Severance Plan
Change in Control
Amendment to Change in Control
 
 

EX-10.17 5 dex1017.htm SEVERANCE PLAN

Exhibit 10.17

ARTHUR J. GALLAGHER & CO.

SEVERANCE PLAN

(effective September 15, 1997,

as amended and restated effective January 1, 2009)

ARTHUR J. GALLAGHER & CO. (ILLINOIS) previously adopted the ARTHUR J. GALLAGHER & CO. SEVERANCE PLAN (hereinafter the “Plan”), effective September 15, 1997 for the benefit of eligible employees of the Employer. The Plan is hereby amended and restated, effective January 1, 2009. For purposes of this Plan, “Employer” means Arthur J. Gallagher & Co. (the “Company”), each United States affiliate of the Company, and each wholly-owned United States subsidiary of the Company which adopts this Plan with the written consent of the President of the Company.

The Plan is an unfunded welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (hereinafter “ERISA”) and a severance pay plan within the meaning of United States Department of Labor regulations section 2510.3-2(b). The Plan supersedes any prior Employer severance plans, programs or policies covering eligible employees, both formal and informal.

 

1.

PURPOSE OF THE PLAN

The purpose of the Plan is to provide an “eligible employee” (as hereinafter defined) with severance pay for a specified period of time in the event that his/her employment is involuntarily terminated by the Employer for lack of work, rearrangement of work, or reduction in workforce, as determined in the sole discretion of the Company’s Vice President & Chief Human Resources Officer. As used herein, the term “Vice President & Chief Human Resources Officer” shall include any person serving as the officer of the Company principally responsible for the Company’s human resource or personnel functions.

 

2.

ELIGIBLE EMPLOYEES

“Eligible employee” means a person in an employee-employer relationship with the Employer who is classified by the Employer as either a regular full-time employee or a regular part-time employee, but excluding (i) any employee covered by an agreement with the Employer which provides for the payment of severance or salary continuation (whether such terms are used or not in such agreement) in the event of the termination of the employment of the employee, (ii) any independent contractor, (iii) any consultant, (iv) any person performing services for the Employer under an independent contractor or consultant agreement, purchase order, supplier agreement or any other form of agreement which the Employer enters into for services, (iv) any “leased employee” as defined in Section 414(n) of the Internal Revenue Code, (vi) any contract employee, temporary employee, or  any employee classified by the

 

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Employer other than as a regular full-time employee or regular part-time employee, or (vii) any employee covered by a collective bargaining agreement unless such collective bargaining agreement provides for their coverage under the Plan. For all purposes of the Plan, “regular part-time employee” means an employee regularly scheduled to work less than thirty (30) hours per week.

 

3.

CONDITIONS OF INELIGIBILITY

An otherwise eligible employee shall not be eligible for severance pay under the Plan if:

 

 

(a)

an eligible employee ceases to be an eligible employee as defined in the Plan;

 

 

(b)

the eligible employee’s employment with the Employer terminates by reason of death, conduct leading to immediate termination or discharge for good reason, as determined in the sole discretion of the Company’s Vice President & Chief Human Resources Officer;

 

 

(c)

the eligible employee’s employment with the Employer terminates due to retirement, resignation, job abandonment, or failure to complete three (3) months of employment;

 

 

(d)

employment with the Employer is involuntarily terminated after the eligible employee refuses a position at the same Employer location at which the eligible employee is then employed or some other location of the Company or any other Employer provided that such position (i) is located within fifty (50) miles from the Employer location at which the eligible employee is then employed and (ii) pays similar base pay (i.e., the current base pay level or a greater base pay level or within ten percent (10%) of the current base pay level if the eligible employee is changed to a lesser base pay level);

 

 

(e)

the eligible employee is employed in an Employer operation, facility, business segment or part thereof which is sold, leased or otherwise transferred. In each such situation, a severance arrangement, if any, may be provided in the sole discretion of the Vice President & Chief Human Resources Officer of the Company;

 

 

(f)

the eligible employee is entitled to a benefit from a disability benefit plan sponsored by the Company;

 

 

(g)

the eligible employee remains on an authorized leave of absence, provided however, that an eligible employee who returns from an authorized leave of absence of three (3) months or less and who cannot be placed in employment with the Employer shall be eligible for severance pay under the Plan;

 

 

(h)

the eligible employee leaves employment with the Employer prior to the date authorized by the Employer;

 

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(i)

the eligible employee’s employment with the Employer is terminated under the terms of any form of group reorganization/restructuring benefit plan or program sponsored by the Employer; or

 

 

(j)

the Plan is terminated.

