Exhibit 10.2

ARTHUR J. GALLAGHER & CO.

SENIOR MANAGEMENT INCENTIVE PLAN

I. Purposes

The purposes of the Arthur J. Gallagher & Co. Senior Management Incentive Plan
(the “Plan”) are to retain and motivate the officers of Arthur J. Gallagher &
Co. (the “Company”) and its subsidiaries who have been designated by the
Compensation Committee (the “Committee”) to participate in the Plan for a
specified Performance Period by providing them with the opportunity to earn
incentive payments based upon the extent to which specified performance goals
have been achieved or exceeded for an applicable Performance Period. It is
intended that all amounts payable to Participants who are “covered employees”
within the meaning of Section 162(m) of the Code will constitute “qualified
performance-based compensation” within the meaning of U.S. Treasury regulations
promulgated thereunder, and the Plan and the terms of any awards hereunder shall
be so interpreted and construed to the maximum extent possible.

II. Certain Definitions

“Board” shall mean the Board of Directors of the Company.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Committee” shall mean the Compensation Committee of the Board or such other
committee designated by the Board that satisfies any then applicable
requirements of the New York Stock Exchange, or such other principal national
stock exchange on which the common stock of the Company is then traded, to
constitute a compensation committee, and which consists of two or more members
of the Board, each of whom shall be an “outside director” within the meaning of
Section 162(m) of the Code.

“Company” shall mean Arthur J. Gallagher & Co., a Delaware corporation, and any
successor thereto.

“Determination Period” shall mean, with respect to any Performance Period, a
period commencing on or before the first day of the Performance Period and
ending not later than the earlier of (i) 90 days after the commencement of the
Performance Period and (ii) the date on which twenty-five percent (25%) of the
Performance Period has been completed. Any action required to be taken within a
Determination Period may be taken at a later date if permissible under
Section 162(m) of the Code or regulations promulgated thereunder, as they may be
amended from time to time.

“Individual Award Opportunity” shall mean the potential of a Participant to
receive an incentive payment based on the extent to which the applicable
performance goals for a Performance Period shall have been satisfied. An
Individual Award Opportunity may be expressed in U.S. dollars or pursuant to a
formula that is consistent with the provisions of the Plan.

“Participant” shall mean an officer of the Company or any of its subsidiaries
who is designated by the Company to participate in the Plan for a Performance
Period, in accordance with Article III.

“Performance Period” shall mean any period commencing on or after January 1,
2010 for which performance goals are established pursuant to Article IV. A
Performance Period may be coincident with one or more fiscal years of the
Company or a portion of any fiscal year of the Company.

“Plan” shall mean the Arthur J. Gallagher & Co. Senior Management Incentive
Plan, as set forth herein, as it may be amended from time to time.

III. Administration

3.1 General. The Plan shall be administered by the Committee, which shall have
the full power and authority to interpret, construe and administer the Plan and
any Individual Award Opportunity granted hereunder (including reconciling any
inconsistencies, correcting any defaults and addressing any omissions). The
Committee’s interpretation, construction and administration of the Plan and all
its determinations hereunder shall be final, conclusive and binding on all
persons for all purposes.

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3.2 Powers and Responsibilities. The Committee shall have the following
discretionary powers, rights and responsibilities in addition to those described
in Section 3.1.

 

  (a) to designate within the Determination Period the Participants for a
Performance Period;

 

  (b) to establish within the Determination Period the performance goals and
other terms and conditions that are to apply to each Participant’s Individual
Award Opportunity, including the extent to which any incentive payment shall be
made to a Participant in the event of (A) the Participant’s termination of
employment with the Company due to disability, retirement, death or any other
reason or (B) a change in control of the Company;

 

  (c) to determine in writing prior to the payment under any Incentive Award
Opportunity that the performance goals for a Performance Period and other
material terms applicable to the Incentive Award Opportunity have been
satisfied;

 

  (d) subject to the requirements of Section 409A of the Code, to decide
whether, and under what circumstances and subject to what terms, Incentive Award
Opportunities are to be paid on a deferred basis, including whether such a
deferred payment shall be made solely at the Committee’s discretion or whether a
Participant may elect deferred payment; and

 

  (e) to adopt, revise, suspend, waive or repeal, when and as appropriate, in
its sole and absolute discretion, such administrative rules, guidelines and
procedures for the Plan as it deems necessary or advisable to implement the
terms and conditions of the Plan.

3.3 Delegation of Power. The Committee may delegate some or all of its power and
authority hereunder to the President and Chief Executive Officer or other
executive officer of the Company as the Committee deems appropriate; provided,
however, that with respect to any person who is a “covered employee” within the
meaning of Section 162(m) of the Code or who, in the Committee’s judgment, is
likely to be a covered employee at any time during the applicable Performance
Period, only the Committee shall be permitted to (i) designate such person to
participate in the Plan for such Performance Period, (ii) establish performance
goals and Individual Award Opportunities for such person, and (iii) certify the
achievement of such performance goals.

