Exhibit No. 10.25
ARTHUR J. GALLAGHER & CO.
UNITED KINGDOM
INCENTIVE STOCK OPTION PLAN
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APPROVED BY THE INLAND REVENUE ON
MAY 28, 1986 AND AMENDED BY THE
DIRECTORS ON JULY 1, 1996 (APPROVED BY THE
INLAND REVENUE ON JULY 16) AND FURTHER
AMENDED BY THE DIRECTORS ON JANUARY 22,
1998 (APPROVED BY THE INLAND REVENUE ON
JUNE 12, 1998).
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ARTHUR J. GALLAGHER & CO.
UNITED KINGDOM
INCENTIVE STOCK OPTION PLAN (the Plan)
1. Purpose
The Plan has been established to enable the United Kingdom resident
employees and directors of Arthur J. Gallagher & Co. (the Company) and
companies in its group to obtain beneficial tax treatment under section 185
of the Income and Corporation Taxes Act 1988 (Section 185) in respect of
options granted to them over shares in the capital of the Company.
The Plan shall be administered by the Committee of the Board of the Company
appointed to administer the Arthur J. Gallagher & Co. Incentive Stock
Option Plan (the US Plan) pursuant to the powers conferred on the Committee
under the US Plan. The Plan accordingly reflects the terms and conditions
of the US Plan and, for administrative convenience only, the rules of the
Plan show in italics those provisions which are not contained in the US
Plan.
The Plan was approved by the Inland Revenue pursuant to Schedule 10 to the
Finance Act 1984 (Schedule 10) on 28 May 1986.
The purpose of the Plan is to promote the interests of Arthur J. Gallagher
& Co., a Delaware corporation, and its shareholders by providing key
employees resident in the United Kingdom on whom rests the major
responsibility for the present and future success of the Company and its
subsidiaries with an opportunity to acquire a proprietary interest in the
Company and thereby develop a stronger incentive to put forth maximum
effort for the continued success and growth of the Company and its
subsidiaries. These goals are enhanced further by the fact that
participants in the Plan who are subject to United Kingdom tax will be
entitled to the beneficial tax treatment provided for in section 185 in
respect of options granted to and exercised by them in accordance with the
rules of the Plan and the provisions of section 185. In addition, the
opportunity to acquire a proprietary interest in the Company will aid in
attracting and retaining key personnel of outstanding ability.
2. Administration
All administrative duties hereunder shall rest with the Option Committee of
the Board of Directors (hereinafter the Committee) which will consist of
not less than two persons, each of whom will be a disinterested person as
that term is used in Rule 16b-3 under the Securities Exchange Act 1934, as
amended. The Committee shall have the duty and authority, subject to the
provisions of the Plan and of Schedule 9 to the Income and Corporation
Taxes Act 1988 (Schedule 9), to:
(a) determine which individuals shall receive options and how many options
each individual shall receive;
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(b) grant the options;
(c) at the time of a grant of options determine the terms and conditions of
the options including exercise dates, limitations on exercise, and time
periods for exercise, (Vesting Schedules) and the price and payment terms;
(d) prescribe the form or forms of the instruments evidencing any options
granted under the Plan and of any other instruments required under the
Plan, and to change such forms from time to time; and
(e) adopt such rules and regulations for the administration of the Plan as
it deems appropriate.
In making the foregoing determinations the Committee may take into account
the nature of the services rendered by the respective individuals, their
present and potential contributions to the Company's success, and such
other factors as the Committee, in its discretion, shall deem relevant.
3. Shares Subject to the Plan
The shares that may be made subject to options under the Plan shall be
shares of Common Stock of the Company, one dollar ($1.00) par value (Common
Stock), and the total shares subject to option and issued pursuant to this
Plan shall not exceed, in the aggregate, 720,000 share of the Common Stock
of the Company. If any such option lapses or terminates for any reason
without having been exercised in full, the shares covered by the
unexercised portion of such option may again be made subject to options
granted under the Plan. Shares issued upon exercise of options granted
under the Plan may be shares held by the Company either as treasury shares
or as authorized but previously unissued shares.
The shares put under option pursuant to the Plan shall comply with the
conditions contained in paragraphs 10 to 14 of Schedule 9.