The foregoing list of conditions is intended to be illustrative and may not be all inclusive; the Plan Administrator will determine in the Plan Administrator’s sole discretion whether an eligible employee is eligible for severance pay under the Plan.

 

4.

SEVERANCE PAY

In exchange for providing the Company with a valid Waiver and General Release Agreement, an employee who is eligible for severance pay under the Plan will receive severance pay in accordance with the following table; provided that in no event shall the amount of severance pay payable to any employee exceed 52 weeks of pay:

 

Eligible Employee’s Complete Years of Service

  

Weeks of Severance Pay

At least three (3) months, but less than three (3) years

  

Two (2) weeks of pay

At least three (3) years, but less than five (5) years

  

One (1) week of pay for each year of service

At least five (5) years, but less than ten (10) years

  

One and one-half (1 1/2) weeks of pay for each year of service

Ten (10) or more years

  

Two (2) weeks of pay for each year of service

An eligible employee’s “years of service” for all purposes of the Plan shall be determined from the eligible employee’s last date of hire, including the date of hire of the employee by a previous employer that was acquired by the Company, in either case as determined in accordance with the Employer’s personnel records, and equal to the number of whole years of service between such date and the date of the employee’s termination of employment.

For all purposes of the Plan, (i) a “week of pay” for a regular full-time or regular part-time salaried eligible employee shall be determined by using his/her regular base salary compensation rate on his/her date of termination of employment with the Employer, and (ii) a “week of pay” for a regular full-time or regular part-time hourly paid eligible employee shall be determined by using his/her hourly pay rate on his/her date of termination of employment with the Employer multiplied times his/her regularly scheduled number of work hours per week in accordance with the records of the Human Resources Department.

The Vice President & Chief Human Resources Officer of the Company may, in his/her sole discretion, in writing, enhance the amount of severance pay which an eligible employee is eligible to receive over the amount of severance pay described above and/or make available one or more forms of supplemental severance benefit.

 

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The consideration for the voluntary Waiver and General Release Agreement shall be the severance pay (and, if applicable, any enhancement thereto and/or any supplemental severance benefit) which the eligible employee would otherwise not be eligible to receive.

 

5.

PAYMENT OF SEVERANCE PAY

Severance pay generally will be paid in a lump sum within 60 days after the eligible employee’s date of termination of employment; provided that the seven (7) day revocation period for a signed Waiver and General Release Agreement has passed. The Employer reserves the right in its sole discretion to pay severance pay in accordance with the Employer’s regular payroll payment schedule beginning within 60 days after the eligible employee’s date of termination of employment and payable only if the seven (7) day revocation period for a signed Waiver and General Release Agreement has passed; provided that such discretion shall not apply to any portion of severance pay that would be considered deferred compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). All legally required taxes and any sums owing to the Employer shall be deducted from Plan severance pay payments.

In the event that an eligible employee who is receiving payment of severance pay under the Plan is reemployed by an Employer, the payment of severance pay under the Plan shall cease as of the date his/her reemployment begins. Also, if an eligible employee has received his/her severance pay in one lump sum and is reemployed by an Employer during a period of time during which he/she would have been receiving severance pay if paid to him/her in installments, he/she shall be required to repay to the Employer that portion of the lump sum payment attributable to the period of time from the date his/her reemployment begins to the date he/she would have received his/her last installment payment of severance pay.

 

6.

WAIVER AND RELEASE AGREEMENT

In order to receive the severance pay (and, if applicable, any enhancement to severance pay and/or any supplemental severance benefit) available under the Plan, an eligible employee must submit a signed Waiver and General Release Agreement form to the Plan Administrator on or within forty-five (45) days of his/her date of termination of employment. The required Waiver and Release Agreement shall be substantially in the form attached hereto as Attachment I. An eligible employee may revoke his/her signed Waiver and Release Agreement within seven (7) days of his/her signing the Waiver and General Release Agreement.

