Document:

Exhibit 10.2

 

CHANGE IN CONTROL AGREEMENT

 

This Agreement is entered into as of November 19, 2010 between Aon Corporation, a Delaware corporation, and Russell P. Fradin (the “Executive”).

 

WHEREAS, the Executive will serve as a key employee of the Company (as defined in Section 1) and the Executive’s services and knowledge are valuable to the Company in connection with the management of one or more of the Company’s principal operating facilities, divisions, departments or subsidiaries; and

 

WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure the Executive’s services and to ensure the Executive’s dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1) of the Company, without concern as to whether the Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage the Executive’s full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows:

 

1.                                       Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

(a)                                  “Board” means the Board of Directors of the Company.

 

(b)                                 “Cause” means:

 

(1)                                  a material breach by the Executive of those duties and responsibilities of the Executive which do not differ in any material respect from the duties and responsibilities of the Executive during the 90-day period immediately prior to a Change in Control (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive’s part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach;

 

(2)                                  gross misconduct, theft, fraud, breach of trust or any act of dishonesty by the Executive which results in material harm to the Company; or

 

(3)                                  the commission by the Executive of a felony involving moral turpitude.

 

 

(c)                                  “Change in Control” means:

 

(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 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

 

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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.

 

(d)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)                                  “Company” means Aon Corporation, a Delaware corporation.

 

(f)                                    “Good Reason” means, without the Executive’s express written consent, the occurrence of any of the following events after a Change in Control:

 

(1)                                  a material adverse change in the nature or scope of the Executive’s authority, powers, functions, duties or responsibilities as in effect immediately prior to such Change in Control;

 

(2)                                  a material reduction by the Company in the Executive’s rate of annual base salary or bonus opportunity as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;

 

(3)                                  the failure of the Company to continue in effect any material employee benefit plan or compensation plan in which the Executive is participating immediately prior to such Change in Control, unless the Executive is permitted to participate in other plans providing the Executive with substantially comparable benefits, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such plan;

 

 

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(4)                                  a change in the Executive’s primary employment location to a location that is more than 50 miles from the primary location of the Executive’s employment at the time of such Change in Control; or

 

(5)                                  the failure of the Company to obtain from any successor or transferee of the Company an express written and unconditional assumption of the Company’s obligations under this Agreement, as further described in Section 12(b) of this Agreement.

 

For purposes of this Agreement, any good faith determination of Good Reason made by the Executive shall be conclusive; provided, however, that an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive shall not constitute Good Reason.

 

The Executive’s employment may be terminated by the Executive for Good Reason if (x) an event or circumstance set forth in this Section 1(f) shall have occurred and the Executive provides the Company with written notice thereof within 90 days after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstance that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within 30 days after the receipt of such notice, and (z) the Executive resigns during the Termination Period and after the date of delivery of the notice referred to in clause (x) above.

 

(g)                                 “Nonqualifying Termination” means a termination of the Executive’s employment (1) by the Company for Cause, (2) by the Executive for any reason other than a Good Reason, (3) as a result of the Executive’s death or (4) by the Company due to the Executive’s absence from the Executive’s duties with the Company on a full-time basis for at least 180 consecutive days as a result of the Executive’s incapacity due to physical or mental illness.

 

(h)                                 “Termination Date” means the date during the Termination Period on which the Executive’s employment is terminated other than by reason of a Nonqualifying Termination.

 

(i)                                     “Termination Period” means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) the date which is two (2) years following such Change in Control and (2) the Executive’s death; provided, however, that, anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive’s employment with the Company was terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (a) was at the request of a third party who was taking steps reasonably calculated to effect a Change in Control or (b) otherwise arose in connection with or in anticipation of a Change in Control, then for purposes of this Agreement, “Termination Period” means the period of time commencing upon the date immediately prior to the date of such termination of employment and ending on the earlier to occur of (x) two (2) years following such Change in Control and (y) the Executive’s death.

 

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2.                                       Obligations of the Executive.  The Executive agrees that in the event any person or group attempts a Change in Control, he shall not voluntarily leave the employ of the Company without Good Reason (a) until such attempted Change in Control terminates or (b) if a Change in Control shall occur, until 90 days following such Change in Control.

 

3.                                       Payments and Benefits Upon Termination of Employment.  If during the Termination Period the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination, and the Executive (or the Executive’s executor or other legal representative in the case of the Executive’s death or disability following such termination) executes a noncompetition, nonsolicitation and confidentiality agreement and release of claims substantially in the form of Exhibit A hereto (the “Noncompetition Agreement and Release”) within 45 days following the Termination Date, the Company shall provide to the Executive, as compensation for services rendered to the Company, and in consideration of the covenants set forth in the Noncompetition Agreement and Release, the payments and benefits described in this Section 3.  The Executive shall forfeit the payments and benefits described in this Section 3 in the event that the Executive fails to execute and deliver the Noncompetition Agreement and Release to the Company in accordance with the timing and other provisions of the preceding sentence or revokes such Noncompetition Agreement and Release prior to the date the release of claims contained therein becomes effective.  For certainty and not intending to extend the provisions above to any equity award, in no event shall such forfeiture as described herein shall apply to the payment of any Transition RSUs (as defined in the Executive’s employment agreement with the Company, dated as of September 30, 2010) or any dividend equivalents credited with respect to the Transition RSUs.  For purposes of this Agreement, the Executive shall be considered to have a termination of employment with the Company and its subsidiaries on the date the Executive has a “separation from service” as described under Section 409A of the Code and the guidance and Treasury Regulations issued thereunder with the Company and its subsidiaries.  Any amount paid pursuant to this Section 3 shall be paid in lieu of any other severance payments and benefits, which benefits may, without limitation, include pay in lieu of notice, salary continuation through a contractual notice period or enhanced supplemental pension benefits conferred, in any event as a result of termination of employment, from the Company or any of its subsidiaries which are not payable pursuant to this Agreement, but are payable pursuant to an employment agreement or other compensation arrangement entered into between such Employee and the Company or any of its subsidiaries.

 

(a)                                  Except as otherwise provided in Section 6, and conditioned upon the Executive’s execution of the Noncompetition Agreement and Release without revocation within the time period described in the preceding provisions of this Section 3, the Company shall pay to the Executive (or the Executive’s beneficiary or estate, as the case may be) on the 60th day following the later to occur of the Termination Date or the Change in Control:

 

(1)                                  a cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 7 and any deductions authorized by the Executive) equal to the sum of (i) the Executive’s full annual base salary from the Company and its affiliated companies through the Termination Date, to the extent not theretofore paid, (ii) the average of the Executive’s annual cash incentive for each of the three fiscal years immediately preceding the fiscal year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days in the

 

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fiscal year in which the Termination Date occurs and the denominator of which is 365 or 366, as applicable, and (iii) any accrued vacation pay, in each case to the extent not theretofore paid; plus

 

(2)                                  a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 7 and any deductions authorized by the Executive) in an amount equal to two (2) times the sum of (a) Executive’s annual base salary from the Company and its affiliated companies in effect on the Termination Date and (b) the average incentive compensation paid to the Executive by the Company for the previous two years; plus

 

(3)                                  a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 7 and any deductions authorized by the Executive) in an amount equal to the amount forfeited by the Executive under any qualified defined contribution plan maintained by the Company or any of its subsidiaries as a result of the Executive’s termination of employment.

