Document:

Exhibit 10.12

 

 

Gregory J. Besio

Aon Corporation

USA

 

January 12, 2012

 

International Assignment — Chicago, Illinois (U.S.) to London, England

 

Dear Greg,

 

Your relocation to London is critical to Project Market and will help us realize the benefits of the transaction for all concerned stakeholders.  As you know, the transaction is anticipated to position the company for future growth, improve our financial flexibility, and increase our ability to invest globally in strategic initiatives and talent.

 

We recognize this assignment will require a significant time commitment, as well as personal adjustment and inconveniences for you and your family. However, we are committed to working with you to ensure that your international assignment is as successful and smooth as possible.

 

This letter sets out the terms of your assignment and the assistance we are committed to provide in connection with your relocation, consistent with the approval of, and directions provided by, the Organization and Compensation Committee of the Company’s board of directors.

 

1.              Introduction

 

This assignment is subject to your acceptance of the terms and conditions outlined in this letter, which sets forth the entire agreement between you and the Company regarding your international assignment.  To the extent that anything in this letter conflicts with your current employment terms or agreement, or the Company’s Employee Handbook, this letter, once countersigned by you, will be a variation to your employment terms.  Unless otherwise specified herein, your current employment terms and conditions will remain unchanged for the duration of the international assignment.

 

2.              Employment Status

 

These terms and conditions will only be in effect for the period of this assignment.  During this period you will remain an employee of Aon Service Corporation or Aon Corporation, as applicable (“the Company”).  You will be expected to conform to the general requirements of the Company’s Employee Handbook and any local rules and procedures and relevant legislation.  During the assignment, you will be seconded (loaned) to Aon Global, Limited, Aon’s parent company in London, England.

 

3.              Assignment Duration

 

Your assignment will commence on a date to be mutually agreed on or before September 1, 2012.  The duration of the assignment is expected to be less than 24 months, after which you will return to the Company’s offices in Chicago, Illinois, provided that the Company may, in consultation with you, extend or shorten your assignment according to business needs and/or your personal circumstances. In the event that your assignment is extended beyond 36 months the Company reserves the right to “localize” your terms.

 

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4.              Immigration

 

Your assignment is conditional upon the Company being able to obtain and maintain the appropriate work permit, visa and/or other authorization documents for you to work and remain in London, England.  The Company will cover the cost of obtaining and maintaining the appropriate work permit/visa for you.  In addition, should you desire and consistent with current policy, the Company will also assist your spouse or partner in obtaining a work permit, visa and/or other authorization documents to work in London.

 

5.              Changes to Compensation Arrangements

 

The changes to your compensation and benefits package during your international assignment, as described below, are designed to provide you with a level of income and benefits which do not disadvantage you in comparison to those you would have received in the United States. We have also taken into consideration any additional costs that you may reasonably incur as a result of living in London.  Unless otherwise noted below as being a non-taxable benefit, the following benefits will be provided to you subject to income and social taxes.

 

5.1.           Foreign Service Allowance

 

You will receive an annual foreign service allowance of US$97,500. While on assignment, your target annual incentive award will be 100% of the sum of your annual base salary, as in effect at the end of the bonus year, plus your annual foreign service allowance.  The allowance will be paid semi-monthly via your U.S. payroll.

 

5.2.           Housing Allowance

 

During your assignment you will receive an annual housing allowance of US$252,000 (GBP160,800) [monthly allowance of US$21,000 (GBP13,400)].  The allowance is to be used to pay accommodation and furniture rental costs and associated utility costs (excluding telephone and internet access which are personal expenses).  This allowance will be reviewed and adjusted annually to reflect foreign exchange and local market rate variation.  The allowance will paid semi-monthly via your U.S. payroll.

 

The Company will not be responsible in any way for your current residence in your home location. The payment of your U.S. housing expenses will remain your responsibility.