Any such revocation must be made in writing and must be received by the Plan Administrator within such seven (7) day period. An eligible employee who timely revokes his/her Waiver and General Release Agreement shall not be eligible to receive any severance pay under the Plan. An eligible employee who timely submits a signed Waiver and General Release Agreement form and who does not exercise his/her right of revocation shall be eligible to receive severance pay under the Plan.

Eligible employees shall be advised to contact their personal attorney at their own expense to review the Waiver and General Release Agreement form if they so desire.

 

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7.

PLAN ADMINISTRATION

The Company’s Vice President & Chief Human Resources Officer shall serve as the “Plan Administrator” of the Plan and the “named fiduciary” within the meaning of such terms as defined in ERISA. The Plan Administrator shall have the discretionary authority to make final determinations of eligibility for Plan benefits and to construe the terms of the Plan, including the making of factual determinations. The decisions of the Plan Administrator shall be final and conclusive with respect to all questions concerning the administration of the Plan. The Plan Administrator may delegate to other persons responsibilities for performing certain of the duties of the Plan Administrator under the terms of the Plan and may seek such expert advice as the Plan Administrator deems reasonably necessary with respect to the Plan. The Plan Administrator shall be entitled to rely upon the information and advice furnished by such delegates and experts, unless actually knowing such information and advice to be inaccurate or unlawful.

The Plan Administrator shall establish and maintain a reasonable claims procedure, including a procedure for appeal of denied claims. In no event shall an eligible employee or any other person be entitled to challenge a decision of the Plan Administrator in court or in any other administrative proceeding unless and until the claim and appeals procedures established under the Plan have been complied with and exhausted.

In the event of a group termination, as determined in the sole discretion of the Plan Administrator, the Plan Administrator or its designee shall furnish affected eligible employees with such additional information as may be required by law.

 

8.

AMENDMENT/TERMINATION/VESTING

Eligible employees do not have any vested right to severance pay under the Plan and Arthur J. Gallagher & Co. (Illinois) reserves the right in its sole discretion to amend or terminate the Plan at any time, retroactively or otherwise, either by resolution of its Board of Directors or in a writing signed by the President or Chief Executive Officer of Arthur J. Gallagher & Co. (Illinois).

 

9.

NO ASSIGNMENT

Severance pay payable under the Plan shall not be subject to anticipation, alienation, pledge, sale, transfer, assignment, garnishment, attachment, execution, encumbrance, levy, lien, or charge, and any attempt to cause such severance pay to be so subjected shall not be recognized, except to the extent required by law.

 

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10.

CONFIDENTIAL INFORMATION

Eligible employees may have access to trade secrets and other confidential and proprietary information (hereinafter “Confidential Information”) with regard to the business of the Employer. Confidential Information includes without limitation, trade secrets, financial results and other information relating to the Employer’s practices in human resources, personnel, including salary programs, accounting, marketing, advertising, promotion, selling and distributing, price lists, customer lists, and research. Recognizing that the disclosure or improper use of such Confidential Information will cause serious and irreparable injury to the Employer, eligible employees with such access acknowledge that (i) they will not at any time, directly or indirectly, disclose Confidential Information to any third party or otherwise use such Confidential Information for their own benefit or the benefit of others, (ii) payment of severance pay under the Plan shall cease if an eligible employee discloses or improperly uses such Confidential Information, and (iii) retention of severance pay under the Plan is conditioned upon the eligible employee not disclosing or improperly using such Confidential Information.

 

11.

RECOVERY OF PAYMENTS MADE BY MISTAKE

An eligible employee shall be required to return to the Employer any severance pay payment, or portion thereof, made by a mistake of fact or law.

 

12.

REPRESENTATIONS CONTRARY TO THE PLAN

No employee, officer, or director of the Company or any other Employer has the authority to alter, vary, or modify the terms of the Plan except by means of an authorized written amendment to the Plan. No verbal or written representations contrary to the terms of the Plan and its written amendments shall be binding upon the Plan, the Plan Administrator, the Company, or any other Employer.