4. Eligibility
Employees eligible to participate in the Plan shall be those salaried
officers and other salaried key employees of the Company and its
subsidiaries who, in the opinion of the Committee, are in a position to
affect materially the profitability and growth of the Company and its
subsidiaries. Directors who are salaried key employees within the meaning
of the foregoing are eligible to participate in the Plan, provided however
that members of the Committee shall not be eligible to receive options. An
employee owning stock comprising over 10% of the combined voting power of
the Company or any subsidiary (a 10% Shareholder) is not eligible to
receive an option unless the option price offered is at least 110% of the
fair market value of the stock at the time the option is granted, and
unless the option by its terms expires not more than five years from the
date of grant. For all purposes of the Plan, except where "wholly owned" is
indicated, the term subsidiary shall mean a corporation 50% or more of the
stock of which is owned directly
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by the Company or indirectly through another corporation or corporations in
which the Company owns 50% or more of the stock and which is, in addition,
under the control of the Company, within the meaning of section 840 of the
Income and Corporation Taxes Act 1988.
Further, an option may only be granted under the Plan to a person if (and
only if) he is a full-time executive director or qualifying employee of the
Company and he does not fall within the provisions of paragraph 8 of
Schedule 9.
For the purpose of this paragraph a person shall be treated as a full-time
executive director of the Company if he is employed by the Company or a
subsidiary to work not less than 25 hours per week (excluding meal breaks).
For the purpose of this paragraph a qualifying employee is an employee of
the Company or a subsidiary who is not also a director of the Company or a
subsidiary and who is required to work for that company under a contract of
employment.
5. Granting of Options
Subject to the terms and conditions of the Plan, the Committee may from
time to time prior to the termination of the Plan grant to eligible
employees options to purchase the number of shares of Common Stock
authorized by the Committee, subject to such terms and conditions as the
Committee may determine. More than one option may be granted to the same
employee. The day on which the Committee approves the granting of an option
shall be considered as the date on which such option is granted.
6. Option Price
The purchase price per share of Common Stock subject to an option shall be
fixed by the Committee, but shall not be less than 100% (110% in the case
of a 10% Shareholder) of the fair market value of a share of Common Stock
on the date the option is granted by the Committee. The fair market value
of a share of Common Stock shall be the closing price for the Company's
Common Stock on the New York Stock Exchange as listed in the Wall Street
Journal for the date the option is granted.
7. Terms of Options
The term of each option shall be not more than 10 years commencing with the
date of grant (5 years in the case of a 10% Shareholder). Each option shall
also terminate as provided in paragraph 13.
8. Method of Exercising Options
Any option granted hereunder may be exercised by the optionee by delivering
to the Company at is main office (attention of the Secretary) written
notice of the number of shares with respect to which the option rights are
being exercised and by paying in cash
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the purchase price of the shares purchased in full, in exchange for the
issuance and delivery of certificates therefor.
9. Amount Exercisable
Each option may be exercised, so long as it is valid and outstanding, from
time to time in part or as a whole, subject to any limitations with respect
to the number of shares for which the option may be exercised at a
particular time and to such other conditions as the Committee in its
discretion may specify upon granting the option, provided that any such
conditions have been approved by the Inland Revenue prior to their
imposition; and provided, however, that the partial exercise of an option
or a combination of options shall in no event be for the smaller of (a) 100
shares of Common Stock, or (b) 10 per cent of the shares of Common Stock
subject to options held by the employee, unless a purchase of fewer shares
would entirely exhaust the options held by the employee; and provided
further that the optionee's cumulative purchases of Common Stock subject to
this option may not exceed the following:
Percentage of
Common Stock Percentage of
Subject to Option Common Stock
Years Following (Other than Subject to Option
Date of Grant 10% Shareholder) (10% Shareholder)
remainder of calendar year 0% 0%
following date of grant
1/st/ calendar year following date 10% 20%
of grant
2/nd/ calendar year following date 20% 40%
of grant
3/rd/ calendar year following date 30% 60%
of grant
4/th/ calendar year following date 40% 80%
of grant
5/th/ calendar year following date 50% 100%
of grant
6/th/ calendar year following date 60% 100%
of grant
7/th/ calendar year following date 70% 100%
of grant
8/th/ calendar year following date 80% 100%
of grant
9/th/ calendar year following date 90% 100%
of grant
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10/th/ calendar year following date 100% 100%
of grant
and provided further that the Committee shall not attach conditions to the
exercise of the option which would prevent the employee from being capable
of satisfying the requirements of sub-section (5) of Section 185 at some
time during the life of the option. Notwithstanding the provisions of this
Paragraph 9, no option granted under the Plan shall be exercised at any
time when the employee holding that option falls within the provisions of
Paragraph 8 of Schedule 9.
