 2015 and the final calculated 2015 cash incentive amount in January 2016.

2016 Compensation

As part of its ongoing evaluation of our executive officers’ compensation and based, in part, on the recommendation of Frederic W. Cook & Co., Inc. (“FWC”), the independent outside consultant retained by the Compensation Committee to advise on matters pertaining to executive compensation, in early 2016, the Compensation Committee approved certain changes to our executive officers’ compensation for 2016, including those described below.

2016 Base Salaries

In February 2016, the Compensation Committee determined not to increase the 2016 base salaries for the Named Executive Officers.

2016 Annual Cash Incentives

Following several months of review and consideration, in February 2016, the Compensation Committee approved a modification to consider EBITDAC Margin (as defined below), instead of the Company’s earnings per share, as part of the methodology for calculating the annual cash incentives payable to the Company’s executive officers. We believe the

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consideration of EBITDAC Margin as part of the 2016 annual cash incentives will better motivate our executive officers to not only drive organic revenue growth, but also leverage our revenues and thereby increase the Company’s operating margins. This change is effective for the 2016 annual cash incentives payable to executive officers, which are expected to be calculated and paid in early 2017.

Under the newly adopted formulas, each executive officer’s annual cash incentive payment amount will consist of three components (the calculation of which may be adjusted by the Compensation Committee, at its discretion, to exclude the effect of certain non-recurring items of gain or loss), which are outlined below.

➢

The first component, which will affect 40% of the 2016 target cash incentive amount, is based on specified organic revenue growth targets, which, for executive officers whose responsibilities encompass the Company as a whole rather than being tied to a particular division, will be calculated based upon the organic revenue growth of the Company as a whole, and for executive officers with divisional operational responsibilities, will be calculated based upon the organic revenue growth of the division for which each such executive officer has oversight responsibility.

​

➢

The second component, which will affect 40% of the 2016 target cash incentive amount, will be determined based upon performance of the Company’s EBITDAC margin (“EBITDAC Margin”), which is the Company’s income before income taxes, plus amortization, depreciation, interest, and the change in estimated acquisition earn-out payables, divided by total revenues, adjusted to exclude any gains or losses on sales of books of business.

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➢

The third component, which will affect 20% of the 2016 target cash incentive amount, will be linked to the achievement of personal objectives of the executive officer as approved in early 2016 by the Compensation Committee.

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Each of the components described above contemplates a minimum payout of 0% of each named executive officer’s target cash incentive amount and a maximum payout of 200% of each named executive officer’s target cash incentive amount. The target cash incentive amounts and related measurement metrics for our Named Executive Officers were reviewed and approved by the Compensation Committee in February 2016 as part of our annual planning process.

2016 SIP Awards

In August 2015, the Compensation Committee engaged FWC 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. This engagement was the second step of a two-step process, which began in 2014 with the redesign of our annual cash incentive program, to further align executive compensation with shareholder value. The primary goal of FWC’s engagement was to ensure that such long-term equity incentive arrangements continue to be competitive and aligned with shareholder interests. As a result of this review, an in-depth evaluation and consideration of many factors, and based upon the recommendations of FWC, in early 2016 the Compensation Committee approved certain modifications to the design of our long-term equity incentive program, which are effective for those SIP awards granted to our executive officers and other key employees in March 2016. These changes include the following:

➢

In general, 75% of the shares (based upon the grant-date fair value) comprising each new SIP award will be tied to vesting criteria that are both performance and time based (each, a “Performance Stock Award” or “PSA”), and 25% of the shares (based upon the grant-date fair value) of each new SIP award will be tied to vesting criteria that are exclusively time based (each, a “Restricted Stock Award” or “RSA”). Each PSA will be granted pursuant to the Company’s standard Performance Stock Award Agreement, and each RSA will be granted pursuant to the Company’s standard Restricted Stock Award Agreement. We believe that tying a majority of our equity awards to pre-established corporate financial objectives that drive shareholder return more closely aligns the long-term interests of our executive officers and our shareholders.