 

13.

NO EMPLOYMENT RIGHTS

The Plan shall not confer employment rights upon any person. No person shall be entitled, by virtue of the Plan, to remain in the employ of the Employer and nothing in the Plan shall restrict the right of the Employer to terminate the employment of any eligible employee or other person at any time.

 

14.

PLAN FUNDING

No eligible employee shall acquire by reason of the Plan any right in or title to any assets, funds, or property of the Company or any other Employer. Any severance pay benefits which become payable under the Plan are unfunded obligations of the Employer and shall be paid from the general assets of the Employer. No employee, officer, director or agent of the Company or any other Employer guarantees in any manner the payment of Plan severance pay.

 

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15.

APPLICABLE LAW

The Plan shall be governed and construed in accordance with ERISA and in the event that any reference shall be made to State law, the internal laws of the State of Illinois shall apply.

 

16.

SEVERABILITY

If any provision of the Plan is found, held or deemed by a court of competent jurisdiction to be void, unlawful or unenforceable under any applicable statute or other controlling law, the remainder of the Plan shall continue in full force and effect.

 

17.

PLAN YEAR

The ERISA plan year of the Plan shall be the twelve month period commencing on January 1 of each year.

 

18.

MANDATED PAYMENTS

The severance pay and, if applicable, any supplemental severance benefit, available under the Plan are the maximum made available by an Employer in the event of involuntary termination of employment. To the extent that a federal, State or local law may mandate an Employer to make a payment to an eligible employee because of involuntary termination of employment or in accordance with a plant closing law, the severance pay and, if applicable, any supplemental severance benefit, available under the Plan may, in the sole discretion of the Plan Administrator, be reduced by the amount of such mandated payment.

 

19.

MISCELLANEOUS PROVISIONS

All Employer property (including, but not limited to, computers and computer related equipment, Confidential Information, keys, credit cards, documents and records, identification cards, equipment, car/mobile telephones, parking stickers, and Company cars) must be returned by an eligible employee as of his/her date of termination of employment with the Employer in order for such eligible employee to commence receiving severance pay under the Plan.

All pay and other benefits (except Plan severance pay) payable to an eligible employee as of his/her date of termination of employment with the Employer according to the established policies, plans, and procedures of the Employer shall be paid in accordance with the terms of those established policies, plans, and procedures. In addition, any benefit continuation or conversion rights which an eligible employee has as of his/her date of termination of employment with the Employer according to the established policies, plans, and procedures of the Employer shall be made available to him/her.

 

20.

SECTION 409A

The payments pursuant to this Plan are intended to be exempt from Section 409A of the Code, to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purpose each payment under the Plan shall be considered a separate payment. All references in the Plan to an employee’s “termination of employment” shall be deemed to refer to such employee’s “separation from

 

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service,” within the meaning of Section 409A of the Code. Notwithstanding any other provision in the Plan, if an employee is a “specified employee,” as defined in Section 409A of the Code, as of the date of the employee’s separation from service, then to the extent any amount payable under this Plan (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon the employee’s separation from service and (iii) under the terms of the Plan would be payable prior to the six-month anniversary of the employee’s separation from service, such payment shall be delayed until the earlier to occur of (a) the six-month anniversary of the separation from service or (b) the date of the employee’s death.

 

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IN WITNESS WHEREOF, this Severance Plan (effective September 15, 1997, as amended and restated effective January 1, 2009) has been executed the 31st day of December, 2008.

 

ARTHUR J. GALLAGHER & CO. (ILLINOIS)

By

 

/s/ J. Patrick Gallagher

 

J. Patrick Gallagher, Jr.

 

President

 

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EXHIBIT 10.14
 
                         "CHANGE IN CONTROL" AGREEMENT
 
 
     THIS AGREEMENT is made between Arthur J. Gallagher & Co., a Delaware
corporation (the "Company"), and ________________________ (the "Executive"),
dated this 7th day of October, 1998.
 