On the exercise or partial exercise of an option the shares will be
allotted to the employee, a share certificate issued and his name
registered as stockholder in the Company's books within the thirty days
following the date of exercise of the option.
10. Maximum Annual Amount
No option shall be granted to an employee under the Plan if the aggregate
market value (determined as in paragraph 6 above) of all shares of Common
Stock the subject of outstanding options granted to him under the Plan, or
granted to him under any other share option scheme approved under Schedule
9 and established by the Company or an associated company would exceed
(Pounds)30,000, or if different, such appropriate limit as shall from time
to time apply to the Plan by virtue of paragraph 28 of Schedule 9.
In order to calculate whether the aggregate fair market value of all shares
of Common Stock the subject of any option (determined as in paragraph 6
above) exceeds the limit referred to in this paragraph, the UK pounds
sterling equivalent of such aggregate fair market value shall be calculated
by applying the US$/UK(Pounds) spot exchange rate quoted in the London
Financial Times on the date on which the relevant option was granted.
For the purpose of this paragraph:
associated company shall mean an associated company within the meaning
of section 840 of the Income and Corporation Taxes Act 1988.
11. Capital Adjustments Affecting Common Stock
In the event of a capital adjustment resulting from a stock dividend, stock
split, reorganization, merger, consolidation, or a combination or exchange
of shares, the number of shares of Common Stock subject to the Plan and the
number of shares under the option shall be adjusted in a manner consistent
with such capital adjustment. The price of any shares under option shall be
adjusted so that there will be no change in the aggregate purchase price
payable upon exercise of any such option.
Provided that no adjustment consequent on such an event shall be made
pursuant to this paragraph 11 in respect of options granted under the Plan
at any time while the Plan is approved by the Inland Revenue without the
prior approval of the Inland Revenue.
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12. TRANSFERABILITY OF OPTIONS
Options shall not be transferable by the optionee otherwise than by will or
under the laws of descent and distribution, and shall be exercisable,
during his lifetime, only by him. Provided that an option granted under the
Plan shall only be transferable in the circumstances set out in paragraph
27(2) of Schedule 9.
13. /1/TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
Any termination of the employment relationship between the Company or a
subsidiary and the optionee due to death, disability or retirement, as
those events are provided for in (A), (B) and (C) below, shall not act to
terminate an option grant. A termination of the employment relationship
for any reason other than those so provided in (A), (B) and (C) below shall
act to terminate an option grant as of the effective date of such
termination of the employment relationship, as reflected in the records of
the Company. The Committee shall have the authority to determine whether
an authorized leave of absence or absence due to military or government
service shall constitute a termination of the employment relationship for
purposes hereof.
(A) /1/DEATH If an optionee dies while in the employ of the Company or a
subsidiary and before the date of expiration of such option, such option
shall terminate on the earlier of such date of expiration or twelve months
following the date of such death and any Vesting Schedule shall be
accelerated so that the option shall be exercisable as to 100% of the
Common Stock subject to the Option (notwithstanding that the conditions as
to cumulative purchases referred to in paragraph 9 above would not
otherwise be satisfied). After the death of the optionee, his executors,
administrators, or any person or persons to whom his option may be
transferred by will or by the laws of descent and distribution shall have
the right, at any time prior to such termination, to exercise the option,
in whole or in part, subject to the terms and conditions of the Plan and of
the option grant letter or stock option agreement entered into by the
optionee as varied by this paragraph (A).
(B) /1/RETIREMENT FOR DISABILITY If, before the date of expiration of the
option, the employment relationship between the Company or any subsidiary
and the optionee is terminated at a time when the optionees' medical
condition, upon such termination, would qualify the optionee to receive
long term disability benefits under the Company's employee benefits plan
such option shall not terminate on the termination of the employment
relationship and any Vesting Schedule shall be accelerated so that the
option shall be exercisable at any time until the expiration of the option
in respect of 100% of the Common Stock then remaining subject to the Option
(notwithstanding that the conditions as to cumulative purchases referred to
in paragraph 9 above would not otherwise be satisfied).
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/1/ The provisions of Rule 13 were amended with effect from the date of
Inland Revenue approval on 16 July 1996 and are therefore applicable
only to options granted after that date.