 

5.3.           Cost of Living Allowance

 

You will receive an annual cost of living allowance of US$90,000.  This allowance is intended to replicate your U.S. purchasing power in London and is based on a family size of four.  The allowance will be paid semi-monthly via your U.S. payroll

 

5.4.           Car Allowance

 

You will receive an annual car allowance of US$23,500 (GBP15,000) while on assignment in the U.K.  Some or all of this allowance may be non-taxable to you, depending on the extent of your usage of transportation for Company business. This allowance will be reviewed and adjusted annually to reflect local market practice.  The allowance will be paid semi-monthly via your U.S. payroll.

 

5.5.           Home Leave Allowance

 

You and each family member that is relocating with you are entitled to one round-trip home leave to return to the U.S. for each complete year you are on assignment.  In addition, any immediate family members (e.g., university aged dependent children) not accompanying you on assignment are entitled to two round-trip flights to the U.K. for each complete year you are on assignment.

 

5.6.           Household Goods Move

 

The Company will pay the transportation and moving cost of you and your family to London from the U.S. at the beginning of your assignment in line with the Company’s

 

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relocation policy for an international household goods move.  You and your spouse or partner may also make a pre-assignment visit to London at Company expense to locate permanent housing.  If necessary, you will be provided with corporate housing for up to 30 days after your arrival on assignment to allow time to finalize your permanent housing. All or a portion of the benefits described in this paragraph 5.6 may be non-taxable to you.

 

5.7.           Relocation Allowance

 

You will receive a one-time relocation allowance of US$64,167 in the first month you are working in London. This allowance is intended to cover all miscellaneous expenses not covered by other provisions included in your relocation package.  All or a portion of this allowance may be non-taxable to you if used to purchase certain goods or services related to the international assignment, as evidenced by receipts.  Your independent tax advisor will provide the criteria.

 

5.8.           Waiver/Retention Bonus

 

You will receive an annual waiver/retention bonus of US$325,012 as consideration, and in exchange, for your acknowledgement and agreement that your consent herein to the international assignment, and your acceptance of this international assignment to London and repatriation thereafter, shall not give rise to any right to terminate for good reason (as defined in your employment agreement, if applicable) now or hereafter.  This bonus will be paid in two equal lump sums: one-half in the month prior to your relocation to London; and, one-half on the 12 month anniversary of the relocation date.

 

5.9.            Income Taxes Payable in the U.K. (Equalization Tax)

 

It is likely that all or a portion of your earned income during any given U.K. tax year will be subject to tax in the U.K. The Company applies a tax equalization policy (as described in Appendix A) which is designed to ensure the income and social taxes you pay will be no more than what you would have paid had all of your earnings been taxable solely in the U.S.  For the avoidance of doubt, the policy does not provide for the grossing up for U.S. income and social taxes on the relocation benefits described herein.

 

5.10.       Tax Preparation Services

 

The Company will also provide you with enhanced tax preparation, financial planning and expatriate services for the tax years covered by the international assignment and tax years for which international earnings are taxed by U.K. tax authorities following repatriation at the conclusion of the assignment.

 

6.              Hours of Work and Holidays

 

Your work schedule, work hours and observed holidays will follow the practice in London.

 

7.              Repayment Agreement

 

Should you elect to resign from the Company to work with a direct competitor, during your assignment or up to 12 months after the end of your assignment, the Company reserves the right to require repayment of all expatriate allowances you received in the preceding 12 months.  You agree that the Company may set off any such amounts against any amount the Company owes you on or after termination of your employment.

 

Additionally, with respect to the waiver/retention bonus only, if you resign for any reason while on the international assignment or the Company terminates your employment for cause (as defined in your employment agreement), you will be obligated to repay promptly to the Company a pro-rata portion of the annual waiver/retention bonus.  The prorated portion to be repaid will be calculated according to the following formula:  (the number of months remaining before the next succeeding anniversary date of the beginning of the international assignment divided by 12) x the USD value of the annual waiver/retention bonus.

 

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Should you depart the Company due to mutual consent, the repayment obligation in this paragraph 7 will not apply.

 

8.              Termination of Employment

 

If your employment is terminated without cause while on assignment, the Company will pay reasonable transportation and moving costs for you and your family to return to the U.S.  For avoidance of doubt, in this instance the company will continue to provide tax preparation and planning services for the tax years covered by the international assignment and tax years for which international earnings are taxed by U.K. tax authorities following repatriation.