 

(b)                                 The Executive shall become fully (100%) vested in the Executive’s accrued benefits under the Aon Corporation Excess Benefit Plan, the Aon Corporation Supplemental Savings Plan and the Aon Corporation Supplemental Employee Stock Ownership Plan, or successor plans in effect on the date of the Executive’s termination of employment (the “Nonqualified Plans”).  The Executive’s accrued benefits under the Aon Corporation Excess Benefit Plan or the Aon Corporation Supplemental Savings Plan, whichever plan is applicable to the Executive on the date of the Executive’s termination of employment, shall be determined by crediting the Executive with two (2) additional years of age and service credits and, in the case of the Aon Corporation Supplemental Savings Plan, two (2) additional years of Retirement Plan Contributions.

 

(c)                                  For the period commencing on the Termination Date and ending on the earlier of (i) the date which is two (2) years following the Termination Date and (ii) the date on which the Executive becomes eligible to participate in and receive medical, dental and life insurance benefits under a plan or arrangement sponsored by another employer having benefits substantially equivalent to the benefits provided pursuant to this Section 3(c), the Company shall continue the Executive’s medical, dental and life insurance coverage, under the Company-sponsored plans or otherwise, upon the same terms and otherwise to the same extent as such coverage shall have been in effect immediately prior to the Executive’s Termination Date, and the Company and the Executive shall share the costs of the continuation of such medical, dental and life insurance coverage in the same proportion as such costs were shared immediately prior to the Termination Date; provided, that the cost of any medical insurance plan premium reimbursement paid by the Company to the Executive following the end of the continuation coverage period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, shall be the full cost thereof; provided, further, the Company’s share of the cost of the continuation of coverage under any self-insured medical reimbursement plan that is subject to Section 105(h) of the Code shall be included in the Executive’s taxable income from the Company.  Such continuation of medical and dental coverage shall be in satisfaction of the Company’s obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985

 

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(COBRA).  Payment or reimbursement of expenses incurred by the Executive pursuant to this Section 3(c) shall be made promptly and in no event later than December 31 of the year following the year in which such expenses were incurred, and the amount of expenses eligible for reimbursement, or in-kind benefits provided, in any year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in any other year, except for any limit on the amount of expenses that may be reimbursed under an arrangement described in Section 105(b) of the Code.  Additionally, such right to payment or reimbursement, or in-kind benefits to be provided, shall not be subject to liquidation or exchange for another benefit.  If the Executive is a “specified employee” under Section 409A of the Code, the full cost of the continuation or provision of employee benefits described under this Section 3(c) (other than any cost of medical or dental benefit plans or programs or the cost of any other plan or program that is exempt from Section 409A of the Code) shall be paid by the Executive until the earlier to occur of the Executive’s death or the date that is six months and one day following the Executive’s termination of employment, and such cost shall be reimbursed by the Company or the applicable subsidiary to, or on behalf of, the Executive in a lump sum cash payment on the earlier to occur of the Executive’s death or the date that is six months and one day following the Executive’s termination of employment.

 

4.                                       Vesting of Equity Awards Upon Termination Date; Exercise Period.  Immediately upon the Executive’s Termination Date, all stock options and other equity awards, if any, granted by the Company to the Executive (or stock options and other equity awards granted in substitution therefor by an acquiror of, or successor to, the Company) that are not otherwise exercisable or vested shall become exercisable and vested in full.  Notwithstanding the foregoing, the time or schedule of any payment or amount scheduled to be paid pursuant to the terms of this Section 4, including but not limited to any restricted stock unit or other equity-based award, payment or amount that provides for the “deferral of compensation” (as such term is defined under Section 409A of the Code), may not be accelerated except as otherwise permitted under Section 409A of the Code and the guidance and Treasury regulations issued thereunder.  With respect to any and all outstanding stock options granted by the Company to the Executive, each such option shall remain exercisable following the Executive’s termination of employment until and including the expiration date of the term of the option (as set forth in the written agreement relating to such option).

 

5.                                       Code Section 4999 Excise Tax.  (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that (i) any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of the Executive (whether pursuant to the terms of this Agreement or otherwise) (the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), and (ii) the reduction of the amounts payable to the Executive under this Agreement to the maximum amount that could be paid to the Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”) would provide the Executive with a greater after-tax amount than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement shall be reduced (but not below zero) to the Safe Harbor Cap.  The reduction of the amounts payable hereunder, if applicable, shall be made to the extent necessary in the following order: (i) the acceleration of vesting of stock options with an exercise

 

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price that exceeds the then fair market value of the stock subject to the award and of other equity awards, provided that such stock options and of other equity awards are not permitted to be valued under Treasury Regulation Section 1.280G-1 Q/A — 24(c); (ii) the payments under Section 3(a); (iii) the payments and benefits under Section 3(b); (iv) the payments and benefits under Section 3(c); (v) any equity awards accelerated pursuant to Section 4 or otherwise valued at full value, provided that such equity awards are not permitted to be valued under Treasury Regulation Section 1.280G-1 Q/A — 24(c); (vi) the acceleration of vesting of stock options with an exercise price that exceeds the then fair market value of the stock subject to the award and other equity awards, provided that such stock options and other equity awards are permitted to be valued under Treasury Regulation Section 1.280G-1 Q/A — 24(c); and (vii) the acceleration of vesting of all other stock options and equity awards on a basis resulting in the highest amount retained by the Executive.  For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a greater after-tax result to the Executive, no amounts payable under this Agreement shall be reduced pursuant to this provision.  Notwithstanding the foregoing, payment of the Transition RSUs or any dividend equivalents credited with respect to the Transition RSUs shall not be subject to any reduction as provided in this Section 3.

 

(b)                                 All determinations required to be made under this Section shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company.  Notwithstanding the foregoing, in the event (i) the Board shall determine prior to the Change in Control that the Accounting Firm is precluded from performing such services under applicable auditor independence rules or (ii) the Audit Committee of the Board determines that it does not want the Accounting Firm to perform such services because of auditor independence concerns or (iii) the Accounting Firm is serving as accountant or auditor for the person(s) effecting the Change in Control, the Board shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees, costs and expenses (including, but not limited to, the costs of retaining experts) of the Accounting Firm shall be borne by the Company.  If payments are reduced to the Safe Harbor Cap or the Accounting Firm determines that no Excise Tax is payable by the Executive without a reduction in payments, the Accounting Firm shall provide a written  opinion to the Executive to the effect that the Executive is not required to report any Excise Tax on the Executive’s federal income tax return, and that the failure to report the Excise Tax, if any, on the Executive’s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  The determination by the Accounting Firm shall be binding upon the Company and the Executive (except as provided in Section 5(c) below).

