EXHIBIT NO. 10.28
ARTHUR J. GALLAGHER & CO.
1989 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(RESTATED AS OF JANUARY 22, 1998)
1. PURPOSE
The purpose of this 1989 Non-Employee Directors' Stock Option Plan (the
"Plan") is to promote the interests of Arthur J. Gallagher & Co., a
Delaware corporation (the "Company"), and its shareholders by providing an
incentive to non-employee directors to serve and continue to serve on the
Company's Board of Directors and to devote the large amounts of time
required to participate actively in the work of the Board of Directors. In
that the continued services of qualified non-employee directors are
essential to the sustained growth and progress of the Company, it is
thought that the Plan will make service on the Board of Directors more
attractive to present and future non-employee directors.
2. GENERAL
The Plan encompasses options granted to a non-employee director in the
discretion of the Option Committee of the Board of Directors
("Discretionary Options") and options granted to a non-employee director
pursuant to an election made by the non-employee director to receive
options in lieu of his annual retainer, as defined in Paragraph 11 hereof,
("Retainer Options"), (together, hereinafter referred to as "Options"). All
Options under the Plan will be nonqualified options not eligible for
treatment as "incentive stock options" as that term is used in Section 422A
of the Internal Revenue Code, as amended.
3. ADMINISTRATION
A. All administrative duties hereunder shall rest with the Option
Committee of the Board of Directors (hereinafter the "Committee").
Except as otherwise provided in Paragraph 11 hereof as to Retainer
Options, the Committee shall have the duty and authority, subject to
the provisions of the Plan, to:
(i) determine which non-employee directors of the Company shall
receive Options and how many Options each non-employee director
shall receive;
(ii) grant the Options;
(iii) 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;
(iv) prescribe the form or forms of the instruments evidencing any
Options granted under the Plan ("Option Agreements") and of any
other
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instruments required under the Plan, and to change such forms
from time to time; and
(v) adopt such rules and regulations for the administration of the
Plan as it deems appropriate.
B. The Committee is further authorized, at the discretion of the
Committee, to amend, at any time, all Option Agreements entered into
pursuant to the Plan and in effect as of May 11, 1993:
(i) to provide that the Option Agreements, and all rights
thereunder, shall continue and be unaffected by any termination
of optionee's association with the Company for any reason;
and/or
(ii) to accelerate or shorten Vesting Schedules in the event of a
termination of an optionee's association with the Company for
any reason.
C. The Committee is further authorized, at its discretion, to amend at
any time all previous grants of options pursuant to the Plan and in
effect as of January 22, 1998, to provide that in the event of a
change in control of the Company, as defined in Paragraph 22 below,
all such options shall become immediately vested and exercisable.
4. SHARES SUBJECT TO THE PLAN
The shares that may be made subject to the Options under the Plan shall be
shares of common stock, one dollar ($1.00) par value ("Common Stock"), of
the Company, and the total number of shares subject to the Options and
issued pursuant to this Plan shall not exceed, in the aggregate, 200,000
shares 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 the 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. Upon
authorization from the Board of Directors, the Company may from time to
time acquire shares of Common Stock in the open market upon such terms as
the Board shall deem appropriate for reserve in its treasury for reissuance
in connection with exercises hereunder.
5. ELIGIBILITY
Non-employee directors of the Company shall be eligible to receive
Discretionary Options under the Plan and on an annual basis may make an
election to receive Retainer Options as set forth in Paragraph 11 hereof.
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6. 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 non-employee
directors Discretionary 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. Retainer Options shall be granted by the
Committee subject to the terms and conditions of Paragraph 11 hereof and
such other terms and conditions as the Committee may prescribe. The day on
which the Committee approves the granting of a Discretionary Option shall
be considered as the date on which such Discretionary Option is granted.
Retainer Options shall be deemed granted on the applicable Annual Meeting
Date referred to in Paragraph 11.
7. OPTION PRICE
The purchase price per share of Common Stock subject to a Discretionary
Option shall be fixed by the Committee. The purchase price per share of
Common Stock subject to a Retainer Option shall be determined as set forth
in Section 11 hereof.
8. TERM OF OPTIONS
The term of each Discretionary Option shall be determined by the Committee
but shall be not more than 10 years commencing with the date of grant. The
term of each Retainer Option shall be unlimited subject to the provisions
of Paragraph 14 hereof.