​

➢

PSA shares are subject to the satisfaction of performance conditions measured over a three-year period beginning in the year the PSA shares are granted. For those PSAs granted to our executive officers in March 2016, the measurement of 50% of the PSA shares is tied to the Company’s Average Organic Sales Growth (as defined in the Performance Stock Award Agreement), and the measurement of 50% of the PSA shares is tied to the compound annual growth rate of the Company’s cumulative earnings per share, excluding any impact for changes in acquisition earn-out liabilities. We believe that Average Organic Sales Growth and cumulative earnings per share are appropriate performance measures because they are easily understandable, directly influenceable by our executive officers and meaningful to driving our shareholder value.

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➢

In general, 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.

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➢

In order to (i) achieve a strong alignment between pay and performance, and (ii) incentivize the long-term retention of our executive officers and key employees, 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.

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➢

Like PSAs, RSAs granted to our executive officers in March 2016 are subject to a cliff vesting condition requiring five years of continuous employment from the date of grant. We believe that these equity awards with time-based vesting conditions will 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. We also believe that the continued inclusion of a longer-term equity award (e.g., five years) will help us to attract, motivate and retain those individuals whose performance drives our results.

​

➢

We expect to issue SIP awards to our executive officers and key employees on an annual basis, instead of every two to three years, which has been our historical practice.

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Other Compensation

As appropriate, and in the reasonable discretion of the Chief Executive Officer, or, in the case of the Chief Executive Officer, in the reasonable discretion of the Compensation Committee, 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. Along with all other full-time employees, each of the Named Executive Officers is eligible: (a) to receive matching contributions made by the Company to the 401(k) accounts of participants in the qualified 401(k) Plan sponsored by the Company; (b) to participate in the Company’s 1990 Employee Stock Purchase Plan; (c) to participate in group medical, dental and other benefit plans subscribed to by the Company and its subsidiaries; and (d) to the extent permitted by applicable law, for reimbursement of any amounts earned by the Company on personal lines insurance such as homeowners and flood insurance purchased by such employees.

Additionally, the Named Executive Officers receive dividends on shares granted pursuant to the Company’s equity incentive compensation plans for which certain time-based requirements of vesting have not yet been fulfilled. This includes dividends on PSP shares in the case of Messrs. Powell Brown, Lydecker, Penny and Strianese and, in the case of Mr. Powell Brown, SIP shares for which stock price vesting conditions have been satisfied; dividends on certain SIP/PTSG grants made in July 2013 in the case of Messrs. Lydecker, Penny and Strianese; dividends on SIP/PTSG grants made in January 2014 in the case of Messrs. Powell Brown, Lydecker, Penny and Strianese; dividends on SIP/PTSG grants made in February 2014 in the case of Mr. Watts; and dividends on SIP/PTSG grants made in January 2015 in the case of all of the Named Executive Officers.

We offer a qualified 401(k) Plan to provide a tax-advantaged retirement savings vehicle. To encourage employees to save money for retirement, the 401(k) Plan provides for matching contributions by the Company. Effective January 1, 2014, the 401(k) Plan was amended to become a safe harbor plan for certain federal tax law compliance testing purposes. The effects of the safe harbor amendment were to increase the annual maximum matching contribution percentage from two and one-half percent (2.5%) to four percent (4.0%) of contributions made by each participant, to make the annual matching contributions mandatory instead of discretionary, and to provide that the matching contributions are immediately vested. Although the 401(k) Plan continues to permit discretionary profit-sharing contributions, the safe harbor matching contribution amendment was adopted with the expectation that such discretionary contributions would be made only in extraordinary circumstances.

The Named Executive Officers are eligible to participate in the Company’s 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 participant’s deferral contribution account. The amounts credited to the participant’s account are funded by a grantor trust, also known as a ”rabbi trust.” The assets of the trust are subject to the claims of the Company’s creditors, and participants are treated as the Company’s unsecured general creditors. The participant’s account is credited with earnings based on the performance of the participant’s 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 2015.

A participant’s account under the Company’s non-qualified deferred compensation plan generally is distributed upon the participant’s retirement, other termination of employment or death. However, if timely elected by the participant at the

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time of deferral, all or a portion of the participant’s 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. Deferred amounts may not be withdrawn prior to the designated distribution date, except upon a determination by the Company that a participant has suffered an unforeseeable, severe financial hardship.

These plans, and our contributions to them, enhance the range of benefits we offer to executives and enhance our ability to attract and retain key employees.

