Exhibit 10.5

 

AON CORPORATION

LEADERSHIP PERFORMANCE PROGRAM

For 2009-2011

 

Overview

 

The Program has been adopted by the Committee as a sub-plan to the Stock Plan,
effective as of January 1, 2009.  The Program is the fourth layer of multi-year
performance programs implemented by the Company.  Earlier programs covered the
performance periods January 1, 2006 through December 31, 2008, January 1, 2007
through December 31, 2009, and January 1, 2008 through December 31, 2010,
respectively.

 

Performance Cycle

 

The Program covers a multi-year performance cycle that begins on January 1, 2009
and ends on December 31, 2011 (“Performance Cycle”).

 

Eligibility

 

As recommended by the CEO and approved by the Committee, key members of the
Company’s senior leadership team are eligible to participate in the Program. The
CEO is also eligible to participate in the Program as approved by the Committee.

 

Participation

 

The Committee will approve in writing no later than May 31, 2009 the identity of
the participants eligible to participate in the Program and each participant’s
Award, denominated as described herein either in total number of LPP units or US
dollars.  Those participants so identified by May 31, 2009 shall be eligible to
participate in the full Performance Cycle, retroactive to January 1, 2009.

 

If a participant is no longer considered a member of the Company’s senior
leadership team, but the participant’s employment with the Company has not
terminated, the participant’s Award under the Program shall be unaffected by the
change in status.

 

Award Components

 

Stock Options

 

At the outset of participation in the Program, each participant will receive 20%
of his or her Award “value” in nonqualified options to purchase shares of the
Company’s common stock.  If the Award is denominated by the Committee in US
dollars, the number of stock options will be derived by dividing the portion of
the Award to be granted in stock options (20% of the total value) by the Fair
Market Value of a share the Company’s common stock on the Grant Date, and then
multiplying the resulting number by 3.  If the Award is denominated by the
Committee in LPP units, the number of stock options will be derived by
multiplying 60% by the total number of LPP units granted.

 

Performance Share Units

 

In addition, each participant will be awarded 80% of his or her Award “value” as
target Performance Share Units.  If the Award is denominated by the Committee in
US dollars, the number of such target units will be derived by dividing the
portion of the Award to be granted in Performance Share Units (i.e. 80% of the
total value) by the Fair Market Value of a share of the Company’s common stock
on the Grant Date.  If the Award is denominated by the Committee in

 

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LPP units, the number of target performance share units will be derived by
multiplying 80% by the total number of LPP units granted.

 

Rules Applicable to Stock Options

 

1.

The options will be priced at the Fair Market Value on the Grant Date,
regardless whether the Committee denominated the Award in US dollars or LPP
units.

2.

The options will become exercisable during employment as follows: (a) one-third
on the first anniversary of the Grant Date; (b) one-third on the second
anniversary of the Grant Date; and (c) the remainder on the third anniversary of
the Grant Date.

3.

After the options become exercisable in whole or in part in accordance with the
table set forth in rule #7 below and until they expire, the options may be
exercised, and the participant’s tax withholding obligations may be fulfilled,
in the manner specified by the Committee. Under no circumstances may the options
be exercised after they have expired.

4.

The options will have a term of six years.

5.

If the options would expire, or the exercise period would end, on a date that is
not a business day, they will expire, or become unexercisable, at the close of
business on the last business day preceding that date. A business day is any day
on which the Company’s common stock is traded on the New York Stock Exchange.

6.

The participant must accept the stock option award agreement through his or her
Company-related Fidelity account.

7.

If a participant’s employment is terminated, the following rules will apply to
the vesting and exercise of the participant’s stock options:

 

Reason for
Employment
Termination

 

Impact on Vesting and Exercise of Stock Options

Retirement or termination by Company without Cause

 

Stock options will vest pro rata through the date of termination or Retirement.
In the event of the participant’s Retirement, the vested stock options will be
exercisable for 36 months. In the event of a termination by the Company without
Cause, the stock options will be exercisable for 90 days.

 

 

 

Death or Total and Permanent Disability

 

Stock options will immediately and fully vest upon the participant’s death or
Total and Permanent Disability. The stock options will be exercisable for twelve
months.

 

 

 

Voluntary Resignation

 

Unvested stock options will be immediately forfeited. Stock options that vested
in accordance with three-year graded vesting schedule will be exercisable for 90
days.