                                WITNESSETH THAT:
 
     WHEREAS, the Company wishes to attract and retain well-qualified executive
personnel and to assure both itself and the Executive of continuity of
management in the event of any actual or threatened change in control of the
Company;
 
     NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
 
1.   Change in Control.   A "change in control of the Company" shall be deemed
     to have occurred if: (a) any person or group, as defined in Sections 13(d)
     and 14(d)(2) of the Securities Exchange Act of 1934, 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 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.
 
2.   Termination.   "Termination" shall mean either (a) termination by the
     Company of the employment of the Executive with the Company for any reason
     other than death, physical or mental incapacity, or cause (as defined
     below) within 24 months following a Change in Control of the Company, or
     (b) resignation of the Executive within 24 months following a Change in
     Control of the Company upon the occurrence of any of the following events:
 
     (i)    a material change in the nature or scope of the Executive's
            authorities, powers, functions, or duties;
 
     (ii)   a reduction in Executive's total compensation;
 
     (iii)  any relocation of Executive's principal place of employment more
            than 35 miles from Executive's location immediately prior to the
            change in control;
 
     (iv)   the breach by the Company of any other provision of this Agreement;
            or
 
     (v)    a good faith determination by the Executive that, as a result of a
            change in control of the Company Executive's position is materially
            affected so that Executive is unable to exercise the authorities,
            powers, functions or duties attached to Executive's position.
<PAGE>
 
     "Cause" means gross misconduct or willful and material breach of this
     Agreement by the Executive.  No act, or failure to act, on the Executive's
     part shall be deemed "willful" unless done, or omitted to be done, by the
     Executive not in good faith and without reasonable belief that the action
     or omission was in the best interest of the Company.
 
3.   Severance and Benefit Payments.
 
     a.   In the event of termination of the Executive as defined in Section 2
          hereof, the Company shall pay the Executive a lump-sum severance
          allowance equal to salary and bonus payments for a 24 calendar month
          period calculated on the basis of a salary rate which shall not be
          less than Executive's annual salary immediately prior to termination,
          or if greater, not less than Executive's annual salary immediately
          prior to the change in control of the Company and an annual bonus
          amount which shall not be less than the Executive's annual bonus
          immediately prior to termination, or if greater, not less than
          Executive's bonus immediately prior to the change of control of the
          Company. The lump-sum severance allowance shall not be adjusted on a
          present value basis.
 
     b.   The amount of the severance allowance payment described in this 
          Section 3 shall be determined and such payment shall be made as soon
          as it is reasonably practicable but in no event later than 7 days
          after the date of such termination.
 
     c.   The severance allowance payment to be provided pursuant to this 
          Section 3 shall be in addition to, and shall not be reduced by, any
          other amounts or benefits provided by separate agreement with the
          Executive, or plan or arrangement of the Company or its subsidiaries,
          unless specifically stipulated in an agreement which constitutes an
          amendment to this Agreement.
 
     d.   In the event of termination of Executive as defined in Section 2 
          hereof, with respect to each welfare benefit plan, including, without
          limitation, medical, dental, life and disability insurance plans, for
          the period beginning on Executive's termination and ending on the
          earlier of (i) two years following Executive's termination, or (ii)
          the date Executive becomes covered by a welfare benefit plan or
          program maintained by an entity other than the Company which provides
          coverage or benefits at least equal, in all respects, to such welfare
          benefit plan, Executive shall continue to participate in such welfare
          benefit plan on the same basis and at the same cost to Executive as
          was the case immediately prior to the Change in Control (or, if more
          favorable to Executive, as was the case at any time thereafter), or,
          if any benefit or coverage cannot be provided under a welfare benefit
          plan because of applicable law or contractual provisions, the Company
          shall provide Executive with substantially similar benefits and
          coverage for such period. Immediately following the expiration of the
          continuation period required by the preceding sentence, Executive
          shall be entitled to continued group health benefit plan coverage (so-
          called "COBRA coverage") in accordance with Section 4980B of the
          Internal Revenue Code of 1986, as amended, (the "Code"), it being
          intended that COBRA coverage shall be consecutive to the benefits and
          coverage provided for in the preceding sentence. Executive's
          eligibility for, and premium contribution level, under each welfare
          benefit plan and any similar or successor plans or programs maintained
          or contributed to by the Company, shall be determined by adding two
          years to Executive's age and years of service at Executive's
          termination.
<PAGE>
 
     (e)  In the event of the termination of Executive as defined in Section 2
          hereof, the Company shall pay to Executive any unpaid salary or other
          compensation of any kind earned with respect to any period prior to
          Executive's termination (including a proportionate share of any bonus
          for a part of a year in which termination as defined in Section 2
          hereof occurs) and a lump sum cash payment for accumulated but unused
          vacation earned through Executive's termination.
 
