ARTHUR J. GALLAGHER & CO. 1988 NONQUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.32

ARTHUR J. GALLAGHER & CO.

1988 NONQUALIFIED STOCK OPTION AGREEMENT

(2007 GRANT)

THIS AGREEMENT (“Agreement”), dated May 15, 2007 (the “Effective Date”), between ARTHUR J. GALLAGHER & CO., a Delaware corporation (the “Corporation”), and                                          , an employee of the Company (the “Employee”). For purposes of this Agreement, the term “Company” shall mean the Corporation and any corporation 50% or more of the stock of which is beneficially owned directly by the Corporation or indirectly through another corporation or corporations in which the Corporation is the beneficial owner of 50% or more of the stock.

WITNESSETH

WHEREAS, the Company on May 10, 1988 adopted the “Arthur J. Gallagher & Co. 1988 Nonqualified Stock Option Plan” (herein, as the same may be amended from time to time, called the “Plan”); and

WHEREAS, the purpose of the Plan is to attract, retain and reward employees, to increase stock ownership and identification with the Company’s interests, and to provide incentive for remaining with and enhancing the long-term value of the Company;

NOW, THEREFORE, in consideration of the premises and the promises herein contained, the parties hereby agree as follows:

1. As a matter of separate inducement and agreement in connection with his employment by the Company, the Employee is hereby granted the option to purchase from the Company all or part of              shares of Common Stock (par value $1.00 per share) of the Company at $28.65 per share, during the period and upon the terms and conditions stated herein and in the Plan as amended. The Employee understands and agrees that determination of the personal tax consequences of any exercise of this option or subsequent disposition of shares so acquired is entirely and solely the responsibility of the Employee.

2. Subject to the provisions of the Plan and this Agreement, shares subject to this stock option shall be purchasable at any time during the term of the option after the Effective Date of this Agreement. This option shall terminate entirely on the earliest of the following:

(a) May 15, 2017 (not more than 10 years from date of grant);

(b) upon the severance of the employment relationship between the Company and the Employee for any reason other than by death or disability of the Employee as such conditions are defined in the Plan.

3. Subject to the provisions of Section 2 hereof, this option may be exercised at any time as to all or any of the shares then purchasable hereunder (but not for less than the smaller of (a) 100 shares of Common Stock, or (b) 10% of the shares of Common Stock subject to the option, unless a purchase of fewer shares would entirely exhaust the option) and provided further that the optionee’s cumulative purchases of Common Stock subject to this option may not exceed the following: !

An option shall be exercised by giving notice to the Company, on a form which the Secretary of the Company will supply upon request, specifying the number of whole shares to be purchased and accompanied by payment of the purchase price therefore. Such exercise shall be effective upon receipt by the Secretary of the Company, at the main office of the Company, of such written notice and payment. If the Employee’s employment with the Company is terminated due to death or disability (as defined in the Plan) and, to the extent Section 5 is applicable, the Employee has neither engaged in nor expressed an intention to engage in any of the activities described in Section 5(a), then the restrictions contained in the above vesting schedule are removed as of the date employment is terminated for those reasons and the Employee may thereafter exercise any portion or all of the shares subject to grant, subject only to the fact that the entire grant and all rights to exercise all or any portion thereunder shall expire on May 15, 2017. If the Employee’s employment with the Company is terminated due to retirement (s defined in the Plan) and, to the extent Section 5 is applicable, the Employee has neither engaged in nor expressed an intention to engage in any of the activities described in Section 5(a), then the Employee may thereafter exercise any portion or all of the shares subject to grant, but only to the extent the option was exercisable immediately prior to the date employment is terminated for such reason, subject only to the fact that the entire grant and all rights to exercise all or any portion thereunder shall expire on May 15, 2017. Furthermore, in addition, an Employee’s ability to exercise an option may be limited by the Company’s policy regarding insider trading.

4.(a) In the event the shares issuable on an exercise of this option have not been registered under the Securities Act of 1933, as amended (the “Act”), or if the effectiveness of any such registration shall lapse, any certificates evidencing shares of the Common Stock of the Company issued pursuant to such exercise of option or right hereunder shall bear upon its face the following legend or any other legend which counsel for the Company considers necessary or advisable to comply with the Act or any applicable state securities laws:

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“THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON THE RECEIPT BY THE CORPORATION OF ANY OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.”

(b) The Employee agrees and represents that the shares of Common Stock acquired by him upon exercise will be acquired for investment and not with a view to the sale or distribution thereof. The Employee further agrees that he will not sell or transfer any shares except in strict compliance with applicable securities laws. The Company may, but shall in no event be obligated to, register any securities issued in connection with this Agreement pursuant to the Act (as now in effect or as hereafter amended); and in the event any shares are so registered the Company may remove any legend on certificates representing such shares.

5.(a)(i) If, at any time within (A) the ten year term of this grant; (B) two years after the termination of employment; or (C) two years after the Employee exercises any portion of this grant, whichever is the latest, the Employee, in the determination of the management of the Company, engages in any activity in competition with any activity of the Company, or inimical, contrary or harmful to the interests of the Company, including, but not limited to: (1) conduct related to his employment for which either criminal or civil penalties against him may be sought, (2) violation of Company policies, including, without limitation, the Company’s Insider Trading Policy, (3) directly or indirectly, soliciting, placing, accepting, aiding, counseling or consulting in the renewal, discontinuance or replacement of any insurance or reinsurance by, or handling self-insurance programs, insurance claims or other insurance administrative functions (“insurance services”) for, any existing Company account or any actively solicited prospective account of the Company for which he performed any of the foregoing functions during the two-year period immediately preceding such termination or providing any employee benefit brokerage, consulting, or administration services, in the areas of group insurance, defined benefit and defined contribution pension plans, individual life, disability and capital accumulation products, and all other employee benefit areas (“benefit services”) the Company is involved with, for any existing Company account or any actively solicited prospective account of the Company for which he performed any of the foregoing functions during the two-year period immediately preceding such termination or, if the Employee has not terminated employment, the date of the prohibited activity (the term Company account as used in this paragraph shall be construed broadly to include all users of insurance services or benefit services including commercial and individual consumers, risk managers, carriers, agents and other insurance intermediaries), (4) the rendering of services for any organization which is competitive with the Company, (5) employing or recruiting any current or former employee of the Company, (6) disclosing or misusing any confidential information or material concerning the Company, or (7) participating in a hostile takeover attempt of the Company, then this option and all

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other stock options held by the Employee shall terminate effective the date on which the Employee enters into such activity, unless terminated sooner by operation of another term or condition of this grant or the Plan, and any option gain realized by the Employee from exercising all or a portion of this or any other option shall be paid by the Employee to the Company. Such option gain shall be calculated based on the difference between exercise price per share of the option and the closing price per share of the Company’s common stock as quoted on the New York Stock Exchange on the date of exercise, multiplied by the number of shares exercised on such date, plus interest measured from the first date the Employee engaged in any of the prohibited activities set forth above at the highest rate allowable under Delaware law.

(ii) The Employee acknowledges that Employee’s engaging in activities and behavior in violation of Section 5(a)(i) above will result in a loss to the Company which cannot reasonably or adequately be compensated in damages in an action at law, that a breach of this Agreement will result in irreparable and continuing harm to the Company and that therefore, in addition to and cumulative with any other remedy which the Compan