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(C) /1/RETIREMENT If, before the date of expiration of the option, the
holder of an option retires from the employment of the company or any
subsidiary in circumstances other than those referred to in paragraph (B)
above at a time when the optionee, upon such termination, would be
immediately eligible to commence to receive retirement benefits under the
Company's pension plan such option shall not terminate on the termination
of the employment relationship and any Vesting Schedule shall be
accelerated so that the option shall be exercisable at any time until the
expiration of the option in respect of 100% of the Common Stock then
remaining subject to the Option (notwithstanding that the conditions as to
cumulative purchases referred to in paragraph 9 above would not otherwise
be satisfied).
14. REQUIREMENTS OF LAW
In the event the shares issuable on exercise of an option are not
registered under the Securities Act of 1933 of the USA, the Company shall
imprint the following legend or any other legend which counsel for the
Company considers necessary or advisable to comply with the Securities Act
of 1933:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel in form and substance satisfactory to the Corporation that
registration is not required for such sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended); and in the event an shares are so
registered the Company may remove any legend on certificates representing
such shares. The Company shall make reasonable efforts to cause the
exercise of an option or the issuance of shares pursuant thereto to comply
with any law or regulation of any governmental authority.
15. NO RIGHTS AS STOCKHOLDER
No optionee shall have rights as a stockholder with respect to shares
covered by his option until the date of issuance of a stock certificate for
such shares; and, except as otherwise provided in paragraph 11 hereof, no
adjustment for dividends, or otherwise, shall be made if the record date
therefor is prior to the date of issuance of such certificate.
16. EMPLOYMENT OBLIGATIONS
The granting of any option shall not impose upon the Company or subsidiary
any obligation to employ or continue to employ any optionee; and the right
of the Company or
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/1/ The provisions of Rule 13 were amended with effect from the date of
Inland Revenue approval on 16 July 1996 and are therefore applicable
only to options granted after that date.
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subsidiary to terminate the employment of any officer or other employee
shall not be diminished or affected by reason of the fact that an option
has been granted to him.
17. WRITTEN AGREEMENT
Each option granted hereunder shall be embodied in writing, the form and
content of which shall be as the Committee in its discretion shall deem
advisable.
18. AMENDMENT, TERMINATION AND EFFECTIVE DATE
This Plan shall be effective as of the date of its approval by the Inland
Revenue and shall terminate on 29 May 2006. The Board shall have the right
to amend, suspend or terminate the Plan, provided that no termination or
amendment of the Plan may, without the consent of the individual to whom
any option shall have been therefore granted, adversely affect the rights
of such individual under such option. Unless in respect of (a), (b) and
(c) below first approved by the shareholders of the Company, no amendment
shall be made to the Plan which:
(a) materially modifies the eligibility requirements provided in paragraph
4;
(b) changes the option price specified in Paragraph 6, except as provided
in Paragraph 11; or
(c) changes the option period in Paragraph 7.
Notwithstanding the provisions of this Paragraph 18, no amendment shall
have effect at any time when the Plan is approved by the Inland Revenue
until approved by the Inland Revenue. However, the Committee may make such
amendments as are required to obtain the approval by the Inland Revenue of
the Plan pursuant to Schedule 9.
19. CHANGE IN CONTROL
In the event of a change in control of the Company, as defined below, each
option outstanding shall immediately become exercisable in full. For all
purposes of the Plan, a "change in control of the Company" occurs if:
(a) any person or group, as defined in Sections 13(d) and 14(d)(2) of the
Exchange Act, as amended, is or becomes the beneficial owner, directly
or indirectly of securities of the Company representing 50 percent or
more of the combined voting power of the Company's outstanding
securities then entitled to vote for the election of directors; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors and any new
directors whose election by the Board or nomination for election by
the Company's Stockholders was approved by at least two-thirds of the
directors then still in office who either were
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directors at the beginning of the period or whose election was
previously so approved cease for any reason to constitute at least a
majority thereof; or
(c) the Stockholders of the Company shall approve the sale of all or
substantially all of the assets of the Company or any merger,
consolidation, issuance of securities or purchase of assets, the
result of which would be the occurrence of any event described in
clause (a) or (b) above.
This Paragraph 19 will be effective only for options granted after 12 June
1998 being the date on which Inland Revenue approval was given to the
relevant rule amendment.
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