Policy on Tax Deductibility.   The Compensation Committee considers the anticipated tax treatment to the Company in its review and establishment of compensation programs and payments, including the potential impact of Section 162(m). 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, for which the Company accounts in accordance with Statement of Financial Accounting Standards ASC Topic 718 (formerly “SFAS 123(R)”), issued by the Financial Accounting Standards Board (“FASB”). The Compensation Committee will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of the Company and its shareholders.

Payments Upon Termination or Change in Control.   With the exception of Mr. Walker, who joined the Company in January 2012 in connection with our acquisition of Arrowhead General Insurance Agency, Inc., the Named Executive Officers all entered into employment agreements with the Company in 2014 that include change-in-control provisions. As explained below in the section titled “Employment and Deferred Compensation Agreements,” Mr. Watts entered into an employment agreement effective February 17, 2014, upon joining the Company, while Messrs. Powell Brown, Lydecker, Penny and Strianese entered into new agreements in May 2014. Mr. Watts’ agreement provides that in the event of termination without “Cause,” or resignation for “Good Reason” or a “Change in Control,” as defined therein, during the three-year term of the agreement, Mr. Watts is entitled to certain payments. The agreements entered into with Messrs. Powell Brown, Lydecker, Penny and Strianese provide that in the event of a “Change in Control,” as defined therein, they will be entitled to employment terms and benefits commensurate with those of other similarly situated executives. Mr. Walker entered into an employment agreement effective January 9, 2012 upon joining the Company, and following the expiration of the initial three-year employment term, the Company is not required to make any payments under the employment agreement to Mr. Walker upon termination or change of control. The terms of our employment agreements with our Named Executive Officers are described below in the section titled “Employment and Deferred Compensation Agreements.”

The PSP, the SIP and the ISO Plan include change-in-control provisions. 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 Company’s 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 Company’s 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

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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 2015, please see the table titled “Potential Payments Upon Termination or Change in Control — 2015” below.

The ISO Plan (which expired in 2008) and the SIP provide for double-trigger vesting under which all participants, including all of the Named Executive Officers, shall become one hundred percent (100%) vested in all options or, in the case of the SIP, unvested restricted stock grants or stock appreciation rights granted under that plan, only if the participant’s service with us is involuntarily or constructively terminated (other than for specified causes, as set forth in the ISO Plan or SIP) within 12 months after a “Transfer of Control” as defined in the ISO Plan and the SIP. For information concerning the value of the vested options that each of the Named Executive Officers would have under the ISO Plan and 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 2015, please see the table titled “Potential Payments Upon Termination or Change in Control — 2015” below.

Potential Payments Upon Termination or Change in Control — 2015

(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, 2015, the last business day of the Company’s last completed fiscal year, and that the price per share of our common stock is $32.10, 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

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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 in the Event of 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 — $1,199,287; Mr. Lydecker — $1,016,082; Mr. Penny — $946,170 and Mr. Strianese — $657,790. 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 executive’s 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 executive’s 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, 2015, at our closing market price of  $32.10 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.

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EXECUTIVE COMPENSATION

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, 2015, 2014 and 2013, except in the case of  (a) Mr. Watts, who joined the Company in February 2014 and was therefore not a named executive officer in 2013, for the year ended December 31, 2013; (b) Mr. Penny, who was not a named executive officer in 2013, for the year ended December 31, 2013; and (c) Mr. Walker, who was not a named executive officer in 2014 or 2013, for the years ended December 31, 2014 and 2013, respectively.

Summary Compensation Table 2013 – 2015

(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, 2015. See the “Compensation Discussion and Analysis” and the “Outstanding Equity Awards at 2015 Fiscal Year-End” tables for information with respect to stock granted under the SIP and PSP prior to 2015. For awards that are performance based, the indicated grant date fair value amounts assume that the highest level of performance, a CAGR of our EPS equaling or exceeding 10% as measured at the conclusion of the performance period, will be achieved.

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(2)

These dollar amounts include the items identified in the table titled “All Other Compensation Table — 2015” below.

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All Other Compensation Table — 2015

(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.”

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(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.

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(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.

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(4)

These amounts include 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.