4.   Make-Whole Payments.
 
     a.   Anything in this Agreement to the contrary notwithstanding, in the 
          event that any payment or distribution by or on behalf of the Company
          to or for the benefit of Executive (whether paid or payable or
          distributed to distributable pursuant to the terms of this Agreement
          or otherwise, but determined without regard to any additional payments
          required under this Section 4) (the "Payments") is determined to be an
          "excess parachute payment" pursuant to Section 280G of the Code or any
          successor or substitute provision of the Code, with the effect that
          Executive is liable for the payment of the excise tax described in
          Code Section 4999 or any successor or substitute provision of the
          Code, or any interest or penalties are incurred by Executive with
          respect to such Payments (such excise tax, together with any such
          interest and penalties, are hereinafter collectively referred to as
          the "Excise Tax"), then Executive shall be entitled to receive an
          additional payment (the "Gross-Up Payment") in an amount such that
          after payment by Executive of all taxes imposed upon the Gross-Up
          Payment, including, without limitation, federal, state, local or other
          income taxes, FICA taxes, and additional Excise Tax (and any interest
          and penalties imposed with respect to such taxes), Executive retains a
          portion of the Gross-Up Payment equal to the Excise Tax imposed upon
          the Payments.
 
     b.   Subject to the provisions of Section 4(c), all determinations required
          to be made under this Section 4, including whether and when a Gross-Up
          Payment is required and the amount of such Gross-Up Payment and the
          assumptions to be utilized in arriving at such determination, shall be
          made by the public accounting firm that serves as the Company's
          auditors (the "Accounting Firm"), which shall provide detailed
          supporting calculations both to the company and Executive within 15
          business days of the receipt of notice from the Company or Executive
          that there have been Payments, or such earlier time as is requested by
          the Company. In the event that the Accounting Firm is serving as
          accountant or auditor for the individual, entity or group effecting
          the Change in Control, Executive shall designate another nationally
          recognized accounting firm to make the determinations required
          hereunder (which accounting firm shall then be referred to as the
          Accounting Firm hereunder). All fees and expenses of the Accounting
          Firm shall be borne solely by the Company. Any Gross-Up Payment, as
          determined pursuant to this Section 4, shall be paid by the Company to
          Executive within five days after the receipt by the Company and
          Executive of the Accounting Firm's determination. If the Accounting
          Firm determines that no Excise Tax is payable by Executive, it shall
          furnish Executive with a written opinion that failure to report the
          Excise Tax on Executive's applicable federal income tax return would
          not result in the imposition of a negligence or similar penalty. Any
          determination by the Accounting Firm shall be binding upon the Company
          and Executive, except as provided in paragraph (c) below.
 
     c.   As a result of the uncertainty in the application of Section 4999 of 
          the Code at the time of the initial determination by the Accounting
          Firm hereunder, it is possible that 
<PAGE>
 
          the Internal Revenue Service or another agency will claim that a
          greater Excise Tax is due, and thus a greater amount of Gross-Up
          Payment should have been made by the Company than that determined
          pursuant to paragraph (b) above (an "Underpayment"). In the event that
          Executive is required to make a payment of any such Excise Tax, the
          Accounting Firm shall determine the amount of the Underpayment that
          has occurred, if any, and such Underpayment shall be promptly paid by
          the Company to or for the benefit of the Executive. Executive shall
          notify the Company in writing of any claim by the Internal Revenue
          Service or other agency that, if successful, would require the payment
          by the company of the Gross-Up Payment or an Underpayment.
 
