Exhibit 10.7


 


AON
BENFIELD PERFORMANCE PROGRAM


 


Overview


 


This Program has been adopted by the
Committee as a sub-plan to the Stock Plan, effective as of January 1, 2009.  The Program is intended to provide a unifying
and motivating long-term wealth-building program for the key members of the Aon
Benfield leadership team.


 


Performance Cycle


 


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


 


Eligibility


 


As recommended by the Aon Benfield management
team, and as further recommended by Aon’s Chief Executive Officer and approved
by the Committee, key members of the Aon Benfield leadership team are eligible
to participate in the Program.


 


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 US
dollars or number of target Performance Share Units (“PSUs”).  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 leadership team for Aon Benfield, but the participant’s employment
with Aon has not terminated, the participant’s Award under the Program shall be
unaffected by the change in status.


 


Number of Target Performance
Share Units


 


In the event the Committee denominates a
participant’s Award in US dollars, versus specifying the number of target PSUs
awarded, the number of target PSUs will be derived by dividing the US dollar value
of the Award by the Fair Market Value of a share of the Company’s common stock
on the PSU Grant Date, and rounding to the nearest whole share.


 


Rules Applicable to PSUs and
Restricted Stock Units


 


1.                                      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 number of target PSUs granted to the participant.


2.                                      The PSUs will
be earned and will convert to Restricted Stock Units of Aon Corporation common
stock (“RSUs”) as of the Settlement Date, subject to the satisfaction of the
performance criteria and the vesting criteria set forth herein.


3.                                      The settlement
of the PSUs will be determined based on the cumulative adjusted three-year Segment
PTI over the Performance Cycle as compared to the target cumulative three-year Segment
PTI, as set forth herein.


4.                                      Payouts will
range from 0% to 200% of the number of target PSUs awarded.


5.                                      For achievement
above threshold level, the PSUs will settle in RSUs 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 settlement shall take place in the calendar year following the end of
the Performance Cycle.  In no event will
the Award be settled in RSUs later than two and one-half months after the end
of the calendar year to which such award relates.


 

















 


6.                                      Unless
otherwise set forth in Rule 11 below, the RSUs will vest during employment
as follows:  50% will become vested upon
the Settlement Date, and will in turn be settled in shares of common stock of
Aon Corporation; and 50% will become vested on the first anniversary of the Settlement
Date, subject to the participant’s continued employment with Aon through such
date.  In no event with the second
tranche of RSUs be settled later than two and one-half months after the first
anniversary of the Settlement Date.


7.                                      The Company will
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 applicable vesting date.


8.                                      The PSUs and
RSUs are not transferable and may not be sold, assigned, pledged, hypothecated
or otherwise encumbered.


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


10.                                Until the
Settlement Date, the participant will not be treated as a stockholder as to any
shares of the Company’s common stock relating to the PSUs.  No cash payments will be provided for
dividend equivalents or other distributions in connection with the PSUs.
Notwithstanding the foregoing, on and after the Settlement Date, the Company
will provide a cash dividend equivalent to the participant, at the same time that
actual dividends are declared for stockholders, on any unvested RSUs.


11.                                If a
participant’s employment with the Company terminates before the last day of the
Performance Cycle with respect to the PSUs, or between the Settlement Date and
the first anniversary thereof with respect to any unvested RSUs, the following rules will
apply to the vesting of the PSUs or RSUs:


 


	
  Reason for

  Employment

  Termination

  	
   

  	
  Impact on Vesting of PSUs or RSUs

  
	
  Retirement or termination
  by Company without Cause

  	
   

  	
  PSUs will vest pro rata
  through the date of termination or Retirement, and the vested PSUs will pay
  out in accordance with the rules above, exclusive of rule 6, within
  60 days following the participant’s employment termination date. 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
  Segment PTI as of the last full calendar quarter preceding the participant’s
  termination or Retirement date, multiplied by 75%.

   

  Unvested RSUs will vest
  pro rata on the date of termination or Retirement at 25% plus the number of
  days employed between the Settlement Date and the first anniversary thereof,
  and will be paid out within 60 days following the participant’s employment
  termination date. After application of the previous sentence, any remaining
  unvested RSUs will be forfeited.

  



 


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  Reason for

  Employment

  Termination

  	
   

  	
  Impact on Vesting of PSUs or RSUs

  
	
  Death or Total and
  Permanent Disability

  	
   

  	
  PSUs 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 Segment PTI
  during the period of the Performance Cycle in which the participant was
  employed by the Company, and the vested PSUs will pay out in accordance with
  the rules above, exclusive of rule 6, within 60 days following the
  participant’s employment termination date.