 

(c)                                  If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that Payments have been made to, or provided for the benefit of, the Executive by the Company which are in excess of the limitations provided in this Section (referred to hereinafter as an “Excess Payment”), the Executive shall repay the Excess Payment to the Company on

 

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demand, together with interest on the Excess Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of the Executive’s receipt of such Excess Payment until the date of such repayment.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the determination, it is possible that Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made under this Section.  In the event that it is determined (i) by the Accounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on its federal income tax return) or the IRS or (ii) pursuant to a determination by a court, that an Underpayment has occurred, the Company shall pay an amount equal to such Underpayment to the Executive within 10 days of such determination together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Executive until the date of payment.  The Executive shall cooperate, to the extent the Executive’s expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the IRS in connection with the Excise Tax or the determination of the Excess Payment.  Notwithstanding the foregoing, in the event that amounts payable under this Agreement were reduced pursuant to Section 5(a) and the present value of any Payment is subsequently re-determined by the Accounting Firm within the context of Treasury Regulation Section 1 280G-1 Q/A 33 that reduces the value of the Payment, the Company shall promptly pay to Executive any amounts payable under this Agreement that were not previously paid solely as a result of Section 5(a), subject to the Safe Harbor Cap.

 

(d)                                 A payment or reimbursement of expenses described in this Section 5 shall be made promptly and in no event later than December 31 of the year following the year in which such expenses were incurred, any reimbursement of expenses incurred due to a tax audit or litigation shall be made no later than the end of the calendar year immediately following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or, if no taxes are to be remitted, the end of the calendar year following the calendar year in which the audit or litigation is completed, and the amount of such expenses eligible for payment or reimbursement in any year shall not affect the amount of such expenses eligible for payment or reimbursement in any other year nor shall such right to payment or reimbursement be subject to liquidation or exchange for another benefit.

 

(e)                                  For the avoidance of doubt, this Section 5 shall not limit or supersede any rights the Executive may have for any tax gross-up protection for any excise taxes imposed under Section 4999 of the Code arising out of, or in any way in connection with, the acquisition by the Company (or one of its wholly-owned subsidiaries) of or with Hewitt Associates, Inc. that was consummated on October 1, 2010.

 

6.                                       Delay of Payments.  (a)  Except as otherwise provided in Section 6(b) below, in the event that any payment or distribution or portion of any payment or distribution to be made to the Executive under Section 3(a) of this Agreement cannot be characterized as a “short term deferral” for purposes of Section 409A of the Code or is not otherwise exempt from the provisions of Section 409A of the Code, and “Change in Control” as defined for purposes of this Agreement does not satisfy the requirements of a change in control event as described in Section 409A of the Code and the guidance and regulations issued thereunder or, if “Change in

 

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Control” does satisfy such requirements under Code Section 409A, the Termination Date is not within two years following the Change in Control in accordance with Treasury Regulation Section 1.409A-3(c)(1), then an amount equal to the aggregate severance payments that would otherwise be payable to the Executive upon an involuntary termination of employment under any other employment agreement or other compensation arrangement entered into between the Executive and the Company or any of its subsidiaries shall be paid to the Executive at the same time and in the same form of payment as such other severance payments would otherwise be paid and the remainder of the payment or distribution, or portion thereof, under Section 3(a) of this Agreement shall be paid in accordance with Section 3(a).

 

(b)                                 In the event that any payment or distribution or portion of any payment or distribution to be made to the Executive hereunder cannot be characterized as a “short term deferral” for purposes of Section 409A of the Code or is not otherwise exempt from the provisions of Section 409A of the Code, and the Executive is determined to be a “specified employee” under Section 409A of the Code, such portion of the payment shall be delayed until the earlier to occur of the Executive’s death or the date that is six months and one day following the Executive’s termination of employment with the Company and its subsidiaries (the “Delay Period”).  Upon the expiration of the Delay Period, the payments delayed pursuant to this Section 6 shall be paid to the Executive or his beneficiary in a lump sum, and any remaining payments due under this Agreement shall be payable in accordance with their original payment schedule.

 

7.                                       Withholding Taxes.  The Company may withhold from all payments due to the Executive (or the Executive’s beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.

 

8.                                       Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of the Executive’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse the Executive, on a current basis, for all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute; provided, however, that in the event the resolution of any such contest or dispute includes a finding denying, in total, the Executive’s claims in such contest or dispute, the Executive shall be required to reimburse the Company, over a period of 12 months from the date of such resolution, for all sums advanced to the Executive pursuant to this Section 8.  Payment or reimbursement of expenses described in this Section 8 shall be made promptly and in no event later than December 31 of the year following the year in which such expenses were incurred, and the amount of such expenses eligible for payment or reimbursement in any year shall not affect the amount of such expenses eligible for payment or reimbursement in any other year nor shall the right to payment or reimbursement be subject to liquidation or exchange for another benefit.

 

9.                                       Operative Event.  No amounts shall be payable hereunder unless and until there is a Change in Control.

 

10.                                 Termination of Agreement.  (a)  This Agreement shall be effective on the date hereof and shall continue until terminated by the Company as provided in Section 10(b); provided, however, that this Agreement shall terminate in any event upon the earlier to occur of

 

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(1) termination of the Executive’s employment with the Company prior to a Change in Control and (2) the Executive’s death.

 

(b)  The Company shall have the right prior to a Change in Control, in its sole discretion, pursuant to action by the Board, to approve the termination of this Agreement, which termination shall not become effective until the date fixed by the Board for such termination, which date shall be at least 120 days after notice thereof is given by the Company to the Executive in accordance with Section 13; provided, however, that no such action shall be taken by the Board during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Board, such person has abandoned or terminated its efforts to effect a Change in Control; and provided  further, that in no event shall this Agreement be terminated in the event of a Change in Control.

 

11.                                 Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle the Executive to continued employment with the Company or its subsidiaries and, subject to Section 2 hereof, if the Executive’s employment with the Company shall terminate prior to a Change in Control, then the Executive shall have no further rights under this Agreement; provided, however, that any termination of the Executive’s employment following a Change in Control shall be subject to all of the provisions of this Agreement.

 

12.                                 Successors; Binding Agreement.

 

(a)  This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company.  In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.