 

 

 

Termination by Company for Cause

 

All vested and unexercised and unvested stock options will be immediately
forfeited.

 

 

 

Termination due to Change in Control

 

Regardless whether a successor to the Company assumes and continues this Program
after a Change in Control, the stock options will be subject to the following
rules: (1) if the participant’s employment is terminated by the Company without
Cause within two years after the Change in Control, the participant will become
immediately vested in any unvested stock options and the stock options will be
exercisable for 90 days; and (2) if the participant’s employment is terminated
by the Company for Cause, by the participant in a voluntary resignation, or by
reason of the participant’s death or Total and Permanent Disability, or if the
participant’s employment is continued through the end of the Performance Cycle,
the rules of the

 

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Reason for
Employment
Termination

 

Impact on Vesting and Exercise of Stock Options

 

 

Program shall continue to apply to the stock options as if the Change in Control
had not occurred.

 

Rules Applicable to Performance Share Units

 

1.

The Performance Share Units will be earned and will vest as of the Settlement
Date, subject to the satisfaction of the performance criteria set forth herein.

2.

The payout resulting from the vesting of the Performance Share Units will be
determined based on the Company’s cumulative adjusted Earnings per Share over
the Performance Cycle as compared to the target Earnings per Share.

3.

Payouts will range from 0% to 200% of the targeted number of Performance Share
Units awarded.

4.

The Performance Share Units will pay out in shares of the Company’s common stock
issued under, and subject to, the limitations of the Stock Plan or such other
shareholder-approved Company equity-based incentive plan as designated by the
Committee, provided that the pay out in shares shall take place in the calendar
year following the end of the Performance Cycle.

5.

The Company shall have the right to satisfy all federal, state and local
withholding tax requirements with respect to the award earned by reducing the
number of earned shares by the number of shares determined by dividing the
amount of withholding required by the Fair Market Value of a share of the
Company’s common stock on the Settlement Date.

6.

The Performance Share Units are not transferable and may not be sold, assigned,
pledged, hypothecated or otherwise encumbered.

7.

Until the Settlement Date, the participant will not be treated as a stockholder
as to those shares of the Company’s common stock relating to the Performance
Share Units. No cash payments will be provided for dividend equivalents or other
distributions.

8.

The participant will be granted a Performance Award Certificate at the outset of
his or her participation in the Program. The certificate will set forth the
target number of Performance Share Units granted to the participant. The
participant must sign and return to the Company the certificate to indicate that
he or she agrees to be bound by the provisions of the Program, including the
restrictive covenants described herein. Failure to return a signed certificate
to the Company will result in forfeiture of the Performance Share Units.

9.

If a participant’s employment with the Company terminates before the last day of
the Performance Cycle, the following rules will apply to the vesting of the
Performance Share Units:

 

Reason for
Employment
Termination

 

Impact on Vesting of Performance Share Units

Retirement or termination by Company without Cause

 

Performance Share Units will vest pro rata through the date of termination or
Retirement, and the vested Performance Share Units will pay out in accordance
with rule 4 above. The Committee’s determination regarding the vested portion
and payout will occur after the close of the Performance Cycle. The number of
units earned will be pro-rated based on the proportion of achievement of the
target cumulative earnings per share as of the last full calendar quarter
preceding the participant’s termination or

 

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Reason for
Employment
Termination

 

Impact on Vesting of Performance Share Units

 

 

Retirement date.

 

 

 

Death or Total and Permanent Disability

 

Performance Share Units will become immediately vested at the greater of the
target award level or the number of units that would have been earned based on
the actual cumulative earnings per share during the period of the Performance
Cycle in which the participant was employed by the Company, and the vested
Performance Share Units will pay out in accordance with rule 4 above.

 

 

 

Voluntary Resignation

 

Performance Share Units will be forfeited in their entirety.

 

 

 

Termination by Company for Cause

 

Performance Share Units will be forfeited in their entirety.