 

Should you be terminated for cause or voluntarily terminate your employment without mutual consent while on assignment, you will bear all relocation and other costs arising after your termination for cause or resignation date.

 

9.              Completion of Assignment

 

At the end of your assignment the Company will endeavor to repatriate you into a position consistent with your then current employment agreement, if applicable, and in accordance with your capabilities, interest and career potential.  Your relocation will be managed in accordance with the provisions of the Company’s policy.

 

10.       Repatriation Assistance

 

The Company will pay the transportation and moving cost for you and your family back to the U.S. at the end of your assignment in accordance with the Company’s international relocation policy.

 

11.       Third Party Beneficiary

 

Each related entity of the Company is a third party beneficiary of this letter, and each of them has the full right and power to enforce rights, interests and obligations under this letter without limitation or other restriction.

 

12.       No Waiver

 

No failure or delay by any party in exercising any right, power or remedy under this letter shall operate as a waiver thereof, nor shall any single or particular exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy.  Without limiting the foregoing, no waiver by any party of any breach of any provision of this letter shall be deemed to be a waiver of any subsequent breach of that or any other provision of this letter.

 

13.       Withholding and Deductions

 

While it is anticipated that all or most of your compensation from the Company will be subject to a hypothetical tax deduction rather than actual tax withholdings, all amounts paid pursuant to this letter shall be subject to deductions and withholding for taxes (national, local, foreign or otherwise) to the extent required by applicable law.

 

14.       Code Section 409A

 

We intend that this letter and the benefits provided hereunder be interpreted and construed to comply with Section 409A of the U.S. Internal Revenue Code of 1986, as amended (“Code Section 409A”), to the extent applicable thereto. The time and form of payment of compensation, expense reimbursements and payments of in-kind benefits described herein will be made in accordance with the applicable sections of this letter, provided that with respect to termination of employment for reasons other than death, 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 you are a “specified employee” under Code Section 409A, such portion of the payment will be delayed until the earlier to occur of your death or the date that is six months and one day following your termination of employment (the “Delay Period”).

 

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Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this section will be paid or reimbursed to you in a lump sum, and any remaining payments due under this letter will be payable at the same time and in the same form as such amounts would have been paid.  For purposes of applying the provisions of Code Section 409A, each separately identifiable amount to which you are entitled will be treated as a separate payment.

 

15.       Governing Law

 

This letter will be construed in accordance with and governed by the laws of the State of Illinois, without regard to the choice of law principles thereof.  Any suit, action or other legal proceeding arising out of or relating to this Agreement shall be brought exclusively in the Federal or state courts located in the State of Illinois.  You agree to submit to personal jurisdiction in the foregoing courts and to venue in those courts.  You further agree to waive all legal challenges and defenses to the propriety of a forum in Chicago, Illinois and to the application of Federal or Illinois law therein.

 

Please confirm acceptance of the terms set out in this letter by signing below and returning a copy of the signed letter to me.

 

	
Sincerely,
    	
 
    
	
 
    	
 
    
	
/s/ Gregory C. Case
    	
 
    
	
 
    	
 
    
	
Gregory C. Case
    	
 
    
	
CEO
    	
 
    

 

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Employee’s Acknowledgement:

 

By signing below, I acknowledge receipt of this letter; I accept the terms and conditions contained herein; and I consent to this international assignment.  For the avoidance of doubt, nothing in this letter is intended to diminish my rights under my current employment arrangement with the Company (including, if applicable, my employment agreement with the Company), or any plan or equity-based award agreement, and I will continue to be entitled to the rights and benefits under any such arrangement during this international assignment.  Notwithstanding the foregoing, I acknowledge and agree that my consent herein to the international assignment, and my acceptance of this particular international assignment to London and my repatriation thereafter, shall not give rise to any right to terminate for good reason (as defined in the employment agreement, if applicable) now or hereafter.

 

I further acknowledge that I have read and agree to be bound by the Company’s tax equalization policy (as set forth on Appendix A).  With regard to that policy, I specifically agree acknowledge and agree that: if I owe any monies to the Company I will make payment of such monies to the Company within 60 days of receiving notification of the amount due; and authorize the Company to deduct (or reduce from my earnings) any amounts owed under this policy from my paycheck where permitted by law.