 

(b)  The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in Section 12(a), it will cause any successor or transferee unconditionally to assume, by written instrument delivered to the Executive (or the Executive’s beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption prior to the effectiveness of any such merger, consolidation or transfer of assets shall be a breach of this Agreement and shall entitle the Executive to compensation and other benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive’s employment were terminated following a Change in Control other than by reason of a Nonqualifying Termination during the Termination Period.  For purposes of implementing the foregoing, the date on which any such merger, consolidation or transfer becomes effective shall be deemed the Date of Termination.

 

(c)  This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Executive shall die while any amounts would be payable to the Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such 

 

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person or persons appointed in writing by the Executive to receive such amounts or, if no person is so appointed, to the Executive’s estate.

 

13.                                 Notices.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed (1) if to the Executive, to the last known residential address on file for the Executive with the Company, and if to the Company, to Aon Corporation, 200 East Randolph Drive, Chicago, Illinois 60602, 3d Floor, attention General Counsel, with a copy to the Secretary, or (2) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

(b)                                 A written notice of the Executive’s Termination Date by the Company or the Executive, as the case may be, to the other, shall (1) indicate the specific termination provision in this Agreement relied upon, (2) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (3) specify the termination date (which date shall be not less than 15 days after the giving of such notice).  The failure by the Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

14.                                 Full Settlement; Resolution of Disputes.  (a) The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, subject to Section 3(c) hereof,  such amounts shall not be reduced whether or not the Executive obtains other employment.

 

(b)                                 If there shall be any dispute between the Company and the Executive in the event of any termination of the Executive’s employment, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause, that the determination by the Executive of the existence of Good Reason was not made in good faith, or that the Company is not otherwise obligated to pay any amount or provide any benefit to the Executive and the Executive’s dependents or other beneficiaries, as the case may be, under Sections 3 and 4 hereof, the Company shall pay all amounts, and provide all benefits, to the Executive and the Executive’s dependents or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Sections 3 and 4 hereof as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this Section 14(b) except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled.

 

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15.                                 Employment with, and Action by, Subsidiaries.  For purposes of this Agreement, employment with the Company or actions taken by the Company with respect to the Executive shall include employment with or actions taken by any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors.

 

16.                                 Governing Law; Validity.  The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Illinois without regard to the principle of conflicts of laws.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect.

 

17.                                 Counterparts.  This Agreement may be executed in two counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument.

 

18.                                 Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by the Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

19.                                 Prohibition on Acceleration of Payments.  The time or schedule of any payment or amount scheduled to be paid pursuant to the terms of this Agreement, or pursuant to the terms of any other employment agreement or compensation arrangement entered into between the Executive and the Company or any of its subsidiaries, may not be accelerated hereunder, or under any such other employment agreement or other compensation arrangement, except as otherwise permitted under Section 409A of the Code and the guidance and Treasury Regulations issued thereunder.

 

20.                                 Code Section 409A.  The parties intend that this Agreement and the benefits provided hereunder be interpreted and construed to comply with Section 409A of the Code to the extent applicable thereto.  Notwithstanding any provision of the Agreement to the contrary, the Agreement 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 Company intends to administer the Agreement so that it will comply with the requirements of Section 409A of the Code, the Company does not represent or warrant that the Agreement will comply with Section 409A of the Code or any other provision of federal, state, local or non-United States law.

 

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21.                                 Entire Agreement.  This Agreement supersedes the Severance Agreement (or Change in Control Agreement)  between the parties entered into, and approved by the Board for execution by the parties, in 2006 and any and all similar agreements entered into by the parties prior to the date hereof.  This Agreement constitutes the entire understanding between the parties with respect to the Executive’s severance pay in the event of a termination of the Executive’s employment with the Company in connection with a Change in Control; provided, however, that except as otherwise expressly set forth in this Agreement, the rights of, and benefits payable to, the Executive, the Executive’s estate or the Executive’s beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, the Executive, the Executive’s estate or the Executive’s beneficiaries under any other employee benefit plan or broad-based compensation program of the Company.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and the Executive has executed this Agreement as of the day and year first above written.

 

	
 
    	
AON   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jeremy G.O. Farmer
    
	
 
    	
Its:
    	
SVP   + Head of Human Resources
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Russell P. Fradin
    
	
 
    	
Russell   P. Fradin
    

 

15

 

EXHIBIT A TO 
  AGREEMENT

 

NONCOMPETITION, NONSOLICITATION,

CONFIDENTIALITY AGREEMENT AND RELEASE OF CLAIMS

 

This Noncompetition, Nonsolicitation, Confidentiality Agreement and Release of Claims (this “Noncompetition Agreement”) is executed by Aon Corporation, a Delaware corporation (the “Company”), and                                 (the “Executive”) pursuant to the Change in Control Agreement dated as of                               , 20     between the Company and the Executive (the “Agreement”).

 

WHEREAS, the Executive’s employment with the Company and its subsidiaries is terminating;

 

WHEREAS, the Executive acknowledges that the benefits to be provided to the Executive under the Agreement are in consideration of, and are sufficient to support, the covenants set forth in this Noncompetition Agreement; and

 

WHEREAS, the Executive understands that the Company regards the representations and covenants by the Executive in this Noncompetition Agreement as material and that the Company is relying on such representations and covenants in paying amounts to the Executive pursuant to the Agreement.

 

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

 

1.                                       Severance Benefits.  The Executive’s employment with the Company and its subsidiaries shall terminate on                 , and the Executive shall receive the severance benefits set forth in the Agreement in accordance with the terms and subject to the conditions thereof.

 

2.                                       Restrictive Covenants.  The Executive acknowledges and agrees that the provisions in Sections 4, 5 and 6 of the Executive’s employment agreement with the Company, dated as of [September]     , 2010 (the “Employment Agreement”) shall continue to apply.

 

3.                                       General Release of All Claims.  (a) For valuable consideration, the adequacy of which is hereby acknowledged, the undersigned Executive, on his own behalf and on behalf of his heirs, executors, administrators, successors, representatives and assigns, does herein knowingly and voluntarily unconditionally release, waive, and fully discharge the Company and its subsidiaries (including successors and assigns thereof) and all of their respective past, present and future employees, officers, directors, agents, affiliates, parents, predecessors, administrators, representatives, attorneys, and shareholders, and employee benefit plans, from any and all legal claims, liabilities, suits, causes of action (whether before a court or an administrative agency), damages, costs, attorneys’ fees, interest, injuries, expenses, debts, or demands of any nature whatsoever, known or unknown, liquidated or unliquidated, absolute or contingent, at law or in equity, which were or could have been filed with any Federal, state or local court, agency, arbitrator or any other entity, based directly on indirectly on the Executive’s 

 