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Grants of Plan-Based Awards in Fiscal 2015

The following table provides information about the range of possible annual incentive cash payouts in respect of 2015 performance, the range of shares that may be earned pursuant to the stock grants made to our Named Executive Officers under our SIP in 2015 and the grant date fair value of these stock grants computed under Statement of Financial Accounting Standards ASC Topic 718 (formerly “SFAS 123(R)”).

(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.

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(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 2015. For additional information related to these grants, see the “Compensation Discussion and Analysis” section of this proxy statement.

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(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.

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(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.

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(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 2015. 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.

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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 $32.10 per share as of December 31, 2015. The resulting difference between the year-end market price and the exercise price per share of  $18.48 for options granted in 2008 is $13.62 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 — 2015

(1)

Generally, these options vest three months prior to their expiration dates. This vesting may accelerate, however, in increments of 20% based upon each 20% increase in the stock price above the stock price on the grant date, based on a 20-trading-day average.

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(2)

The market value shown was determined by multiplying the number of shares of stock that have not vested by $32.10, the closing market price of our common stock on December 31, 2015.

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(3)

The market value shown was determined by multiplying the number of unearned stock shares (at target) by $32.10, the closing market price of our common stock on December 31, 2015.

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Option Exercises and Stock Vested — 2015

(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.

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(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.

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Nonqualified Deferred Compensation at Fiscal Year-End — 2015

(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 2015.

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Employment and Deferred Compensation Agreements

Messrs. Powell Brown, Lydecker, Penny and Strianese

In May 2014, the Named Executive Officers other than Mr. Watts and Mr. Walker, whose employment agreements effective February 17, 2014, and January 9, 2012, respectively, are described below, entered into new employment agreements with the Company. These agreements were entered into with certain members of the Company’s executive leadership because the employment agreements previously in effect with these Company leaders were entered into on different effective dates and varied somewhat, and we deemed it desirable to enter into agreements with consistent terms, on a uniform effective date. 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. Compensation under these agreements is not specified, but rather is at amounts 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 Executive’s, the Agreement shall be deemed modified to provide Executive with “equivalent terms and benefits to those of similar executives.” These agreements may be terminated by either party at any time, with or without cause or advance notice.

Mr. Watts

In connection with his hiring, Mr. Watts and the Company entered into an employment agreement with a term ending on February 17, 2017 (the “Term”) pursuant to which Mr. Watts: (1) receives a starting annual base salary of  $500,000; (2) was

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eligible to receive a performance-based bonus with an estimated target cash incentive amount of  $350,000 for calendar year 2014 (pro-rated for time employed in 2014 and subject to reduction in the event of unexpectedly poor financial performance of the Company or the commission of acts of malfeasance by recipient), 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 transition cash bonus of  $225,000 to compensate him for a cash bonus that he has not received from his previous employer due to his acceptance of employment with the Company, subject to certain conditions; (5) received a transition cash bonus of  $500,000 to compensate him for a stock award that he did not receive from his previous employer due to acceptance of employment with the Company, subject to certain conditions; (6) 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”); (7) received a stock grant with grant date fair value of $800,020 that will potentially be earned in five years based upon the Company’s achievement of specified performance targets and, if earned, will vest in years six, seven and eight; and (8) received reimbursement of relocation expenses in the amount of  $71,281. 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.

In addition, Mr. Watts’ employment agreement provides that, during the Term, if Mr. Watts’ employment is terminated (a) by 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:

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“Cause” means (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 describing said breach; (b) repeated failure to perform the services reasonably required of him by the Company which remains uncured for 30 days after receiving written notice from the Company describing said failure (after three separate incidents of failure for which he received written notice from the Company); (c) a proven violation of the Company’s written discrimination or harassment policy based upon race, sex, national origin, religion, disability or age; (d) commission of  (I) a felony, provided that he has been convicted of the same, (II) a crime involving moral turpitude, provided that he has been convicted of the same, (III) any act involving fraud, theft, embezzlement, conversion or misappropriation of money or property, (IV) breach of the duty of loyalty to the Company, (V) breach of any fiduciary duties to the Company, (VI) any intentional or grossly negligent act that otherwise materially damages the Company, its business or its material assets, (VII) violation of the Company’s code of ethics, or (VIII) any act of threatening, inappropriate or abusive behavior that disrupts the normal day-to-day operation of any of the Company’s offices, all of which will be as determined by the Company in its sole discretion; provided that the events listed in (IV) through (VIII) shall be subject to a 30-day right to cure after receiving written notice from the Company describing such event; (e) current alcohol or substance abuse which the Company has informed him that the Company believes has occurred and that the Company deems, in its reasonable discretion, to materially impair his abilities to perform his duties; 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.