 

 

 

Termination due to Change in Control

 

If a successor to the Company assumes and continues this Program substantially
in its current form after a Change in Control, the Performance Share Units will
be subject to the following rules: (1) if the participant’s employment is
terminated by the Company without Cause after the Change in Control but prior to
the end of the Performance Cycle, the participant will become immediately vested
in the greater of the target Performance Share Units or the number of units that
would be earned based on the proportion of achievement of the target cumulative
earnings per share as of the last full calendar quarter preceding the
participant’s termination date, and the vested Performance Share Units will pay
out in accordance with rule 4 above; and (2) if the participant’s employment is
terminated by the Company for Cause, by the participant in a voluntary
resignation, or by reason of the participant’s death or Total and Permanent
Disability, or if the participant’s employment is continued through the end of
the Performance Cycle, the rules of the Program shall continue to apply to the
Performance Share Units as if the Change in Control had not occurred.

 

If the successor to the Company does not assume and continue this Program
substantially in its current form, the Performance Share Units shall become
immediately vested at the greater of the target Performance Share Units or the
number of units that would have been earned based on the proportion of
achievement of the target cumulative earnings per share as of the last full
calendar quarter preceding the effective date of the Change in Control, and the
vested Performance Share Units will pay out in accordance with rule 4 above.

 

10.

The time and form of payment of Performance Share Units shall be made in
accordance with rule 4 above, provided that with respect to any payment upon the
participant’s “separation from service” (as such term is defined under
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), the
payment at such time can be characterized as a “short-term deferral” for
purposes of Code Section 409A or as otherwise exempt from the provisions of Code
Section 409A, or if any portion of the payment cannot be so characterized, and
the participant is a “specified employee” under Code Section 409A, such portion
of the payment shall be delayed until the earlier to occur of the participant’s
death or the date that is six

 

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months and one day following the participant’s termination of employment (the
“Delay Period”).  Upon the expiration of the Delay Period, all payments delayed
pursuant to this section shall be paid to the participant in accordance with
rule 4 above.  For purposes of the Program, the terms “retirement,” “termination
of employment,” “terminated,” “termination,” and variations thereof, as used in
this Program, are intended to mean a termination of employment that constitutes
a “separation from service” under Code Section 409A.

 

 

11.

The time or schedule of any payout of Performance Share Units pursuant to the
terms of the Program may not be accelerated except as otherwise permitted under
Code Section 409A and the guidance and Treasury regulations issued thereunder.

 

Performance Measure for Performance Share Units

 

The performance measure for the Performance Share Units will be cumulative
adjusted Earnings per Share for the Performance Cycle, for which the Committee
has established a target of $9.25.

 

Following the end of the Performance Cycle, the Committee will determine in its
sole discretion the payout, which determination shall be final and binding. 
Performance Share Units will be subject to complete forfeiture if the Company’s
performance for the Performance Cycle does not meet or exceed a minimum
cumulative adjusted Earnings per Share of $8.85, and the payout for performance
at or above that level will be calculated as follows:

 

2009-2011 Cumulative Adjusted EPS

 

% of Targeted Units Earned

 

$8.85

 

50

%

$9.25

 

100

%

$9.70

 

150

%

$10.15 or higher

 

200

%

 

The Performance Share Units will pay out linearly between each set of data
points.

 

Adjustments to Performance Measures or Results

 

The Committee will make appropriate adjustments to the target Earnings per Share
or the Company’s actual results on account of: change in accounting policy;
gain/loss on disposition of assets or business; charge for goodwill impairment;
extraordinary legal/regulatory settlements; extraordinary market conditions;
significant currency fluctuations; effects of natural or man-made disasters
(e.g. Word Trade Center); hyperinflation (e.g. >15%); change in statutory tax
rates/regulations; charges from Board-approved restructuring programs; results
of discontinued operations held for sale after sale closing; other
extraordinary, unusual or infrequently occurring items — as defined by GAAP. The
form and manner of any such adjustment shall be at the sole discretion of the
Committee.  By way of example, the following events will not require
adjustment:  change in accounting estimate; gained/lost pre-tax income from
sold/acquired businesses that represent less than 5% of total pre-tax income;
inflation; general tax developments; litigation costs; effects of repaying or
issuing debt; effects of share buyback/issue; effects of pension plan funding;
changes in benefit/incentive plans; or normal currency/interest rate
fluctuations.