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employment with and separation from the Company or based on any other alleged act or omission by or on behalf of the Company prior to the Executive’s signing this Noncompetition Agreement.  Without limiting the generality of the foregoing terms, this Noncompetition Agreement and this Section providing a general release of all claims specifically includes all claims based on the terms, conditions, and privileges of employment, and those based on breach of contract (express or implied), tort, harassment, intentional infliction of emotional distress, defamation, negligence, privacy, employment discrimination, retaliation, discharge not for just cause, constructive discharge, wrongful discharge, the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Notification Act, as amended, Executive Order 11,141 (age discrimination), Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Civil Rights Act of 1866 and 1871, Section 1981 through 1988 of Title 42 of the United States Code, as amended, 41 U.S.C. Section 1981 (discrimination), 29 U.S.C. Section 206(d)(1) (equal pay), Executive Order 11,246 (race, color, religion, sex and national origin discrimination), the National Labor Relations Act, the Equal Pay Act of 1993, the Americans with Disabilities Act of 1990, the Occupational Safety and Health Act, as amended, the Family Medical Leave Act, the Immigration Reform and Control Act, as amended, the Vietnam Era Veterans Readjustment Assistance Act, Sections 503-504 of the Rehabilitation Act of 1973 (handicap rehabilitation), the Employee Retirement Income Security Act of 1974, as amended, any federal, state or local fair employment, civil or human rights, wage and hour laws and wage payment laws, and any other Federal, state, local or other governmental statutes, laws, ordinances, regulations and orders, under common law, and under any Company policy, procedure, bylaw or rule.  This Section 3 of the Noncompetition Agreement shall not waive or release any rights or claims (i) that the Executive may have which arise after the date of this Noncompetition Agreement or that arise under or are preserved by the Agreement, and shall not waive any claims for benefits required by applicable law (including post-termination health-continuation insurance benefits required by state or Federal law) or claims arising under the terms of any applicable plan, program or other arrangement of the Company; (ii) for payments and benefits under Sections 3 and 4 of the Agreement; (iii) for indemnification (including advancement of attorneys’ fees) and directors and officers liability insurance; (iv) any rights to the payment of the Transition RSUs (as defined in the Employment Agreement) and any dividend equivalents credited with respect to the Transition RSUs; (v) any tax gross-up payment in connection with any excise taxes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, in connection with the Company’s (or one of its wholly-owned subsidiaries) corporate transaction with Hewitt Associates, Inc. that was completed on         , 2010; and (vi) for any rights for any equity awards pursuant to the terms of such equity grant, including, but not limited, to any rights for accelerated vesting and extended exercise periods of exercisable equity awards.

 

(b)  The Executive intends this Section 3 of the Noncompetition Agreement to be binding on his successors, and the Executive specifically agrees not to file or continue any claim in respect of matters released herein.  The Executive further agrees, with respect of matters released herein, never to institute any suit, complaint, proceeding, grievance or action of any kind at law, in equity, or otherwise in any court of the United States or in any state, or in any administrative agency of the United States or any state, county or municipality, or before any other tribunal, public or private, against the Company arising from or relating to his employment with or his termination of employment from the Company and/or any other occurrences to the 

 

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date of this Noncompetition Agreement, other than a claim challenging the validity of this Section 3 of the Noncompetition Agreement under the ADEA or respecting any matters not covered herein.

 

(c)  The Executive is further waiving his right to receive money or other relief in any action instituted by him or on his behalf by any person, entity or governmental agency in respect of matters covered by this Section 3.  Nothing in this Section 3 shall limit the rights of any governmental agency or his right of access to, cooperation or participation with any governmental agency, including without limitation, the United States Equal Employment Opportunity Commission.  The Executive further agrees to waive his rights under any other statute or regulation, state or federal, with provides that a general release does not extend to claims which the Executive does not know or suspect to exist in his favor at the time of executive this Noncompetition Agreement, which if known to him must have materially affected his settlement with the Company.

 

(d) The Executive agrees that he shall not be eligible and shall not seek or apply for reinstatement or re-employment with the Company, and he agrees that any application for re-employment may be rejected without explanation or liability pursuant to this provision.

 

(e) In further consideration of the promises made by the Company in this Noncompetition Agreement, the Executive specifically waives and releases the Company, to the extent set forth in this Section 3, from all claims the Executive may have as of the date of this Noncompetition Agreement, whether known or unknown, arising under the ADEA.  The Executive further agrees that:

 

(1) the Executive’s waiver of rights under Section 3 of this Noncompetition Agreement is knowing and voluntary and in compliance with the Older Workers Benefit Protection Act of 1990 (“OWBPA”);

 

(2) the Executive understands the terms of this Section 3 of the Noncompetition Agreement;

 

(3) the consideration offered by the Company under this Noncompetition Agreement and the Agreement in exchange for the general release of all claims in this Section 3 represents consideration over and above that to which the Executive would otherwise be entitled, and that the consideration would not have been provided had the Executive no agreed to sign this Noncompetition Agreement and did not sign it;

 

(4) the Company is hereby advising the Executive in writing to consult with an attorney prior to executing this Noncompetition Agreement;

 

(5) the Company is giving the Executive a period of twenty-one (21) days within which to consider this Noncompetition Agreement;

 

(6) following the Executive’s execution of this Noncompetition Agreement, the Executive has seen (7) days in which to revoke this Noncompetition Agreement by written notice.  An attempted revocation not actually received by the Company prior to the revocation deadline will not be effective; and

 

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(7) this Noncompetition Agreement, the Agreement, and all payments and benefits under either or both of them shall be void and of no force and effect if the Executive chooses to so revoke, and if the Executive chooses not to so revoke this Noncompetition Agreement and the Agreement then become effective and enforceable.

 

(f)  This Section 3 does not waive rights or claims that may arise under the ADEA after the date the Executive signs this Noncompetition Agreement.  To the extent barred by the OWBPA, the covenant not to sue contained herein does not apply to claims under the ADEA that challenge the validity of this Section 3 of the Noncompetition Agreement.

 

(g)  To revoke this Noncompetition Agreement, the Executive must send a written statement of revocation to:                                                                      .  The revocation must be received no later than 5:00 pm on the seventh day following the Executive’s execution of this Noncompetition Agreement.  If the Executive does not revoke, the eighth day following the Executive’s acceptance will be the “effective date” of this Noncompetition Agreement.

 

4.                                       Entire Agreement.  The Agreement and this Noncompetition Agreement constitute the entire understanding between the parties.  The Executive has not relied on any oral statements that are not included in the Agreement or this Noncompetition Agreement.

 

5.                                       Severability.  If any provision of this Noncompetition Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Noncompetition Agreement shall be construed and enforced as if such provision had not been included.

 

6.                                       Governing Law.  This Noncompetition Agreement shall be construed, interpreted and applied in accordance with the internal laws of the State of Illinois without regard to the principles of conflicts of laws.

 

IN WITNESS WHEREOF, the Company has caused this Noncompetition Agreement to be executed by a duly authorized officer of the Company and the Executive has executed this Noncompetition Agreement as of the day and year first above written.