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“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

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“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.

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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. Following the expiration of the initial three-year employment

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term, 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.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is or has been an executive officer of the Company, and no director who served on the Compensation Committee during 2015 had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, any executive officer of which served as a director of the Company or member of the Compensation Committee during 2015.

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.

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PROPOSAL 1

ELECTION OF DIRECTORS

The twelve (12) nominees for election as directors at the Meeting are: J. Hyatt Brown; Samuel P. Bell, III; Hugh M. Brown; J. Powell 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. Information concerning each of the nominees is set forth under the caption “Management — Directors and Executive Officers.” All nominees are now members of the Board of Directors. Nomination of all nominees is for a one (1)-year term until the next Annual Meeting of Shareholders.

Should any nominee become unable or unwilling to accept nomination or election for any reason, it is expected that the resulting vacancy will not immediately be filled. All nominees have consented to being named in the Proxy Statement and have agreed to serve if elected. If any nominee for election as a director shall become unable to serve as a director, then proxies will be voted for such substitute nominee as the Nominating/Corporate Governance Committee of the Board of Directors may nominate.

Board Recommendation

The affirmative vote of more than 50% of the votes cast, either in person or by proxy, at the annual meeting is required for the election of these nominees as directors.

If an incumbent director does not receive more than 50% of the votes cast with respect to such director’s election, such director shall promptly tender his or her conditional resignation following certification of the vote.

The Nominating/Corporate Governance Committee shall consider the resignation offer and recommend to the Board whether to accept such offer, and the Board will endeavor to act on the recommendation within 90 days.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE NOMINEES.

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PROPOSAL 2

The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016. Deloitte & Touche LLP has served as our independent registered public accounting firm since the fiscal year ended December 31, 2002.

The Audit Committee and the full Board of Directors 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 Audit Committee of the Board of Directors. Even if the selection is ratified, the Audit 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 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.

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 RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

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Report of the Audit Committee

The Audit Committee of the Board of Directors operates pursuant to an Audit Committee Charter adopted by the Company’s Board of Directors on June 14, 2000, as amended in 2004, 2007 and 2011, and most recently reviewed by the Audit Committee in January 2016 in connection with the Audit Committee’s regular annual review of the Audit Committee Charter. The Audit Committee Charter is posted on the Company’s 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 currently in effect, as well as other statutory, regulatory and other requirements applicable to the Company’s Audit Committee members).

With respect to the fiscal year ended December 31, 2015, the Audit Committee:

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has reviewed and discussed the Company’s audited financial statements with management and the independent registered public accountants;

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has discussed with the independent registered public accountants of the Company the matters required to be discussed by the Public Company Accounting Oversight Board (United States) rules on independence;

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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

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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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, for filing with the Securities and Exchange Commission.

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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 Committee’s considerations and discussions do not assure that the audit of the Company’s 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

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INFORMATION CONCERNING INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

We incurred the following fees for services performed by Deloitte & Touche LLP for fiscal years 2015 and 2014:

FEES PAID TO DELOITTE & TOUCHE LLP

Audit Fees

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, 2015 and 2014, including any out-of-pocket expense, were $1,465,595 and $1,444,458, respectively.

Audit-Related Fees

There were no 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 year ended December 31, 2015. Fees of  $172,478 were 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 year ended December 31, 2014. These fees were billed primarily in connection with our issuance on September 18, 2014 of  $500.0 million of 4.2% unsecured senior notes due in 2024.

Tax Fees

No fees were billed to us by Deloitte & Touche LLP for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2015 or 2014.

All Other Fees

No other fees were billed to us by Deloitte & Touche LLP for the fiscal years ended December 31, 2015 or 2014.