 

Restrictive Covenants

 

The Company is in the business of providing insurance brokerage, reinsurance
brokerage, benefits consulting, compensation consulting, human resources
consulting, managing underwriting and related services including accounting,
claims management and handling, contract wording, information systems and
actuarial services.  An essential element of its business is the development and
maintenance of personal contacts and relationships with clients.  Because of
these contacts and relationships, it is common for the Company’s clients to
develop

 

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identification with the employee who services its insurance needs, rather than
with the Company itself.  The personal identification of clients of the Company
with a Company employee creates potential for the employee’s appropriation of
the benefits of the relationships developed with clients on behalf of and at the
expense of the Company.  Since the Company would suffer irreparable harm if the
employee left its employ and solicited the insurance or other related business
of clients of the Company, it is reasonable to protect the Company against
solicitation activities by the employee for a limited period of time after the
employee leaves the Company so that the Company may renew or restore its
business relationship with its clients.  Therefore, as consideration for
participation in this Program, each participant will be bound by the following
restrictive covenants:

 

Covenant Not to Solicit

The employee agrees and covenants that, except with the prior written consent of
the Company, the employee will not for a period of two years after the end of
the employment compete directly or indirectly in any way with the business of
the Company.  For the purposes of this covenant, “compete directly or indirectly
in any way with the business of the Company” means to enter into or attempt to
enter into (on the employee’s own behalf or on behalf of any other person or
entity) any business relationship of the same type or kind as the business
relationship which exists between the Company and its clients or customers, in
which the employee was involved or had knowledge, to provide services related to
the business of the Company for any individual, partnership, corporation,
association or other entity who or which was a client or customer for whom the
employee was the producer or on whose account the Employee worked or became
familiar during the 24 months prior to the end of employment.

 

Covenant Not to Hire

The employee also agrees not to induce or attempt to induce, or to cause any
person or other entity to induce or attempt to induce, any person who is an
employee of the Company to leave the employ of the Company during the term of
the covenant set forth above.

 

If the Company determines that a participant has breached any of the covenants,
his or her stock options and Performance Share Units will be immediately
forfeited.  In the event any of the restrictive covenants set forth herein is
deemed unenforceable, such as against a non-US employee, the employee agrees
that the maximum period, scope or geographic area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions accordingly.

 

Administration

 

It is expressly understood that the Committee has the discretionary authority to
administer, construe, and make all determinations necessary or appropriate to
the administration of the Program, all of which will be binding upon the
participant.  The Committee may delegate its authority to one or more of its
members, or to one or more members of the Company’s senior management team, to
offer participation in this Program to eligible individuals; provided, however,
that the Committee shall not delegate its authority with respect to the
participation of any officer of the Company who is subject to Section 16 of the
Securities Exchange Act of 1934, as amended.  The Company shall, as necessary,
adopt conforming amendments to this Program as are necessary to comply with Code
Section 409A.

 

General Provisions

 

All obligations of the Company under this Program with respect to payout of
Awards, and the corresponding rights granted thereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger,

 

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consolidation or other acquisition of all or substantially all of the business
and/or assets of the Company.

 

This Program constitutes a legal document which governs all matters involved
with its interpretation and administration and superseded any writing or
representation inconsistent with its terms.

 

Reservation and Retention of Company Rights

 

The selection of any employee for participation in this Program will not give
that participant any right to be retained in the employ of the Company.  No
employee will at any time have a right to be selected for participation in a
future performance-based incentive program despite having been selected for
participation in this Program or a previous program.

 

Stock Plan Controls

 

Except as specifically provided in this Program, in the event of any
inconsistency between this Program and the Stock Plan, the Stock Plan will
control, but only to the extent such Stock Plan provisions do not violate the
provisions of Code Section 409A.

 

Code Section 409A

 

The Company intends that this Program and the Awards granted hereunder be
interpreted and construed to comply with Code Section 409A to the extent
applicable thereto. Notwithstanding any provision of the Program to the
contrary, the Program shall be interpreted and construed consistent with this
intent, provided that the Company shall not be required to assume any increased
economic burden in connection therewith.  Although the Committee intends to
administer the Program so that it will comply with the requirements of Code
Section 409A, neither the Company nor the Committee represents or warrants that
the Program will comply with Code Section 409A or any other provision of
federal, state, local, or non-United States law.  Neither the Company, its
subsidiaries, nor their respective directors, officers, employees or advisers
shall be liable to any participant (or any other individual claiming a benefit
through any participant) for any tax, interest, or penalties any participant may
owe as a result of compensation paid under the Program, and the Company and its
subsidiaries shall have no obligation to indemnify or otherwise protect the
participant from the obligation to pay any taxes pursuant to Code Section 409A.