5.   Mitigation and Set Off. The Executive shall not be required to mitigate the
     amount of any payment provided for in this Agreement by seeking other
     employment or otherwise.  The Company shall not be entitled to set off
     against the amounts payable to the Executive under this Agreement any
     amounts owed to the Company by the Executive, any amounts earned by the
     Executive in other employment after termination of Executive's employment
     with the Company, or any amounts which might have been earned by the
     Executive in other employment had Executive sought such other employment.
 
6.   Other Agreements.  The Company and Executive are parties to an Executive
     Agreement which both parties hereby reconfirm and acknowledge.  Such
     Executive Agreement is not in any way modified, superseded or amended by
     the execution and delivery of this Agreement.
 
7.   Arbitration of All Disputes. Any controversy or claim arising out of or
     relating to this Agreement or the breach thereof, except with respect to
     Section 4, shall be settled by arbitration in the City of Chicago in
     accordance with the laws of the State of Illinois by three arbitrators
     appointed by the parties.  If the parties cannot agree on the appointment,
     one arbitrator shall be appointed by the Company and one by the Executive,
     and the third shall be appointed by the first two arbitrators.  If the
     first two arbitrators cannot agree on the appointment of a third
     arbitrator, then the third arbitrator shall be appointed by the Chief Judge
     of the United States Court of Appeals for the Seventh Circuit.  The
     arbitration shall be conducted in accordance with the rules of the American
     Arbitration Association, except with respect to the selection of
     arbitrators which shall be as provided in this Section 7. Judgment upon the
     award rendered by the arbitrators may be entered in any court having
     jurisdiction thereof.  In the event that it shall be necessary or desirable
     for the Executive to retain legal counsel or incur other costs and expenses
     in connection with enforcement of Executive's rights under this Agreement,
     Executive shall be entitled to recover from the Company Executive's
     reasonable attorneys' fees and costs and expenses in connection with
     enforcement of Executive's rights (including the enforcement of any
     arbitration award in court).  Payment shall be made to the Executive by the
     Company at the time these attorneys' fees and costs and expenses are
     incurred by the Executive.  If, however, the arbitrators should later
     determine that under the circumstances the Executive could have had no
     reasonable expectation of prevailing on the merits at the time Executive
     initiated the arbitration based on the information then available to
     Executive, Executive shall repay any such payments to the Company in
     accordance with the order of the arbitrators.  Any award of the arbitrators
     shall include interest at a rate or rates considered just under the
     circumstances by the arbitrators.
 
8.   Notices.  Any notices, requests, demands, and other communications provided
     for by this Agreement shall be sufficient if in writing and if sent by
     registered or certified mail to the 
<PAGE>
 
     Executive at the last address Executive has filed in writing with the
     Company or, in the case of the Company, at its principal executive offices.
 
9.   Non-Alienation.  The Executive shall not have any right to pledge,
     hypothecate, anticipate or in any way create a lien upon any amounts
     provided under this Agreement; and no benefits payable hereunder shall be
     assignable in anticipation of payment either by voluntary or involuntary
     acts, or by operation of law.  Nothing in this paragraph shall limit the
     Executive's rights or powers which Executive's executor or administrator
     would otherwise have.
 
10.  Governing Law.  The Agreement shall be construed and enforced according to
     the Employee Retirement Income Security Act of 1974 ("ERISA"), and the laws
     of the State of Illinois, other than its laws respecting choice of law, to
     the extent not pre-empted by ERISA.
 
11.  Amendment.  This Agreement may be amended or canceled by mutual agreement 
     of the parties in writing without the consent of any other person and, so
     long as the Executive lives, no person, other than the parties hereto,
     shall have any rights under or interest in this Agreement or the subject
     matter hereof.
 
12.  Term.  This Agreement shall terminate when the Executive has left the
     employ of the Company for any reason prior to a Change in Control of the
     Company.
 
13.  Successors to the Company.  Except as otherwise provided herein, this
     Agreement shall be binding upon and inure to the benefit of the Company and
     any successor of the Company.
 
14.  Severability.  In the event that any provision or portion of this
     Agreement shall be determined to be invalid or unenforceable for any
     reason, the remaining provisions of this Agreement shall be unaffected
     thereby and shall remain in full force and effect.
 