 

	
 
    	
AON   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Executive’s   Name]
    

 

19Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (“Agreement”) is dated and effective as of February 25, 2008 (the “Effective Date”) between Aon Corporation, a Delaware corporation with offices located at 200 East Randolph Street, Chicago, Illinois 60601 (the “Company”), and Michael J. O’Connor (the “Executive”).

 

R E C I T A L S

 

WHEREAS, the Company wishes to employ the Executive, and the Executive wishes to be employed by the Company;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties agree:

 

Section 1.  Employment Term; Title; Responsibilities.

 

(a)           Employment Term; Title.  The Company agrees to employ the Executive as Executive Vice President and Chief Operating Officer of Aon Risk Services, and the Executive agrees to serve in such role, for a term (the “Term of Employment”) beginning on the Effective Date and ending on February 25, 2013 unless renewed pursuant to Section 3 hereof, or terminated during the Term of Employment as fully set forth in Section 3.  It shall not be a breach of this Agreement if the Executive’s title is changed by the Company.

 

(b)           Responsibilities.  The Executive shall report to the President of Aon Risk Services (the “President”), but it shall not be a breach of this Agreement if the reporting structure is changed by the Company.  The Executive shall have the authority and responsibility consistent with the position of Chief Operating Officer of a global business unit.   The Executive shall also perform such other duties (not inconsistent with his position) on behalf of the Company and its subsidiaries as may from time to time be authorized or directed by the President.

 

Section 2.  Consideration; Compensation During Term of Employment.

 

(a)           Consideration.  The consideration for entering into this Agreement shall be the performance of services by the Executive pursuant to this Agreement and the employment of the Executive by the Company as well as the other payments and benefits provided under this Section 2.

 

(b)           Base Salary.  Unless the Company fixes a higher rate for the Executive during the Term of Employment, the Company shall pay compensation to the Executive at the rate of a

 

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minimum of $700,000 per year (the “Base Salary”) payable in accordance with the usual payroll schedule of the Company.

 

(c)         Incentive Compensation.  Executive shall be eligible to participate in the annual incentive compensation program for the Company’s senior executives in accordance with the provisions of such program, as amended from time to time.  For 2008, the Executive’s target bonus is 100% of the Executive’s Base Salary and the maximum bonus is 300% of the Executive’s Base Salary; however, notwithstanding the foregoing and regardless of the achievement of any corporate or individual performance goals, the Executive’s 2008 bonus shall not be less than $700,000.  The Executive’s target, maximum and actual bonus opportunity for performance in 2009 and later years shall be established in accordance with the provisions of the Company’s annual incentive compensation program, as amended from time to time.  The Executive acknowledges and agrees that the annual incentive compensation awards hereunder shall be subject to payment pursuant to and in accordance with the Aon Incentive Stock Program,  payable in a combination of cash and Aon restricted stock units, if applicable.

 

(d)        Awards of Restricted Stock Units and Stock Options.  Subject to the approval of the Organization and Compensation Committee of the Company’s board of directors (the “Committee”) at the next regularly scheduled meeting during which equity-based awards are considered, on or following the later of the Effective Date or the execution of this Agreement, the Executive shall receive:  (i) an award of 50,000 restricted stock units of Aon Corporation common stock pursuant to the 2001 Aon Stock Incentive Plan, as amended from time to time (the “Stock Plan”); and (ii) a nonqualified option to purchase 50,000 shares of Aon Corporation common stock pursuant to the Stock Plan.  The restricted stock units and stock options shall be subject to terms and conditions generally applicable to similar awards granted under the Stock Plan; provided, however, that:  (i) the restricted stock units shall vest over five years with one installment of 34% vesting at the end of the third anniversary of the date of grant and two installments of 33% each vesting at the end of the fourth and fifth anniversaries of the date of grant; and (ii) the stock options shall have an exercise price equal to the fair market value of the Company’s common stock on the date of grant, a ten-year term and shall vest 33% on the second anniversary of the date of grant and 33% and 34%, respectively, on the third and fourth anniversaries of the date of grant.

 

(e)         Award Pursuant to Leadership Performance Program. Subject to the approval of the Committee at its next regularly scheduled meeting during which awards under the Company’s Leadership Performance Program are considered, on or following the later of the Effective Date or the execution of this Agreement, the Executive shall receive an award pursuant to the Company’s Leadership Performance Program, a sub-plan of the Stock Plan, having an aggregate initial value of $1,500,000.  Such award will be granted for the performance period beginning January 1, 2008 and ending December 31, 2010, and will be governed by the terms and conditions of such program.  The Executive shall be eligible to receive awards under the program or successor program(s) for future performance periods in 

 

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accordance with the terms and conditions generally applicable to similarly-situated senior executives.

 

(f)         Executive Benefits.  During the course of employment, the Executive shall enjoy the customary benefits that are generally afforded to executives of the Company.  The Executive also shall be entitled to participate in executive benefit plans now or hereafter provided or made available to the Company’s executives generally, such as group medical, life, disability insurance, savings plan, flexible spending accounts for dependent care and health care and long term care.  Nothing in this Agreement shall require the Company to establish, maintain or continue any of the benefits already in existence or hereafter adopted for executives of the Company and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate such fringe benefit programs.

 

(g)        Vacation Time.  The Executive shall be entitled to paid vacation time in accordance with usual Company policies and procedures. The Company shall not pay the Executive any additional compensation for any vacation time not used by the Executive except as required by law.

 

(h)        Business Travel, Entertainment Expenses.  In accordance with Company policies and procedures and on prescribed Company forms, the Company will reimburse the Executive for business expenses and entertainment expenses incurred by the Executive.

 

Section 3.  Renewal; Termination.

 

(a)         Renewal.  This Agreement may be renewed upon (i) the issuance by the Company of a notice of renewal (“Notice of Renewal”) to the Executive at least six (6) months prior to the end date of the Term of Employment or any renewal period thereof and (ii) the written acceptance of the Notice of Renewal by the Executive within (60) days thereafter.

 

(b)        Termination.

 

(i)  Death or Disability.  This Agreement shall be terminated immediately upon the death or total disability of the Executive (as defined under the Aon Long Term Disability Plan or its successor plan) or in the event that Executive becomes otherwise disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities for one hundred eighty (180) consecutive calendar days; provided, however, (A) in the event of Executive’s death during the Term of Employment the Company shall pay an amount equal to the Base Salary for the remainder of the Term of Employment in accordance with the Company’s normal payroll schedule, which such amount shall be reduced by the amount of life insurance benefits payable to the beneficiary of Executive pursuant to Company-sponsored Basic Group Term Life Insurance or Executive Life Insurance

 

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Coverage, as applicable, and (B) in the event of Executive’s total disability (i) an amount equal to the Base Salary shall be paid for the remainder of the Term of Employment in accordance with the Company’s normal payroll schedule, which such amount shall be reduced by the amount of disability insurance benefits payable to Executive pursuant to Company-sponsored disability insurance coverage, plus (ii) a pro rata bonus for the year in which such termination of employment occurs  equal to the total value of the bonus (i.e. cash portion plus RSU portion) paid to Executive for the year prior to the year of termination multiplied by the ratio of the number of days Executive was employed during the year of termination divided by 365.