 

Definitions

 

CEO:  the Company’s Chief Executive Officer.

 

Cause:  as determined in the sole discretion of the Committee, means the
participant:  (A) performing an act of dishonesty, fraud, theft, embezzlement or
misappropriation involving the participant’s employment with the Company, or
breach of the duty of loyalty to the Company; (B) performing an act of race,
sex, national origin, religion, disability, or age-based discrimination which,
after investigation, counsel to the Company reasonably concludes will result in
liability being imposed on the Company and/or the participant; (C) material
violation of Company policies and procedures including, but not limited to, the
Aon Code of Business Conduct and the Aon Code of Ethics; or (D) performing an
act resulting in a criminal felony charge (or equivalent offense in a non-US
jurisdiction) brought against the participant or a criminal conviction of the
participant (other than a conviction of a minor traffic violation).

 

Change in Control:  means the first to occur of the following:  (1) the
acquisition by any individual, entity or group (a “Person”), including any
“person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (i) the then outstanding shares of common stock of the Company
(the

 

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“Outstanding Common Stock”) or (ii) the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the election
of directors (the “Outstanding Voting Securities”); excluding, however, the
following: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or exchanged was
acquired directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(D) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this Section 1(c);
provided further, that for purposes of clause (B), if any Person (other than the
Company or any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company) shall become the
beneficial owner of 30% or more of the Outstanding Common Stock or 30% or more
of the Outstanding Voting Securities by reason of an acquisition by the Company,
and such Person shall, after such acquisition by the Company, become the
beneficial owner of any additional shares of the Outstanding Common Stock or any
additional Outstanding Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall constitute a
Change in Control;

 

(2)           individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of
such Board; provided that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for election by the
Company’s stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member of the
Incumbent Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or threatened
solicitation by a Person other than the Board for the purpose of opposing a
solicitation by any other Person with respect to the election or removal of
directors, or any other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board shall not be deemed a member
of the Incumbent Board;

 

(3)           the consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals or entities
who are the beneficial owners, respectively, of the Outstanding Common Stock and
the Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the outstanding securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or indirectly) in substantially the same
proportions relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Common Stock and the Outstanding
Voting Securities, as the case may be, (ii) no Person (other than:  the Company;
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly or indirectly, 30% or
more of the Outstanding Common Stock or the Outstanding Voting Securities, as
the case may be) will beneficially own, directly or indirectly, 30% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the

 

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members of the board of directors of the corporation resulting from such
Corporate Transaction; or

 

(4)           the consummation of a plan of complete liquidation or dissolution
of the Company.

 

Committee:  the Organization and Compensation Committee of the Company’s board
of directors.

 

Company:  Aon Corporation, a Delaware corporation, and its subsidiaries.

 

Earnings per Share or EPS:  the Company’s earnings per share from continuing
operations as reported each quarter.  The Committee has the sole discretion to
approve an adjustment to EPS, in accordance with the adjustment criteria set
forth herein.

 

Fair Market Value:  the per share value of the Company’s common stock as
determined by using the closing price of such stock as reported by the New York
Stock Exchange on such date (or, if the New York Stock Exchange was not open for
trading or the stock was not traded on that day, the next preceding day that the
New York Stock Exchange was open for trading and the common stock of the Company
was traded).

 

Grant Date:  the date an Award to a participant is approved in writing by the
Committee.

 

Program or LPP:  the Leadership Performance Program, effective January 1, 2009.

 

Retire or Retirement: a voluntary termination of employment at or after the
participant’s 55th birthday.

 

Settlement Date:  the date that the Committee determines whether the performance
criteria applicable to the Performance Share Units has been achieved or exceeded
and determines the payout to participants.  The Settlement Date shall occur as
soon as practicable following the close of the Performance Cycle.

 

Settlement Date Value:  the Fair Market Value of a share of the Company’s common
stock on the date the Committee determines the amount of the Performance Share
Units earned.

 

Stock Plan:  the 2001 Aon Stock Incentive Plan, as amended and re-approved by
the Company’s stockholders at the 2006 annual meeting of stockholders.

 

Total and Permanent Disability:  for (a) US employees, entitlement to long-term
disability benefits under the Company’s program, as amended from time to time
and (b) non-US employees, as established by applicable Company policy or as
required by local law or regulations.

 

If a term is used but not defined, it has the meaning given such term in the
Stock Plan.

 

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