9. METHOD OF EXERCISING OPTIONS
Any Option granted hereunder may be exercised by the Optionee by delivering
to the Company at its main office (attention of the Secretary) written
notice of the number of shares of Common Stock with respect to which the
option rights are being exercised and by paying in cash the purchase price
of the shares purchased in full, in exchange for the issuance and delivery
of certificates therefor. The Committee in its discretion may permit a
director to use shares of Common Stock as payment for additional stock
purchased pursuant to an Option. The value of the shares to be used as
payment shall be determined by the Committee. The Company may delay the
processing of any exercise hereunder so long as may be necessary, in the
opinion of counsel to the Company, to comply with securities laws and
regulations relating to the disclosure of material non-public information
concerning the Company.
10. 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.
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11. RETAINER OPTIONS
Prior to December 31 of each year that the Plan is in effect, a non-
employee director may elect to receive an option to purchase Common Stock
in lieu of receipt of his annual retainer for the twelve-month period
following the date of the next annual meeting of stockholders ("Annual
Meeting Date"). The election made by the non-employee director shall remain
in full force and effect until a revocation of this election is made prior
to any December 31. Such revocation shall become effective at the next
Annual Meeting Date. The term "annual retainer" will mean the total amount
which a non-employee director will be entitled to receive for serving as a
director and for serving as a member of any committee of the Board of
Directors in the twelve-month period following the Annual Meeting Date, but
will not include fees for attendance at either meetings of the Board of
Directors or any committee of the Board of Directors, or of any other
services which a director may provide to the Company.
Each year on or before two weeks preceding such Annual Meeting Date, the
Committee shall determine the number of shares of Common Stock with respect
to which a non-employee director may have a Retainer Option, and the non-
employee director's exercise price per share shall be equal to the Fair
Market Value of the Common Stock subject to the Retainer Option less the
Annual Retainer, divided by the number of shares subject to the Option.
The term "fair market value" will mean the closing price of the Company's
Common Stock as reported on the New York Stock Exchange Composite
Transaction Reporting System for the day on which the Retainer Option is
granted. The option price per share shall be not less than the par value of
the Common Stock.
12. 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 any Option shall be adjusted in a manner consistent
with such capital adjustment. The price of any shares under an Option shall
be adjusted so that there will be no change in the aggregate purchase price
payable upon exercise of any such Option.
13. 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.
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14. TERMINATION OF ASSOCIATION WITH COMPANY
The term and effectiveness of each Discretionary Option shall not be
limited or affected by the termination of optionee's association with the
Company for any reason.
In the event of a termination of an optionee's association with the Company
for any reason, the term of each Retainer Option of such optionee shall
terminate on the tenth anniversary of the date of grant of such Retainer
Option.
15. REQUIREMENTS OF LAW
In the event the shares issuable on exercise of an Option are not
registered under the Securities Act of 1933, the Company shall (or cause
its transfer agent to) 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 any 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.
16. NO RIGHTS AS STOCKHOLDER
Optionees shall have no rights as a stockholder with respect to shares
covered by an Option until the date of issuance of a stock certificate for
such shares; and, except as otherwise provided in Paragraph 12 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.
17. NO RIGHT TO CONTINUE AS DIRECTOR
Neither the granting of any Option nor any other action taken pursuant to
the Plan will constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a director for any period
of time.
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18. FORM OF AGREEMENT
Each Option granted hereunder shall be embodied in a writing, the form and
content of which shall be as the Committee in its discretion shall deem
advisable.
19. WITHHOLDING REQUIRED BY LAW
Upon the exercise of an Option, the grantee or other person receiving such
Common Stock will be required, as a condition of such distribution, either
to pay to the Company at the time of distribution thereof the amount of any
federal, state, local or foreign taxes due or required to be withheld with
respect to such Common Stock, or to have the number of shares of Common
Stock, valued at fair market value on the date of distribution, reduced by
an amount equal to the value of taxes due or required to be withheld.
20. AMENDMENT, TERMINATION AND EFFECTIVE DATE
This Plan shall be effective as of May 9, 1989, and shall terminate ten
years after this Effective Date. 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 theretofore granted, adversely affect the rights of such
individual under such Option.
21. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto will
be governed by the law of the State of Delaware and construed accordingly.
22. 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; (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 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.
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IN WITNESS WHEREOF, the Company has caused its President and Secretary to
execute this Restated Plan this 22nd day of January, 1998.
ARTHUR J. GALLAGHER & CO.
By /s/Patrick Gallagher, Jr.
-------------------------
J. Patrick Gallagher, Jr.
President
Attest:
/s/Carl E. Fasig
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Carl E. Fasig, Secretary
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