Audit Committee Policy for Pre-Approval of Independent Registered Public Accountant Services

Our Audit Committee is required to pre-approve the audit and non-audit services performed by the independent registered public accountants pursuant to the Audit Committee’s pre-approval policies and procedures in order to assure that the provision of such services does not impair the independent registered public accountants’ independence. The Audit Committee requires that any proposed engagement of the independent registered public accountants to perform services in addition to those approved in connection with the annual engagement letter entered into with the independent registered public accountants must be considered and approved in advance by the Audit Committee, except that the Audit Committee’s pre-approval for non-audit services is not required to the extent such non-audit services meet the de minimus exception requirements of Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended. During fiscal years 2015 and 2014, all services were approved by the Audit Committee in accordance with this policy.

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PROPOSAL 3

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

The Dodd-Frank Act requires that we provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our executive compensation. In 2011, the first year in which these requirements became applicable to us, we recommended, and our shareholders approved, the submission of a “say-on-pay” consideration proposal on an annual basis. Thus, this is the sixth consecutive year in which such a proposal has been included in our Proxy Statement.

As described in detail above 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 of achievement of specific annual goals as well as for delivering financial performance that is 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. Accordingly, the Compensation 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) 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 SEC’s 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. Our Board and our 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 Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

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 RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

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PROPOSAL 4

REAPPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE COMPANY’S 2010 STOCK INCENTIVE PLAN PURSUANT TO SECTION 162(m) OF THE INTERNAL REVENUE CODE

Introduction

Section 162(m) of the United States Internal Revenue Code of 1986, as amended (the “Code”), limits the deductibility of executive compensation paid to each of the Company’s chief executive officer and the three other most highly compensated officers (other than the chief financial officer), as determined pursuant to the executive compensation proxy statement disclosure rules, in any one year, to $1 million. An exception to this limitation applies to “performance-based” compensation as defined in the U.S. Treasury regulations under Section 162(m) of the Code. This exception is referred to as the “performance-based exception.”

One element of the Brown & Brown, Inc. 2010 Stock Incentive Plan, or SIP, is the flexibility to make certain grants with performance-based vesting or payment requirements that are designed to satisfy the requirements of the “performance-based exception” under Section 162(m) of the Code. These awards are referred to as “Performance-Based Stock Grants,” and are in addition to other awards, such as stock options and stock appreciation rights (SARs), discussed below, which are expressly authorized under the SIP and may also qualify as performance-based compensation for purposes of Section 162(m) of the Code.

One of the requirements under the “performance-based exception” under Section 162(m) of the Code is shareholder approval of the plan under which the awards are granted. In the case of Performance-Based Stock Grants, shareholders must also approve the material terms of the performance goals pursuant to which compensation is paid under the awards. We are required to obtain shareholder approval for Performance-Based Stock Grants at least every five years in order for the Company to claim an income tax deduction when it pays such awards. The Company’s shareholders last approved the material terms of the performance goals for Performance-Based Stock Grants under the SIP in May 2015. Since the approval of the material terms of the performance goals in May 2015, the SIP was amended to permit the use of methods in addition to the delivery of share certificates in order to issue shares pursuant to awards granted under the SIP, to authorize the grant of restricted stock units, and 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. Although these amendments to the SIP did not require shareholder approval, grants of restricted stock units may be intended to be Performance-Based Stock Grants. Therefore, in order for future grants of restricted stock units to qualify as Performance-Based Stock Grants, shareholder approval of the material terms of the performance goals for Performance-Based Stock Grants under the SIP, as amended to authorize the grant of restricted stock units, must be obtained.

Stock options or SARs can qualify as performance-based for purposes of Section 162(m) of the Code, even if they are subject to time-based vesting schedules, if the Company’s shareholders approve a maximum limit on the number of shares covered by such awards that may be granted to an individual during any specified period, and if the exercise price or base price of the award is not less than the fair market value of the stock subject to the option or SAR on the date of grant.