 

(ii)  Without Cause  or for Good Reason.   This Agreement may be terminated by the Company without cause on no less than three hundred sixty-five (365) days advance notice by the Company or by the Executive without cause on no less than ninety (90) days advance notice to the Company or by the Executive for Good Reason.  If terminated without cause by the Company or for Good Reason by Executive, the Company shall pay Executive (A) all accrued but unpaid Base Salary and benefits as of the date of such termination, (B) an Incentive Bonus equal to Base Salary on the date of termination.  In addition, if terminated without cause by the Company or for Good Reason by the Executive, so long as Executive continues to abide by the provisions of Sections 4(b), 4(c) and 6 herein notwithstanding the expiration of the period specified therein, the Company shall continue to pay Executive an amount equal to the Base Salary as and when it would be paid to its executives generally until the earlier of:  (i) the second anniversary of the date of termination; or (ii) the end of the initial Term of Employment or, if renewed, until the end of any such renewal period.

 

As used herein, “Good Reason” shall mean any of the following which remains uncured by the Company for twenty (20) days after receipt by the Company of written notice of such Good Reason by Executive: (a) a substantial adverse alteration in the then-current responsibilities of Executive; or (b) any material breach of this Agreement by the Company, including any purported termination of the Executive’s employment which breaches this Agreement.  In the event of termination for Good Reason, this Agreement shall terminate on the three hundredth sixty-fifth (365th) day following receipt of written notice of Good Reason.

 

Notwithstanding anything to the contrary in the Section 3(b)(ii), the Company may require Executive to leave Company premises immediately upon the giving of notice of termination. Such a requirement shall not relieve the Company of its obligations to continue Base Salary or benefits during the notice period.

 

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In the event Executive terminates this Agreement without cause or Good Reason, the Company shall only be required to pay Executive all accrued but unpaid Base Salary and benefits as of the date of such termination.

 

(iii)  For Cause.  The Company may at any time during the initial Term of Employment and during any renewals thereof, terminate this Agreement for “cause”, effective immediately by written notice of termination given to the Executive setting forth the basis for such termination.  For the purposes of this Agreement, “cause” shall mean the Executive’s: (A) performing an act of dishonesty, fraud, theft, embezzlement, or misappropriation involving Executive’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, or sexual harassment, which after investigation, counsel to the Company reasonably concludes will result in liability being imposed on the Company and/or Executive; (C) material violation of the Company’s written  policies and procedures including, but not limited to, the Aon Code of Business Conduct and the Aon Code of Ethics; (D) material non-compliance with the terms of this Agreement, including but not limited to Sections 4 and 6;  (E) admission or conviction of, or a plea of nolo contendere, to a felony or any crime involving moral turpitude or misrepresentation; or (F) failure or inability (other than by reason of total disability as defined in Section 3(b)(i) herein) to perform his duties under this Agreement to the satisfaction of at least a majority of the Board of Directors of the Company including, without limitation, any refusal by the Executive to perform such duties or to follow specific directives of the President,  which such duties and directions are consistent with the experience and qualifications of Executive.

 

In the event of a termination for “cause,” the Company shall only be required to pay Executive all accrued but unpaid Base Salary and benefits as of the date of such termination.

 

(iv)  As of the effective date of termination, Executive agrees that the Secretary of the Company may, as an irrevocable proxy and in Executive’s name and stead, execute all documents and things which the Company deems necessary and desirable to effect Executive’s resignation as an officer or director of the Company and its subsidiaries and affiliates.

 

(v)  Upon the effective date of termination, or other expiration of this Agreement, the obligations of the parties under this Agreement, other than the Executive’s obligations under Sections 3(c), 4, 5, 6, and 8, and the Company’s obligations under Sections 3(b) shall cease; provided further that any other provision which contemplates performance or observance by either or both parties subsequent to

 

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any termination of this Agreement shall survive any termination of this Agreement and continue in full force and effect.

 

(vi)  Any agreement herein by the Company to continue to pay Base Salary or any other benefits after the termination of employment shall be in lieu of, and not in addition to, any benefits provided by the Aon Severance Plan.

 

(c)         The Executive agrees that, prior to the commencement of any new employment in the insurance business, the Executive will furnish the prospective new employer with a copy of this Agreement.  The Executive also agrees that the Company may advise any prospective new employer of the Executive of the existence and terms of this Agreement and furnish the prospective new employer with a copy of this Agreement.

 

Section 4.    Noncompetition; Nonsolicitation.

 

(a)             General.  The Executive acknowledges that in the course of his employment with the Company he has and will become familiar with trade secrets and other confidential information concerning the Company and its subsidiaries and that his services will be of special, unique and extraordinary value to the Company and its affiliates.

 

(b)              Noncompetition.  The Executive agrees that during the Term of Employment  and for a period of two years thereafter (the “Noncompetition Period”) Executive shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise or otherwise, engage or be engaged, or assist any other person, firm, corporation or enterprise in engaging or being engaged, in any business being conducted by, or contemplated by, the Company or any of its subsidiaries as of the termination of the Executive’s employment in any geographic area in which the Company or any of its subsidiaries is then conducting such business.

 

(c)              Nonsolicitation.  The Executive further agrees that during the Noncompetition Period Executive shall not in any manner, directly or indirectly, induce or attempt to induce any employee of the Company or any of its subsidiaries to terminate or abandon his or her employment with the Company for any purpose whatsoever.

 

(d)              Exceptions.  Nothing in this Section 4 shall prohibit the Executive from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than two percent of the outstanding stock of any class of a corporation, any securities of which are publicly traded, so long as Executive has no active participation in the business of such corporation.

 

(e)              Reformation.  If, at any time of enforcement of this Section 4, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties

 

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hereto agree that the maximum period, scope or geographical 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 contained herein to cover the maximum period, scope and area permitted by law.  This Agreement shall not authorize a court to increase or broaden any of the restrictions in this Section 4.

 

(f)               Consideration; Breach.  The Company and the Executive agree that the payments to be made, and the benefits to be provided, by the Company to the Executive pursuant to Section 3 hereof shall be made and provided in consideration of the Executive’s agreements contained in Section 4 hereof.  In the event that the Executive shall commit a material breach of any provision of Section 4 hereof, the Company shall be entitled immediately to terminate making all remaining payments and providing all remaining benefits pursuant to Section 3 hereof and upon such termination the Company shall have no further liability to the Executive under this Agreement.