IV. Performance Goals

4.1 Establishing Performance Goals. The Committee shall establish within the
Determination Period of each Performance Period one or more objective
performance goals for each Participant or for any group of Participants (or
both), provided that the outcome of each goal is substantially uncertain at the
time the Committee establishes such goal. Performance goals shall be based
exclusively on one or more of the following objective corporate-wide or
subsidiary, division, operating unit or individual measures, stated in either
absolute terms or relative terms, such as rates of growth or improvement:
(i) the attainment of a specified fair market value for shares of our common
stock for a specified period of time, (ii) earnings per share, (iii) return to
stockholders, (iv) return on assets, (v) return on equity, (vi) revenue,
(vii) cash flow, (viii) operating expense reduction, (ix) return on investment,
(x) return on capital, (xi) operating margin, (xii) net income, (xiii) earnings
before interest, taxes, depreciation and/or amortization, (xiv) operating
earnings, (xv) net cash provided by operations, and (xvi) strategic business
criteria, consisting of one or more objectives such as (A) geographic business
expansion goals, (B) cost targets, (C) customer satisfaction ratings,
(D) reductions in errors and omissions, (E) reductions in lost business,
(F) management of employment practices and employee benefits, (G) supervision of
litigation, (H) satisfactory audit scores, (I) productivity, (J) efficiency, and
(K) goals relating to acquisitions or divestitures, or any combination of the
foregoing. With respect to Participants who are not “covered employees” within
the meaning of Section 162(m) of the Code and who, in the Committee’s judgment,
are not likely to be a covered employees at any time during the applicable
Performance Period, the performance goals established for the Performance Period
may consist of any objective corporate-wide or subsidiary, division, operating
unit or individual measures, whether or not listed herein. Performance goals
shall be subject to such other special rules and conditions as the Committee may
establish at any time within the Determination Period.

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4.2 Impact of Extraordinary Items or Changes in Accounting. The measures
utilized in establishing performance goals under the Plan for any given
Performance Period shall be determined in accordance with generally accepted
accounting principles (“GAAP”) and in a manner consistent with the methods used
in the Company’s audited consolidated financial statements, without regard to
(i) extraordinary or other nonrecurring or unusual items, or restructuring or
impairment charges, as determined by the Company’s independent public
accountants in accordance with GAAP or (ii) changes in accounting, unless, in
each case, the Committee decides otherwise within the Determination Period or as
otherwise required under Section 162(m) of the Code.

V. Incentive Award Opportunities

5.1 Terms. At the time performance goals are established for a Performance
Period, the Committee also shall establish an Individual Award Opportunity for
each Participant or group of Participants, which shall be based on the
achievement of one or more specified targets of performance goals. The targets
shall be expressed in terms of an objective formula or standard which may, at
the discretion of the Committee, be based upon the Participant’s annual base
salary or a multiple thereof. In all cases the Committee shall have the sole and
absolute discretion to reduce the amount of any payment under any Incentive
Award Opportunity that would otherwise be made to any Participant or to decide
that no payment shall be made. No Participant shall receive a payment under the
Plan with respect to any fiscal year of the Company in excess of $3,000,000,
which maximum amount shall be prorated with respect to Performance Periods that
are less than one year in duration.

5.2 Incentive Payments. Payments under Incentive Award Opportunities shall be in
cash or shares under a stock incentive plan maintained by the Company, as
determined by the Committee, and shall be made at the time determined by the
Committee after the end of the Performance Period for which the Incentive Awards
are payable, except that no such payment shall be made unless and until the
Committee, based to the extent applicable on the Company’s audited consolidated
financial statements for such Performance Period (as prepared and reviewed by
the Company’s independent public accountants), has certified in writing the
extent to which the applicable performance goals for such Performance Period
have been satisfied.

VI. General

6.1 Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 2010 annual meeting of
stockholders and, if approved by the affirmative vote of a majority of the
shares of common stock of the Company present in person or represented by proxy
at such meeting, shall become effective for Performance Periods beginning on and
after January 1, 2010. This Plan shall terminate as of December 31, 2014, unless
terminated earlier by the Board. In the event that this Plan is not approved by
the stockholders of the Company, this Plan shall be null and void.

6.2 Amendment or Termination of Plan. The Board may amend or terminate this Plan
as it shall deem advisable, subject to any requirement of stockholder approval
required by applicable law, rule or regulation, including Section 162(m) of the
Code.

6.3 Non-Transferability of Awards. No award under the Plan shall be transferable
other than by will, the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company. Except to the extent
permitted by the foregoing sentence, no award may be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any such award, such award and all rights
thereunder shall immediately become null and void.

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6.4 Tax Withholding. The Company shall have the right to require, prior to the
payment of any amount pursuant to an award made hereunder, payment by the
Participant of any Federal, state, local or other taxes which may be required to
be withheld or paid in connection with such award.

6.5 No Right of Participation or Employment. No person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.

6.6 Designation of Beneficiary. If permitted by the Company, a Participant may
file with the Committee a written designation of one or more persons as such
Participant’s beneficiary or beneficiaries (both primary and contingent) in the
event of the Participant’s death. Each beneficiary designation shall become
effective only when filed in writing with the Committee during the Participant’s
lifetime on a form prescribed by the Committee. The spouse of a married
Participant domiciled in a community property jurisdiction shall join in any
designation of a beneficiary other than such spouse. The filing with the
Committee of a new beneficiary designation shall cancel all previously filed
beneficiary designations. If a Participant fails to designate a beneficiary, or
if all designated beneficiaries of a Participant predecease the Participant,
then each outstanding award shall be payable to the Participant’s executor,
administrator, legal representative or similar person.

6.7 Governing Law. This Plan and each award hereunder, and all determinations
made and actions taken pursuant thereto, to the extent not otherwise governed by
the Code or the laws of the United States, shall be governed by the laws of the
State of Illinois and construed in accordance therewith without giving effect to
principles of conflicts of laws.

6.8 Other Plans. Neither the adoption of the Plan nor the submission of the Plan
to the Company’s stockholders for their approval shall be construed as limiting
the power of the Board or the Committee to adopt such other incentive
arrangements as it may otherwise deem appropriate.

6.9 Binding Effect. The Plan shall be binding upon the Company and its
successors and assigns and the Participants and their beneficiaries, personal
representatives and heirs. If the Company becomes a party to any merger,
consolidation or reorganization, then the Plan shall remain in full force and
effect as an obligation of the Company or its successors in interest, unless the
Plan is amended or terminated pursuant to Section 6.2.