     IN WITNESS WHEREOF, the Executive has hereunto set Executive's hand and,
pursuant to proper authorization, the Company has caused these presents to be
executed in its name on its behalf by an appropriate corporate officer, and its
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary, all as of the day and year first above written.
 
THE EXECUTIVE                       ARTHUR J. GALLAGHER & CO.
 
 
_____________________________       _________________________________
 
 
                                    Attest:
 
SEAL

 

 

 

 

EX-10.14.1 3 dex10141.htm FORM OF FIRST AMENDMENT TO CHANGE IN CONTROL AGREEMENT

Exhibit 10.14.1

FIRST AMENDMENT TO “CHANGE IN CONTROL” AGREEMENT

This Amendment (the “Amendment”) is made and entered into as of this 5th day of December, 2008 by and between Arthur J. Gallagher & Co., a Delaware corporation (the “Company”), and                      (the “Executive”) as an amendment to the “Change in Control” Agreement between the Company and the Executive, dated as of                      (the “Agreement”). This Amendment shall be effective January 1, 2009.

1. Section 3(e) of the Agreement is hereby amended to read as follows:

“(e) In the event of the termination of Executive’s employment as defined in Section 2 hereof, the Company shall pay to Executive (i) any unpaid salary or other compensation of any kind earned with respect to any period prior to Executive’s termination (including a proportionate share of any bonus for a part of a year in which the termination, as defined in Section 2 hereof, occurs), which shall be paid at the same time such amounts would have been payable had Executive continued in employment with the Company, and (ii) a lump sum cash payment for accumulated but unused vacation earned through Executive’s termination, payable as soon as it is reasonably practicable, but in no event later than seven days after the date of such termination.”

2. Section 4(b) of the Agreement is amended by deleting the fourth sentence therein, and inserting the following sentence in lieu thereof:

“Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by the Company to Executive within five days after the receipt by the Company and Executive of the Accounting Firm’s determination, but in no event later than the last day of the calendar year immediately following the calendar year in which the related tax is remitted to the applicable taxing authority.”

3. The Agreement is hereby amended by adding a new Section 15 thereto, to read as follows:

 

 

“15.

Section 409A.

 

 

(a)

This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be interpreted and construed consistently with such intent. The payments to Executive pursuant to Section 3 of this Agreement are further intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4). In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible, provided that the Company shall not be responsible for any 409A Penalties that cannot be avoided.


 

(b)

To the extent any amounts under this Agreement are payable by reference to Executive’s “termination of employment,” such term shall be deemed to refer to Executive’s “separation from service,” within the meaning of Section 409A of the Code.

 

 

(c)

If Executive is entitled to a severance allowance payment pursuant to Section 3 hereof due to the termination of Executive’s employment following a Change in Control that does not constitute a “change in control event,” within the meaning of Section 409A of the Code, then Executive shall continue to be entitled to such severance allowance payment, but such severance allowance payment shall not be paid in a lump sum payment, but instead shall be paid in equal installments on the Company’s regularly scheduled payroll dates over the 24-month period beginning with the first payroll date occurring after the date of the Executive’s termination.

 

 

(d)

Notwithstanding any other provision in this Agreement, if Executive is a “specified employee,” as defined in Section 409A of the Code, as of the date of Executive’s separation from service, then to the extent any amount payable under this Agreement (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon Executive’s separation from service and (iii) under the terms of this Agreement would be payable prior to the six-month anniversary of Executive’s separation from service, such payment shall be delayed until the earlier to occur of (A) the six-month anniversary of the separation from service or (B) the date of Executive’s death.

 

 

(e)

Any reimbursement or advancement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to Executive within 30 days following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense. Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year. The right to reimbursement or in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.”

 

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IN WITNESS WHEREOF, the Company has caused this Amendment to be signed by its duly authorized representative and the Executive has signed this Amendment as of the day and year first above written.

 

Arthur J. Gallagher & Co.

By:

 

 

Name:

 

Walter D. Bay

Title:

 

Vice President, General Counsel & Secretary

 

Executive

 

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