 

Section 5.  Company’s Right to Injunctive Relief; Attorneys’ Fees.

 

The Executive acknowledges that the Executive’s services to the Company are of a unique character which gives them a special value to the Company, the loss of which cannot reasonably or adequately be compensated in damages in an action at law, and that a breach of Section 4 and 6 of this Agreement will result in irreparable and continuing harm to the Company and that therefore, in addition to any other remedy which the Company may have at law or in equity, the Company shall be entitled to injunctive relief for a breach of this Agreement by the Executive.  In the event that any action is filed in relation to this Agreement, the prevailing party in the action shall recover from the non-prevailing party, in addition to any other sum that either party may be called upon to pay, a reasonable sum for the prevailing party’s attorney’s fees.

 

Section 6.  Trade Secrets and Confidential Information; Inventions.

 

(a)         Trade Secrets and Confidential Information.  The Executive acknowledges that the Company’s business depends to a significant degree upon the possession of information which is not generally known to others, and that the profitability of the business of the Company requires that this information remain proprietary to the Company.

 

The Executive shall not, except as required in the course of employment by the Company, disclose or use during or subsequent to the course of employment, any trade secrets or confidential or proprietary information relating to the business of the Company of which the Executive becomes aware by reason of being employed by the Company or to which Executive gains access during his employment by the Company and which has not been publicly disclosed (other than by Executive in breach of this provision).  Such information includes client and customer lists, data, records, computer programs, manuals, processes, methods and intangible rights which are either developed by the Executive during the course of employment or to

 

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which the Executive has access.  All records and equipment and other materials relating in any way to any confidential information relating to clients or to the business of the Company or Aon Group shall be and remain the sole property of the Company during and after the end of employment.

 

Upon termination of employment, the Executive shall promptly return to the Company all materials and all copies or tangible embodiments of materials involving any confidential information in the Executive’s possession or control.  The Executive agrees to represent in writing to the Company upon termination of employment that he has complied with the provisions of this Section 6.

 

(b)        Inventions.  The Executive hereby assigns to the Company his entire right, title and interest in and to all discoveries and improvements, patentable or otherwise, trade secrets and ideas writings and copyrightable material, which may be conceived by the Executive or developed or acquired by him during the Term of Employment, which may pertain directly or indirectly to the business of the Company or any of its affiliates, parent companies, or subsidiaries. The Executive agrees to disclose fully all such developments to the Company upon its request, which disclosure shall be made in writing promptly following any such request. The Executive shall upon the Company’s request, execute, acknowledge and deliver to the Company all instruments and do all other acts which are necessary or desirable to enable the Company or any of its affiliates, parent companies, or subsidiaries to file and prosecute applications for, and to acquire, maintain and enforce, all patents, trademarks, and copyrights in all countries.

 

Section 7.  Mergers and Consolidations; Assignability.

 

The rights and obligations under this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.  By way of explanation, and without limiting the generality of the foregoing sentence, if the Company or any entity resulting from any merger or consolidation referred to in this Section 7 is merged with or consolidated into any other entity or entities, or if substantially all of the assets of the Company or any such entity are sold or otherwise transferred to another entity, the provisions of this Agreement shall be binding upon and shall inure to the benefit of the continuing entity in or the entity resulting from such merger or consolidation or the entity to which such assets are sold or transferred.  This Agreement shall not be assignable by the Executive, but in the event of his death it shall be binding upon and inure to the benefit of the Executive’s legal representatives to the extent required to effectuate its terms.

 

Section 8.  Miscellaneous.

 

(a)         Integration.  Except as is otherwise provided herein, this Agreement contains all of the terms and conditions agreed upon by the parties relating to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements, negotiations,

 

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correspondence, undertakings and communications of the parties, whether oral or written, respecting the subject matter of this Agreement.

 

This Agreement may not be amended, altered or modified without the prior written consent of both parties and such instrument must acknowledge that it is an amendment or modification of this Agreement.

 

(b)        Waiver.  Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of a subsequent breach or failure of the same term or condition, or a waiver of any other term or condition of this Agreement.  Any waiver must be in writing.

 

(c)         Captions.  The captions in this Agreement are not part of its provisions, are merely for reference and have no force or effect.  If any caption is inconsistent with any provision of this Agreement, such provision shall govern.

 

(d)        Governing Law; Waiver of Jury Trial. The validity, interpretation, construction, performance, enforcement and remedies of, or relating to, this Agreement, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the substantive laws of the State of Illinois, without regard to the conflict of law principles, rules or statutes of any jurisdiction.  In the event of a legal action filed or brought by either party relating to the validity, interpretation, construction, performance, enforcement and remedies of, or relating to, this Agreement, and the rights and obligations of the parties hereunder, each of the Company and the Executive hereby agree that it and he now and forever waives any and all rights to a trial by jury irrespective of the law principles, rules or statutes of any jurisdiction or of the nature of the cause of action.

 

(e)           Agreement To Be Available In Future Proceedings.  During the period of employment, and after employment termination, Executive agrees to voluntarily make himself available to the Company and its legal counsel, at Company’s request, without the necessity of obtaining a subpoena or court order, in the Company’s investigation, preparation, prosecution and/or defense of any actual or potential legal proceeding, regulatory action, or internal matter.  Executive agrees to provide any information reasonably within his recollection.  The Company will reimburse Executive for reasonable out-of-pocket expenses actually incurred as a result of such requests, or, at Company’s option, will arrange to advance Executive’s expenses or incur such expenses directly.

 

(f)         Severability.  To the extent that the terms set forth in this Agreement or any word, phrase, clause or sentence is found to be illegal or unenforceable for any reason, such word, phrase, clause or sentence shall be modified or deleted in such manner so as to afford the Company the fullest protection commensurate with making this Agreement, as modified, legal and enforceable under applicable laws, and the balance of this Agreement shall not be affected thereby, the balance being construed as severable and independent.

 

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(g)        Notice.  All notices given hereunder shall be in writing and shall be sent by registered or certified mail or delivered by hand and, if intended for the Company, shall be addressed to it or delivered to it at its principal office for the attention of the Secretary of the Company.  If intended for the Executive, notices shall be delivered personally or shall be addressed (if sent by mail) to the Executive’s then current residence address as shown on the Company’s records, or to such other address as the Executive directs in a notice to the Company.  All notices shall be deemed to be given on the date received at the address of the addressee or, if delivered personally, on the date delivered.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

	
 
    	
AON   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Greg Case
    
	
 
    	
 
    	
Gregory   C. Case
    
	
 
    	
 
    	
President   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
2-29-08
    

 

 

I have read the above Agreement and understand and agree to be bound by its terms.

 

 

	
 
    	
/s/ Michael O’Connor
    
	
 
    	
Michael   J. O’Connor
    
	
 
    	
 
    
	
 
    	
Date:   
    	
2-25-08
    

 

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