At the Meeting, the Company’s shareholders will be asked to reapprove the material terms of the performance goals in the SIP pursuant to which Performance-Based Stock Grants, including restricted stock units, may be granted, and the individual award limits on stock options and SARs. For purposes of Section 162(m) of the Code, the material terms of the performance goals include:

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Shareholder approval of the material terms of the performance goals in the SIP and the individual award limits will allow the Compensation Committee the opportunity to continue to grant Performance-Based Stock Grants and stock options and SARs intended to qualify as “performance-based” compensation under Section 162(m) of the Code, thereby permitting the Company to claim an income tax deduction for such compensation when it is paid. Approval of this Proposal 4 will constitute approval of the material terms of the performance goals and the individual award limits in the SIP.

This Proposal 4 does not include an increase in the number of shares authorized for issuance under the SIP. However, the Company is requesting shareholder approval of an increase in the number of shares authorized under the SIP under Proposal 5 below. Because Section 162(m) of the Code requires that the material terms of the performance goals be approved by shareholders in a separate vote, this Proposal 4 for reapproval of the material terms of the performance goals under the SIP is being requested separately from the request for approval of the SIP amendment to increase in the number of shares authorized for issuance under Proposal 5.

As of February 29, 2016, a total of 6,229,383 shares of common stock were subject to outstanding awards payable in shares granted under the SIP, and an additional 2,830,427 shares of common stock were available for new award grants payable in shares under the SIP. In addition, SIP shares and shares of the Company’s PSP (a plan approved in 1995 and suspended upon shareholder approval of the SIP in May 2010) that are forfeited in the future will be available for issuance under the SIP.

If shareholders do not approve this proposal, the current terms of the Performance-Based Stock Grant feature under, and other terms and conditions of, the SIP will continue in effect. However, the Company will not grant restricted stock unit awards that are intended to satisfy the performance-based exception under Section 162(m) of the Code after the Meeting unless and until the requisite shareholder approval is obtained in accordance with the provisions of Section 162(m) of the Code.

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, which includes the amendment to the SIP that is the subject of Proposal 5 below.

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 Company’s common stock reserved for issuance under the SIP (without giving effect to the proposed share increase that is the subject of Proposal 5) is 5,953,543, 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 29, 2016, a total of 6,229,383 shares were subject to outstanding equity awards under the SIP. The shares issued by the Company under the SIP may be, at the Company’s 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 Company’s 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, 2015, there were approximately 7,807 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.

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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 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.

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 Company’s 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 holder’s retirement, disability or death. During the award holder’s 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 holder’s 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 Company’s 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 Company’s 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 grantee’s 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.

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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:

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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.

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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 holder’s employment after a change in control transaction, as defined in the SIP, may cause the holder’s 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 Company’s 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 Company’s 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 employee’s 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 employee’s realization of ordinary income by virtue of the employee’s 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

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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 holder’s 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 holder’s 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.

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 recipient’s death or the income tax laws of any municipality, state or foreign country in which a recipient may reside.

Board Recommendation

In order to pass, this Proposal 4 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 4 is in the best interests of the Company and its shareholders.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

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PROPOSAL 5

AN AMENDMENT TO THE COMPANY’S 2010 STOCK
INCENTIVE PLAN TO INCREASE SHARES
AVAILABLE FOR ISSUANCE

On March 23, 2016, the Compensation Committee approved, pursuant to approval by the Board of Directors, an additional amendment to the SIP, which provides for a 1,200,000 share increase in the aggregate number of shares of the Company’s 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.

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 Company’s 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 3,993,832 based on the 2,793,832 shares remaining available for grant under the SIP as of December 31, 2015.

A summary of the number of shares subject to outstanding awards under the SIP, the PSP, and the ISO as of December 31, 2015, is as follows:

With respect to the outstanding stock options, as of December 31, 2015, the weighted average exercise price was $18.48, and the weighted average remaining contractual term was 2.2 years. With respect to the outstanding restricted stock grants, 87.08% 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 5 to 7 years, and the additional time-based conditions require at least 5 years, and as many as 20 years, of service for full vesting of the awarded grants. More than 50 percent 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.

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 the projected cost or “shareholder value transfer” of the amended SIP relative to the Company’s market and industry peers. This shareholder value transfer evaluation takes into account all of the Company’s 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 and limitations recommended by ISS.

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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, 2015, 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:

Based on the 138,985,058 shares outstanding on December 31, 2015, 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 8.03% of the fully diluted outstanding shares.

The Company’s three-year average burn rate, based upon the total number of options and restricted stock granted, is shown below: