<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ARTHUR J. GALLAGHER & CO.
(Name of Registrant as Specified In Its Charter)
ARTHUR J. GALLAGHER & CO.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
--------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
LOGO
ARTHUR J. GALLAGHER & CO.
THE GALLAGHER CENTRE
TWO PIERCE PLACE
ITASCA, ILLINOIS 60143-3141
March 28, 1995
Dear Stockholder:
Your Company's Annual Meeting of Stockholders will be held on Tuesday, May 9,
1995, at 10:00 a.m., Chicago Time, at The Gallagher Centre, Two Pierce Place,
Second Floor, Itasca, Illinois. Coffee and rolls will be served prior to the
meeting.
The formal Notice of Annual Meeting of Stockholders and Proxy Statement
accompanying this letter describe the business to be acted on at the meeting.
In addition to the formalities, I will report on the business and progress of
your Company during 1994 and you will have an opportunity to ask questions of
our directors and officers.
The continued interest of our stockholders in Arthur J. Gallagher & Co. has
been very gratifying and we are pleased that in the past so many of you have
exercised your right to vote your shares. We hope that you continue to do so.
Whether or not you plan to attend, please mark, sign, date and return the
accompanying proxy card as soon as possible. The enclosed envelope requires no
postage if mailed in the United States. If you attend the meeting, you may
revoke your proxy if you wish and vote personally.
Cordially,
ROBERT E. GALLAGHER
Chairman of the Board
<PAGE>
ARTHUR J. GALLAGHER & CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 1995
To the Stockholders of
Arthur J. Gallagher & Co.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Arthur J.
Gallagher & Co. (the "Company") will be held Tuesday, May 9, 1995, at 10:00
a.m., Chicago Time, at The Gallagher Centre, Two Pierce Place, Second Floor,
Itasca, Illinois for the following purposes:
1. To elect Four Class II directors;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
for the fiscal year ending December 31, 1995; and
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on March 13, 1995 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are urged to mark,
date and sign the enclosed proxy and return it promptly so your vote can be
recorded. If you are present at the meeting and desire to do so, you may revoke
your proxy and vote in person.
Date: March 28, 1995
By Order of the Board of Directors
CARL E. FASIG
Secretary
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
IN PERSON.
<PAGE>
ARTHUR J. GALLAGHER & CO.
THE GALLAGHER CENTRE
TWO PIERCE PLACE
ITASCA, ILLINOIS 60143-3141
PROXY STATEMENT
GENERAL INFORMATION
USE OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Arthur J. Gallagher & Co. (the "Company") of proxies to
be voted at the Annual Meeting of Stockholders to be held on Tuesday, May 9,
1995, in accordance with the foregoing notice. The Proxy Statement and
accompanying proxy are being mailed to stockholders on or about March 28, 1995.
Any proxy may be revoked by the person giving it at any time before it is
voted by delivering to the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date. Shares represented by
a proxy, properly executed and returned to the Company and not revoked, will be
voted at the Annual Meeting.
Shares will be voted in accordance with the directions of the stockholder as
specified on the proxy. In the absence of directions, the proxy will be voted
FOR the election of the Class II directors named as the nominees in this Proxy
Statement; and FOR the ratification of the appointment of Ernst & Young LLP as
the Company's independent auditors for the fiscal year ending December 31,
1995. Any other matters that may properly come before the meeting will be acted
upon by the persons named in the accompanying proxy in accordance with their
discretion.
RECORD DATE AND VOTING SECURITIES
The close of business on March 13, 1995 has been fixed as the record date
(the "Record Date") for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof. As of the Record
Date, the Company had 15,014,793 shares of Common Stock outstanding and
entitled to vote. Each share of Common Stock is entitled to one vote,
exercisable in person or by proxy. There are no other outstanding securities of
the Company entitled to vote, and there are no cumulative voting rights with
respect to the election of directors.
The presence, in person or by proxy, of a majority of the outstanding shares
of the Common Stock of the Company is necessary to constitute a quorum at the
Annual Meeting, and the affirmative vote of a majority of the shares present
and voting on each proposal is required for approval of each of the items,
other than the election of directors, submitted to the stockholders for their
consideration. Directors are elected by a plurality of the shares present and
voting. An automated system administered by the Company's transfer agent
tabulates the votes. Abstentions and broker non-votes are included in the
number of shares present and voting for the purpose of determining if a quorum
is present. Abstentions are also included in the tabulation of votes cast on
proposals presented to the stockholders but broker non-votes are not.
<PAGE>
EXPENSES OF SOLICITATION
All expenses of the solicitation of proxies will be paid by the Company.
Officers, directors and regular employees of the Company may also solicit
proxies by telephone, facsimile or in person.
PRINCIPAL HOLDERS OF SECURITIES
The following tabulation shows with respect to any person who is known to be
the beneficial owner as of December 31, 1994 of more than 5% of the Company's
Common Stock, par value $1.00 per share, which is its only class of issued and
outstanding capital stock, (i) the total number of shares of Common Stock
beneficially owned as of such date; and (ii) the percent of Common Stock so
owned as of the same date.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT & NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
------------------- -------------------- ------------
<S> <C> <C>
Putnam Investments, Inc. ..................... 1,347,566(1) 9.0%
One Post Office Square
Boston, Massachusetts 02109
The Capital Group Companies, Inc. ............ 926,770(2) 6.2%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
The following tabulation shows with respect to each of the directors of the
Company, the executive officers named in the Summary Compensation Table, and
all directors and executive officers as a group, fourteen in number, (i) the
total number of shares of Common Stock beneficially owned as of March 13, 1995;
and (ii) the percent of Common Stock so owned as of the same date.
<TABLE>
<CAPTION>
NAME OF AMOUNT & NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(3) COMMON STOCK
---------------- ----------------------- ------------
<S> <C> <C>
Robert E. Gallagher....................... 705,904(4) 4.7%
John P. Gallagher......................... 587,246(5) 3.9%
T. Kimball Brooker........................ 10,000 *
John G. Campbell.......................... 25,685 *
Michael J. Cloherty....................... 93,902 *
J. Patrick Gallagher, Jr. ................ 152,406(6) 1.0%
Jack M. Greenberg......................... 16,030 *
Philip A. Marineau........................ 6,030 *
Walter F. McClure......................... 59,906 *
Gary M. Van der Voort..................... 107,326(7) *
James R. Wimmer........................... 18,030(8) *
All directors and executive officers as a
group (14 persons)....................... 1,944,739 12.7%
</TABLE>
--------
*Less than 1%
(1) Information obtained from a Schedule 13G dated February 7, 1995 filed with
the Securities and Exchange Commission by Putnam Investments, Inc. The
Company has been informed by Putnam Investments, Inc. that Putnam
Investments, Inc. (together with its parent corporation, Marsh & McLennan
Companies, Inc. and certain of its investment management subsidiaries) is
2
<PAGE>
considered the beneficial owner in the aggregate of 1,347,566 shares, or
9.0% of shares outstanding, of the Company's voting Common Stock.
(2) Information obtained from a Schedule 13G dated February 10, 1995, filed
with the Securities and Exchange Commission by The Capital Group Companies,
Inc. The Company has been informed by The Capital Group Companies, Inc. as
follows: "Capital Guardian Trust Company and Capital Research and
Management Company, operating subsidiaries of The Capital Group Companies,
Inc., exercised as of December 31, 1994, investment discretion with respect
to 424,770 and 502,000 shares, respectively, or a combined total of 6.18%
(sic) of [the Company's] outstanding stock which was owned by various
institutional investors."
(3) Calculated pursuant to Rule 13d-3(d) under the Securities Exchange Act of
1934. Unless otherwise stated in these notes, each person has sole voting
and investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options exercisable within
sixty days are deemed outstanding for the purpose of computing the number
and percentage owned by such person, but are not deemed outstanding for the
purpose of computing the percentage owned by each other person listed.
Includes shares which the listed beneficial owner has a right to acquire
within sixty days as follows: John G. Campbell, 10,300 shares; Michael J.
Cloherty, 23,500 shares; J. Patrick Gallagher, Jr., 21,500 shares; Jack M.
Greenberg, 14,030 shares; Philip A. Marineau, 6,030 shares; Walter F.
McClure, 42,000 shares; Gary M. Van der Voort, 55,000 shares; James R.
Wimmer, 14,030 shares; all directors and executive officers as a group (14
persons), 282,740 shares.
(4) Includes 75,000 shares held in trust for the benefit of Robert E.
Gallagher's grandchildren, 100,000 shares held by a limited partnership of
which Robert E. Gallagher and Isabel Gallagher, his wife, are the general
partners, and 100,000 shares held in trust for the benefit of Isabel
Gallagher.
(5) Includes 26,925 shares held by his wife, Mary C. Gallagher.
(6) Includes 31,220 shares held in trust for the benefit of his minor children
by his wife, Anne M. Gallagher, and another as trustees and 23,820 shares
held by his wife.
(7) Includes 3,600 shares held as custodian for the benefit of his children
under the Uniform Gift to Minors Act.
(8) Includes 4,000 shares held by his wife, Gertrude A. Wimmer.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of ten directors.
The directors are divided into three classes: four Class II directors have
terms expiring at the 1995 Annual Meeting; three Class III directors have terms
expiring in 1996; and three Class I directors have terms expiring in 1997. Each
class of directors is elected to three-year terms at sequential annual meetings
once every three years.
Set forth below is information concerning the nominees for election as Class
II directors as well as information concerning all other current directors. The
Board of Directors recommends a vote FOR the election of such nominees. The
persons named on the enclosed proxy card intend to vote the proxies solicited
hereby FOR all the nominees named below unless such authority is withheld. The
affirmative vote of the holders of a plurality of the shares of Common Stock
represented in person or by proxy is required to elect directors.
3
<PAGE>
If elected, each nominee for Class II director will serve until the 1998
annual election of directors or until his successor is elected and qualified,
or until his earlier death, resignation or removal. John G. Campbell, Robert E.
Gallagher, John P. Gallagher and Walter F. McClure are currently members of the
Board of Directors as Class II directors, each having been previously elected
by the stockholders. Messrs. Campbell, Robert E. Gallagher, John P. Gallagher,
and McClure are the nominees for re-election as Class II directors for three-
year terms. The enclosed proxy cannot be voted for more than four nominees.
Should any nominee be unavailable to serve or for good cause refuse to serve,
an event which the Board of Directors does not anticipate, the persons named in
the enclosed proxy intend to vote the proxies solicited hereby for the election
of such other nominee, if any, as they may select.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS AS
CLASS II DIRECTORS WITH TERMS EXPIRING IN 1998
<TABLE>
<CAPTION>
YEAR FIRST ELECTED DIRECTOR, BUSINESS
NAME AGE EXPERIENCE AND OTHER DIRECTORSHIPS
---- --- ----------------------------------------------------
<S> <C> <C>
John G. Campbell........ 57 Director since 1981; Vice President since 1978.
Robert E. Gallagher(1).. 72 Director since 1950; Chairman since 1990; Chief
Executive Officer from 1963 to 1994.
John P. Gallagher(1).... 67 Director since 1950; Executive Vice President since
1963; Vice Chairman since 1990.
Walter F. McClure....... 61 Director since 1981; Senior Vice President since
1993; Vice President from 1980 to 1993.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE AS
CLASS III DIRECTORS WITH TERMS EXPIRING IN 1996
Michael J. Cloherty..... 47 Director since 1982; Vice President--Finance since
1981.
Jack M. Greenberg....... 52 Director since 1985; Employed by McDonald's
Corporation since 1982, Vice Chairman since 1992 and
Chief Financial Officer since 1982; Director of
McDonald's Corporation and Harcourt General, Inc.
Philip A. Marineau...... 48 Director since 1991; Employed by The Quaker Oats
Company since 1972, President since 1993 and Chief
Operating Officer since 1992; Director of The Quaker
Oats Company.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE AS
CLASS I DIRECTORS WITH TERMS EXPIRING IN 1997
T. Kimball Brooker...... 55 Director since 1994; President, Barbara Oil Company
since 1989; Managing Director, Morgan Stanley & Co.,
Inc. from 1978 to 1988; Director of Zenith
Electronics Corporation.
J. Patrick Gallagher, 43 Director since 1986; Chief Executive Officer since
Jr.(1)................. 1995; President since 1990; Chief Operating Officer
from 1990 to 1994; Vice President--Operations from
1985 to 1990.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST ELECTED DIRECTOR, BUSINESS
NAME AGE EXPERIENCE AND OTHER DIRECTORSHIPS
---- --- ----------------------------------------------------
<S> <C> <C>
James R. Wimmer(2).... 66 Director since 1985; Partner, Lord, Bissell & Brook,
attorneys, from 1959 to 1992; General Counsel of
Commonwealth Industries Corporation from 1991 to
1993. Mr. Wimmer retired as a partner from Lord,
Bissell & Brook in February, 1992 and is presently
of counsel to that firm.
</TABLE>
--------
(1) Robert E. Gallagher and John P. Gallagher are brothers. John P. Gallagher
is the father of J. Patrick Gallagher, Jr.
(2) Lord, Bissell & Brook has served as outside counsel to the Company for over
twenty years.
BOARD OF DIRECTORS
The Company's Board of Directors has the responsibility to review the overall
operations of the Company. The Board members are kept informed of the Company's
results of operations and proposed plans and business objectives by the
Company's management. During 1994, the Board of Directors met six times. All of
the directors attended at least 75% of those meetings and meetings of the
committees on which they served. Included among the committees of the Board are
standing Nominating, Audit and Compensation Committees.
NOMINATING COMMITTEE
The Nominating Committee considers new nominees proposed for the Board of
Directors and will consider individuals whose names and qualifications are
furnished in writing to the Committee (in care of the Chairman at the Company's
principal office) by stockholders. Current members of the Nominating Committee
are Robert E. Gallagher (Chairman), T. Kimball Brooker and J. Patrick
Gallagher, Jr. The Committee met twice in 1994.
AUDIT COMMITTEE
The Audit Committee assists the Board in carrying out its responsibilities
for monitoring management's accounting for the Company's financial results and
for the timeliness and adequacy of the reporting of those results; discusses
and makes inquiry into the audits of the Company's books made internally and by
outside independent auditors, the Company's financial and accounting policies,
its internal controls and its financial reporting; and investigates and makes a
recommendation to the Board each year with respect to the appointment of
independent auditors for the following year. Current members of the Audit
Committee are James R. Wimmer (Chairman), T. Kimball Brooker, Jack M. Greenberg
and Philip A. Marineau. The Committee met three times in 1994.
COMPENSATION COMMITTEE
The Compensation Committee determines the salaries, bonuses and other
compensation and terms and conditions of employment of the executive officers
and certain key employees of the Company and makes recommendations to the Board
of Directors with respect to the Company's compensation plans and policies;
provided, however, that the Option Committee of the Board of Directors
administers the Company's stock option plans. Current members of the
Compensation
5
<PAGE>
Committee are J. Patrick Gallagher, Jr. (Chairman), T. Kimball Brooker, Robert
E. Gallagher, Jack M. Greenberg, Philip A. Marineau and James R. Wimmer. The
Committee met three times in 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. Patrick Gallagher, Jr. and Robert E. Gallagher are executive officers of
the Company and serve on the Compensation Committee. Both officers abstain from
discussion and voting on matters concerning their respective compensation.
James R. Wimmer, a director of the Company, is of counsel to Lord, Bissell &
Brook, a law firm which provides legal services to the Company.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934 that might incorporate filings, including this Proxy
Statement, in whole or in part, the following report and the Comparative
Performance Graph on page 9 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION
The Compensation Committee is responsible for determining the total
compensation and employment conditions of the Company's executive officers. In
determining the total 1994 compensation, the Compensation Committee generally
evaluated the executive's contribution to the overall success of the Company in
achieving the corporate goals set out below. These goals are equally weighted
in determining the executive's compensation.
Profit Goals--The immediate profit goals of the Company are expressed in
the annual budget. The effort of an individual executive in meeting or
exceeding the budget of his or her department or division is an important
criterion in the evaluation. Longer term profit goals, as measured against
the Company's Three Year Strategic Plan, are also considered in the
evaluation. In 1994, the executive officers of the Company generally met
their respective budgetary goals, and the 1994 pretax profit of the Company
increased 10% over 1993.
Business Growth--The Company considers its long term business growth to be
a critical factor in the continued success of the Company. Executives are
expected to support the Company's acquisition program, which seeks to
achieve growth by successfully integrating independent businesses into the
corporate structure. Similarly, establishment of operations in new
geographic areas, as well as the successful development and marketing of
new product lines, are considered necessary to the continued growth of the
Company and are included in the evaluation. In 1994, five businesses were
acquired and several new branch offices were opened, expanding the
Company's geographic presence. The development and marketing of new product
lines continued on a basis consistent with prior years. The Company
believes that these efforts had a direct impact on the 8% increase in total
revenues achieved in 1994 over 1993.
Human Resources--As a service business, the Company believes that its
employees are its greatest asset. Over 50% of the Company's expenses in
1994 were related to the compensation of its employees and related benefit
costs. The Company is committed to the successful hiring, training and
retaining of people who promote the growth, financial success and
management succession of the Company. An executive's ability to manage
these resources, as well as the attendant expenses, is a significant
criterion. In 1994, the Company's overall success in
6
<PAGE>
effectively managing its employees evidenced the commitment of the
Company's executive officers, as a group, to the corporate goal of
preserving and developing human resources. This was demonstrated by the
Company's ability to generate $108,000 in revenue per employee for 1994,
one of the highest figures in the industry.
Enhancement of shareholder value is the ultimate goal of the Company. The
Compensation Committee believes that its focus on specific corporate goals
should result in a strong stock price, improved earnings per share and greater
return on stockholders' equity. Earnings per share in 1994 increased by 21%
over 1993. The Company's Nonqualified Stock Option Plan represents a
significant portion of an executive officer's compensation and directly
reflects the Company's performance through its stock price. Option grants to
executive officers are determined by the Option Committee of the Board of
Directors and are generally based upon more subjective factors than those used
by the Compensation Committee. Robert E. Gallagher and John P. Gallagher serve
on the Option Committee and are thus disqualified from receiving any option
grants. The Option Committee considers the recommendations of the executive
officers of the Company, the responsibilities of each grantee, his past
performance and his anticipated future contribution to the Company.
The Company has a discretionary bonus pool for executive officers and key
employees, contingent upon satisfactory corporate growth and the attainment of
predetermined managerial goals. These pre-determined goals are extremely varied
and, in the case of the executive officers, are established by the individual
officer in conjunction with the Compensation Committee. The goals are too
diverse to generalize but typically include meeting or exceeding budgetary
guidelines and contribution to the Company's profitability. Attainment of these
goals in many cases may be determined by a subjective judgment of the
individual supervisor or, in the case of the executive officers, by the
Compensation Committee. The eligibility for participation in the bonus pool is
determined by the Board. Approximately 50 executive officers and key employees
are current participants.
Amendments adopted in 1993 to the Internal Revenue Code limit the
deductibility for federal income tax purposes of certain compensation payable
to top executive officers of publicly held corporations. Certain types of
compensation are excluded from the limitations. The Company believes that the
limitations are not applicable to stock options granted under its stock option
plans. With respect to awards under the Company's other incentive compensation
plans, the Company is considering whether to make changes to such plans so that
future awards will not be subject to the limitations on deductibility.
Executive officers participate in the Savings and Thrift Plan, Pension Plan
and Stock Option Plan, discussed below, as well as customary employee health
benefits and expense reimbursement in accordance with the Company's policy.
In 1994, the Committee reviewed a report prepared by the Company which
compared the compensation of the five most highly compensated executive
officers of the Company to the four publicly held competitors of the Company
included in the Comparative Performance Graph on Page 9. The Committee targets
the middle of its competitors' salary range for its executive officers'
compensation. This report indicated that the 1993 compensation of the Company's
five most highly compensated executive officers was in the low to middle range
when compared to its publicly-held competitors after making certain adjustments
for the size of the Company.
7
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of Robert E. Gallagher, the Company's Chief Executive
Officer in 1994, increased by $30,000 or approximately 11% from the total
compensation received in 1993. Prior to this 1994 increase, Mr. Gallagher had
not received a compensation increase since 1989. J. Patrick Gallagher, Jr., the
Company's President, was elected Chief Executive Officer by the Board of
Directors effective January 1, 1995, marking 1994 as the last year of Robert E.
Gallagher's tenure as Chief Executive Officer. While the Compensation Committee
believed that the Company's profitability as measured by earnings per share and
net pretax profit justified a much greater increase, Robert E. Gallagher
informed the Compensation Committee that he wished to limit his increase in
compensation to $30,000. The Compensation Committee honored his request. As
previously discussed, Robert E. Gallagher serves on the Option Committee of the
Company's Board of Directors and is precluded from, and has never received,
stock options under any of the Company's stock option plans.
Compensation Committee
J. Patrick Gallagher, Jr. (Chairman)
Robert E. Gallagher
T. Kimball Brooker
Jack M. Greenberg
Philip A. Marineau
James R. Wimmer
SUMMARY COMPENSATION TABLE
The following table presents information concerning compensation paid or set
aside by the Company and its subsidiaries on an accrual basis to or for the
benefit of the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company in each of the Company's last
three fiscal years.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
-------------- --------------------- ALL OTHER
SALARY BONUS SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#) ($)(1)
--------------------------- ---- ------- ------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
Robert E. Gallagher................... 1994 265,000 30,000 -- --
Chairman 1993 240,000 25,000 -- 1,250
1992 240,000 25,000 -- 2,182
John P. Gallagher..................... 1994 262,000 30,000 -- 1,500
Vice Chairman 1993 237,000 25,000 -- 2,249
1992 230,000 25,000 -- 2,182
J. Patrick Gallagher, Jr. ............ 1994 341,250 73,750 15,000 1,500
President and Chief Executive Officer 1993 325,000 40,500 35,000 2,249
1992 205,000 25,000 30,000 2,306
Michael J. Cloherty................... 1994 300,000 67,000 15,000 1,500
Vice President-Finance 1993 280,000 68,000 30,000 2,249
1992 230,000 25,000 20,000 2,182
Gary M. Van der Voort................. 1994 294,000 57,000 15,000 1,500
Vice President 1993 280,000 39,400 30,000 2,249
1992 200,000 25,000 25,000 2,182
</TABLE>
--------
(1) Indicates amounts contributed by the Company under the 401(k) feature of
the Company's Savings and Thrift Plan.
8
<PAGE>
The following graph demonstrates a five year comparison of cumulative total
returns for the Company, the S&P 500 and an Index of Peers comprised of the
Company, Alexander & Alexander, Hilb, Rogal and Hamilton, Marsh & McLennan, and
Poe & Brown. The comparison charts the performance of $100 invested in the
Company, the S&P 500 and the Index of Peers on December 31, 1989, with dividend
reinvestment.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARTHUR J. GALLAGHER & CO., S&P 500 INDEX AND PEER GROUP
<CAPTION>
Measurement Period S&P
(Fiscal Year Covered) AJG & CO. 500 INDEX PEER GROUP
------------------- --------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100 $100 $100
FYE 12/31/90 $ 97 $ 97 $ 90
FYE 12/31/91 $ 96 $126 $ 95
FYE 12/31/92 $124 $136 $117
FYE 12/31/93 $163 $150 $113
FYE 12/31/94 $152 $152 $114
</TABLE>
DIRECTORS' COMPENSATION
Directors who are officers of the Company receive compensation in their
capacities as such officers and receive no additional compensation for serving
as directors.
Non-employee directors, currently Messrs. Brooker, Greenberg, Marineau and
Wimmer, are eligible to receive compensation consisting of nonqualified stock
options. In addition, non-employee directors receive an annual retainer of
$20,000 per year or, in lieu of the cash retainer, an option to purchase shares
of the Company's Common Stock below market value, plus fees of $500 for
attendance at each Board meeting or committee meeting on a date other than a
Board meeting date. Non-employee directors are reimbursed for travel and
accommodation expenses incurred in attending Board or committee meetings. Non-
employee directors are not eligible for participation in any other compensation
plans of the Company.
In 1989, the Company's stockholders approved the adoption of the Company's
1989 Non-Employee Directors' Stock Option Plan (the "1989 Plan"), which was
subsequently amended in 1990, 1993 and 1994. The 1989 Plan currently provides
that non-employee directors are eligible to
9
<PAGE>
be granted nonqualified options to purchase a maximum of 106,000 shares of the
Company's Common Stock. The Plan encompasses options granted to non-employee
directors at the discretion of the Option Committee of the Company's Board of
Directors ("Discretionary Options") and options granted to non-employee
directors pursuant to an election made by a non-employee director to receive
options in lieu of his annual retainer ("Retainer Options"). Shares issued upon
exercise of options granted under the 1989 Plan may be repurchased shares held
by the Company or authorized but previously unissued shares.
Under the 1989 Plan, a Discretionary Option shall be exercisable at such rate
and price fixed by the Option Committee. Discretionary Options terminate if not
exercised by the date set forth in the 1989 Plan or by such date established by
the Option Committee at the time it makes the grant.
Pursuant to the terms of the 1989 Plan, Messrs. Greenberg, Marineau and
Wimmer have filed one time irrevocable elections to receive their annual
retainers in the form of an option to purchase the Company's Common Stock. Each
year on or before two weeks preceding the Company's Annual Meeting of
Stockholders, the Option Committee shall determine the number of shares of
Common Stock with respect to which a non-employee director may be granted a
Retainer Option. The non-employee director's option 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 Retainer Option. The option exercise price per share shall be
not less than the par value of the Common Stock. "Fair Market Value" is defined
as the closing price of the Company's Common Stock as reported on the New York
Stock Exchange Consolidated Transaction Reporting System for the day on which
the option is granted.
On May 10, 1994, the Company granted a Retainer Option for 1,000 shares of
the Company's Common Stock to each of Messrs. Greenberg, Marineau and Wimmer at
an exercise price of $12.75 per share. Such options are exercisable at the rate
of one-fourth of such grant each successive quarter commencing August 10, 1994.
In addition, on July 18, 1994, the Company granted a Discretionary Option for
3,000 shares of the Company's Common Stock to each of Messrs. Brooker,
Greenberg, Marineau and Wimmer at an exercise price of $29.25 per share, which
was the closing price for a share of Common Stock as reported on the
Consolidated Transaction Reporting System for securities listed on the New York
Stock Exchange on that date. Such options are exercisable at the rate of one-
third of such grant each successive July 18, commencing July 18, 1995.
The Company has an arrangement with two former directors of the Company, A.
James Gallagher, Jr. and Sterling L. Bassett, whereby each such former director
received consulting fees or retirement benefits at the rate of $50,000 per year
in 1994. This arrangement will continue in 1995.
SAVINGS AND THRIFT PLAN
The Company maintains a savings and thrift plan covering substantially all
U.S. employees which is qualified under the Internal Revenue Code. Employees
are covered by the plan on their date of hire. Employees with total 1994
compensation of less than $66,000 may contribute up to 10% of total
compensation on an after-tax basis to the plan. Employees who have attained age
21 and completed a year of service may generally contribute up to the lesser of
$8,200 in 1994 ($8,200 in 1995) or 8% of their gross earnings on a pre-tax
basis under the 401(k) "salary reduction" feature of the plan. The Company will
match 25% of any employee's pre-tax contributions up to a
10
<PAGE>
maximum 4% of such employee's gross earnings, resulting in a possible maximum
matched contribution from the Company of 1% of such employee's gross earnings.
PENSION PLAN
The Company also maintains a non-contributory defined benefit pension plan
covering substantially all domestic employees which is qualified under the
Internal Revenue Code. The plan provides an annual pension benefit on normal
retirement at age 65 which, when paid in the form of a single life annuity,
will equal 1% of final average earnings multiplied by the number of years of
credited service, not to exceed 25 years (without any deduction for social
security or other offset amounts). A person's earnings for purposes of the plan
include all compensation other than allowances such as moving expenses plus any
pre-tax contributions under the 401(k) feature of the savings and thrift plan.
Effective for plan years beginning after 1988, the maximum includible
compensation for a participant for any year may not exceed an overall salary
maximum as determined by the Internal Revenue Service ($150,000 in 1994). The
remuneration for executive officers shown under "Salary" and "Bonus" in the
Summary Compensation Table constitutes their earnings during 1994 for purposes
of the plan without regard to the Internal Revenue Service's limitation. "Final
average earnings" are the highest average earnings received in any five
consecutive full calendar years before retirement. Employees' pension rights
are fully vested after the earlier of (i) 5 years of service with the Company
or (ii) the attainment of age 65.
The following table shows the estimated annual benefits (which are not
subject to deduction for social security or other offset amounts) payable on
retirement under the Company's defined benefit plan to persons in specific
remuneration and credited years of service classifications assuming (i) the
person elects the single life annuity basis providing monthly payments without
benefits to his survivors and (ii) the person continues in the employ of the
Company at his present rate of remuneration until age 65:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE REMUNERATION YEARS OF CREDITED SERVICE
DURING HIGHEST FIVE --------------------------------------------------------------------
CONSECUTIVE YEARS 25 OR
BEFORE RETIREMENT 15 20 MORE
-------------------- ------- ------- -------
<S> <C> <C> <C>
$150,000 $22,500 $30,000 $37,500
175,000 26,250 35,000 43,750
200,000 30,000 40,000 50,000
225,000 33,750 45,000 56,250
250,000 37,500 50,000 62,500
</TABLE>
For purposes of estimating potential pension benefits using the foregoing
table, the number of years of credited service as of December 31, 1994 for the
executive officers named in the Summary Compensation Table are as follows:
Robert E. Gallagher (25 years), John P. Gallagher (25 years), J. Patrick
Gallagher, Jr. (19 years), Michael J. Cloherty (12 years) and Gary M. Van der
Voort (25 years). Such pension benefits are in addition to amounts payable to
such persons under the Company's savings and thrift plan on their retirement
and are subject to certain limitations as required under the Internal Revenue
Code.
STOCK OPTION PLANS
In 1988, the Company's stockholders approved the adoption of the Company's
1988 Incentive Stock Option Plan and 1988 Nonqualified Stock Option Plan.
11
<PAGE>
The following table sets forth certain information regarding options to
purchase shares of Common Stock granted to the executive officers of the
Company named in the Summary Compensation Table during the Company's 1994
fiscal year. Members of the Option Committee (currently Robert E. Gallagher and
John P. Gallagher) are not eligible to participate in any of the Company's
Stock Option Plans. The exercise price of the options equals the closing price
for a share of the Company's Common Stock on the date of the option grant.
OPTION GRANTS IN THE LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
--------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($) DATE 5% ($) 10% ($)
---- ----------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Gallagher..... -- -- -- -- -- --
John P. Gallagher....... -- -- -- -- -- --
J. Patrick Gallagher,
Jr..................... 15,000 1.72% 29.25 07/17/04 276,000 699,000
Michael J. Cloherty..... 15,000 1.72% 29.25 07/17/04 276,000 699,000
Gary M. Van der Voort... 15,000 1.72% 29.25 07/17/04 276,000 699,000
</TABLE>
--------
(1) Nonqualified options granted July 18, 1994, exercisable at the rate of 10%
of the total option for each calendar year after 1994.
(2) Based on actual option term and annual compounding.
The following table sets forth certain information regarding options to
purchase shares of Common Stock exercised during the Company's 1994 fiscal year
and the number and value of unexercised options to purchase shares of Common
Stock held at the end of the Company's 1994 fiscal year by the executive
officers of the Company named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SECURITIES SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED UNEXERCISED
NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY IN-THE-MONEY
SHARES VALUE OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
ACQUIRED ON REALIZED FY-END (#) FY-END (#) FY-END ($) FY-END ($)
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
---- ------------ -------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Gallagher..... -- -- -- -- -- --
John P. Gallagher....... -- -- -- -- -- --
J. Patrick Gallagher,
Jr..................... 200 5,000 10,000 89,000 75,000 522,000
Michael J. Cloherty..... 300 8,000 11,000 84,000 104,000 554,000
Gary M. Van der Voort... 2,000 54,000 42,000 88,000 538,000 597,000
</TABLE>
--------
(1) Market value of underlying securities at exercise, minus the exercise
price.
(2) Market value of underlying securities at year end, minus the exercise
price.
SEVERANCE PAY PLAN
The Company has a plan for severance compensation to employees after a
hostile takeover. The plan defines a hostile takeover to include, among other
events, the following events, if not
12
<PAGE>
approved by two-thirds of the members of the Board of Directors in office
immediately prior to any such events: the election of directors not nominated
by the Board of Directors, a business combination, such as a merger, not
approved by the holders of 80% or more of the Common Stock and the Board of
Directors or not meeting various "fair price" criteria, or the acquisition of
20% or more of the combined voting power of the Company's stock by any person
or entity. All full-time and part-time employees who are regularly scheduled to
work 20 or more hours per week and who have completed at least two years of
continuous employment with the Company are participants in the plan. A
severance benefit is payable under the plan if a participant's employment with
the Company terminates voluntarily or involuntarily within two years after a
hostile takeover for reasons such as reduction in compensation, discontinuance
of employee benefit plans without replacement with substantially similar plans,
change in duties or status, certain changes in job location and involuntary
termination of employment for reasons other than just cause. For participants
who have completed two but less than five years of employment, the benefit is
equal to the employee's annual compensation during the year immediately
preceding the termination of employment. For employees who have completed five
or more years of employment, the benefit is equal to two and one-half times the
employee's annual compensation during the 12 months ending on the date of
termination of employment, but may not exceed 2.99 times average annual
compensation during the preceding five years. Annual compensation is defined
for purposes of the plan as the amount of the employee's wages, salary, bonuses
and other incentive compensation. Benefits are payable in a lump sum not less
than 10 days after termination of employment.
PROPOSAL 2--RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1995
The Audit Committee has considered the qualifications of Ernst & Young LLP
and recommended that the Board of Directors appoint them as independent
auditors of the Company for the fiscal year ending December 31, 1995. The Board
of Directors desires to obtain stockholders' ratification of the Board's action
in such appointment. A resolution ratifying the appointment will be offered at
the meeting. If the resolution is not adopted, the adverse vote will be
considered as a direction to the Board to select other auditors for the
following year. Because of the difficulty and expense of making any
substitution of auditors so long after the beginning of the current year, it is
contemplated that the appointment for the year 1995 will stand unless the Board
finds other good reason for making a change.
A representative of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions and to make a statement if the
representative so desires.
Ratification requires the affirmative vote by holders of at least a majority
of the outstanding shares voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
IN FAVOR OF RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR 1995.
13
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Stockholder proposals to be presented at the 1996 Annual Meeting of
Stockholders must be received by the Company at its principal office on or
before November 29, 1995 to be considered for inclusion in the Company's proxy
materials for that meeting.
OTHER MATTERS
The Company knows of no other matters to be presented for action at the
meeting. If any other matters should properly come before the meeting or any
adjournment thereof, such matters will be acted upon by the persons named as
proxies in the accompanying proxy according to their best judgment in the best
interests of the Company.
The Annual Report of Stockholders containing financial statements for the
year ended December 31, 1994, and other information concerning the Company is
being furnished to the stockholders but is not to be regarded as proxy
soliciting material.
Each stockholder is urged to mark, date, sign and return the enclosed proxy
card in the envelope provided for that purpose. Your prompt response is helpful
and your cooperation will be appreciated.
Dated: March 28, 1995
By Order of the Board of Directors
CARL E. FASIG
Secretary
14
<PAGE>
PROXY PROXY
LOGO
ARTHUR J. GALLAGHER & CO.
TWO PIERCE PLACE
ITASCA, ILLINOIS 60143
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert E. Gallagher and John P. Gallagher, or
either of them, as attorneys and proxies, each with the power to appoint a
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of voting stock of Arthur J. Gallagher & Co. held of
record by the undersigned on March 13, 1995, at the annual meeting of
stockholders to be held on May 9, 1995 or any adjournment thereof.
IN THEIR DISCRETION, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. THIS PROXY IS REVOCABLE AT ANY TIME.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
ARTHUR J. GALLAGHER & CO.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. Election of Directors--Class II Nominees for term expiring in 1998 are
John G. Campbell, Robert E. Gallagher, John P. Gallagher and
Walter F. McClure
For All
For Withheld Except
[_] [_] [_]
---------------------------------------------
Nominee Exception
2. Ratification of the appointment of Ernst & Young LLP as the independent
auditors of the Corporation for 1995.
For Against Abstain
[_] [_] [_]
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
-------------------------------------------------------------------------------
Dated: ______________________________________________________, 1995
Signature(s) ___________________________________________________________________
________________________________________________________________________________
IMPORTANT: PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS OPPOSITE. IN THE CASE OF
JOINT HOLDERS, ALL SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINIS-
TRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF
A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