   

  Unvested RSUs will become
  immediately vested in the event of the participant’s death or Total and
  Permanent Disability on or after the Settlement Date but prior to the first
  anniversary thereof, and will be paid out within 60 days following such
  event.

  
	
   

  	
   

  	
   

  
	
  Voluntary Resignation

  	
   

  	
  PSUs and unvested RSUs
  will be forfeited in their entirety.

  
	
   

  	
   

  	
   

  
	
  Termination by Company for
  Cause

  	
   

  	
  PSUs and unvested RSUs
  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 PSUs 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 first year of the Performance
  Cycle, the participant will become immediately vested in the greater of 50%
  of the target PSUs or the number of units that would be earned based on the
  proportion of achievement of the target cumulative Segment PTI as of the last
  full calendar quarter preceding the participant’s termination date, and the
  vested PSUs will pay out in accordance with the rules above, exclusive
  of rule 6, and within 60 days following the participant’s employment
  termination date; or

   

  (2) if the
  participant’s employment is terminated by the Company without Cause after the
  Change in Control and after the end of the first year of the Performance
  Cycle, the participant will become immediately vested in the greater of the
  target PSUs or the number of units that would be earned bases on the
  proportion of achievement of the target cumulative Segment PTI as of the last
  full calendar quarter preceding the participant’s termination date, and the
  vested PSUs will pay out in accordance with the rules above, exclusive
  of rule 6, and within 60 days following the participant’s employment
  termination date; or

   

  (3) 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 at least the end of the Performance Cycle, the
  rules of the Program shall continue to apply to the PSUs and RSUs 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 PSUs shall become immediately vested at the 

  



 


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  Reason for

  Employment

  Termination

  	
   

  	
  Impact on Vesting of PSUs or RSUs

  
	
   

  	
   

  	
  greater of 50% of the
  target PSUs if less than one year of the performance period is completed, or
  100% thereafter, or the number of units that would have been earned based on
  the proportion of achievement of the target cumulative Segment PTI as of the
  last full calendar quarter preceding the effective date of the Change in
  Control, and the vested PSUs will pay out in accordance with the
  rules above, exclusive of rule 6, and within 60 days following the
  participant’s employment termination date.

  



 


12.                                The time and
form of settlement of the PSUs and RSUs will be made as described herein,
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 will be
delayed until the earlier to occur of the participant’s death or the date that
is six 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 will
be paid to the participant in accordance with the rules 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.


 


13.                                The time or
schedule of any payout or settlement of PSUs 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 PSUs


 


The performance measure for the PSUs will be cumulative
adjusted three-year Segment PTI for the Performance Cycle, for which the
Committee will established a target.


 


Following the end of the Performance Cycle, the
Committee will determine in its sole discretion the payout, which determination
shall be final and binding.  PSUs will be
subject to complete forfeiture if the Company’s performance for the Performance
Cycle does not meet or exceed a minimum cumulative adjusted three-year Segment
PTI.


 


Adjustments to Performance
Measures or Results


 


The Committee will make appropriate adjustments
to the target cumulative three-year Segment PTI 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; 


 


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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.


 


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, 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.


 


All employees that participate in this
Program will agree to keep their compensation arrangement confidential.


 


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 


 


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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


 


Aon Benfield:  Aon Benfield, a global business unit of Aon
Corporation.


 


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).  If there is a
dispute between the Company and the employee regarding the occurrence of a
termination for “cause,” it will be subject to review and determination by an
independent adjudicator.


 


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 “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 


 


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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 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.


 


Code Section 409A: Section 409A
of the U.S. Internal Revenue Code of 1986, as amended.


 


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


 


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


 


Fair Market Value: as of any date,
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 the award of PSUs to
a participant under this Program is approved in writing by the Committee.


 


Program:  the Aon Benfield Performance
Program, effective as of January 1, 2009.


 


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


 


Segment PTI:  the annual pretax income
from ongoing operations for the Aon Benfield Segment of Aon, inclusive of
restructuring savings.  The Committee has
the sole discretion to approve an adjustment to Segment PTI, in accordance with
the adjustment criteria set forth herein.


 


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Settlement Date:  the date that the Committee
determines whether the performance criteria applicable to the PSUs were
achieved or exceeded and determines the payout to participants in the form of
RSUs.  The Settlement Date shall occur as
soon as practicable following the close of the Performance Cycle.


 


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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