 

 

	
/s/ Gregory J. Besio
    	
 
    	
1/12/12
    
	
Gregory J. Besio
    	
 
    	
Date
    

 

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Appendix A

 

Tax Equalization Policy

 

The Company will apply the following tax equalization policy to ensure that the income and social taxes you pay will be no more than that you would have paid had all of your earnings been taxable solely in the U.S.  For the avoidance of doubt, the policy does not provide for the grossing up for U.S. income and social taxes on the relocation benefits described in the letter to which this Appendix A is attached.

 

The Company will determine an estimate of the tax liability you would have paid in the U.S. on your earnings from the Company, known as your “hypothetical” tax liability, and will deduct this estimated hypothetical tax from your monthly earnings via the Company’s U.S. payroll.  This policy will not protect you in your capacity as a shareholder of the Company from capital gains recognized pursuant to U.S. federal income tax as a result of the merger; however, your earnings related to granting or vesting of equity-based awards during your international assignment will be covered by this policy.

 

Hypothetical tax is paid on salary and on any other income paid to you by the Company (e.g. bonus) or compensation recognized by you (e.g., granting or vesting of stock-based incentives). Please note, for the avoidance of doubt, the Company will deduct hypothetical tax from your income at the point the income is paid to you and not by reference to the payment date that might have applied had you not taken up the assignment.

 

For a comprehensive description of the hypothetical tax procedures, please see “Aon International Tax Equalization Policy”, a white paper prepared by Corporate Finance in December 2010.

 

Please note that you will be responsible for the cost of any tax or additional charges arising in any tax jurisdiction on any personal income or gains, spousal income or any other U.S. source income.

 

For the duration of your assignment and any tail period required, the Company will authorize and pay for a tax adviser to: (1) prepare your joint or individual U.S. Federal and State, and U.K. tax returns as required; and (2), reconcile the hypothetical tax deductions made from your earnings.

 

If the amount of your final hypothetical tax liability to the Company is greater than the amount of any estimated hypothetical tax payments deducted by the Company from your salary or other payments, then you will be required to pay the additional hypothetical tax to the Company within 60 days of the relevant tax returns being finalized.  If it is less, then the Company will reimburse any excess to you within 60 days.

 

Provided you meet your obligations to the Company in respect of your hypothetical tax liability and provide such information and assistance as the Company and/or its designated tax adviser shall require in order to resolve your tax affairs on a timely basis and within the filing deadlines set down by the applicable tax authorities, the Company will pay any actual tax or social security liability arising in respect of your earned income.

 

Should you delay providing the necessary information to the tax advisers you will be responsible for any additional fees and/or penalties that arise as a result of the delay.

 

Although the Company will retain and pay an external tax adviser on your behalf to prepare your tax returns and to calculate your tax equalization calculations, it remains your personal obligation to file such returns within the applicable time limits and to abide by the tax laws in both the U.S. and U.K.  The external tax adviser will provide regular information regarding your obligations and filing schedules.

 

7Exhibit 10.13

 

AON CORPORATION

LEADERSHIP PERFORMANCE PROGRAM

For 2012-2014

 

Overview

 

The Program has been adopted by the Committee as a sub-plan to the Stock Plan, effective as of January 1, 2012.  The Program is the seventh layer of multi-year performance programs implemented by the Company.  Earlier programs covered the following performance periods: January 1, 2006 through December 31, 2008; January 1, 2007 through December 31, 2009; January 1, 2008 through December 31, 2010; January 1, 2009 through December 31, 2011; January 1, 2010 through December 31, 2012; and January 1, 2011 through December 31, 2013, respectively.

 

Performance Cycle

 

The Program covers a multi-year performance cycle that begins on January 1, 2012 and ends on December 31, 2014 (“Performance Cycle”).

 

Eligibility

 

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

 

Participation

 

The Committee will approve in writing no later than May 31, 2012 the identity of the participants eligible to participate in the Program and each participant’s Award, denominated as described herein either in total number of LPP units or US dollars.  Those participants so identified by May 31, 2012 shall be eligible to participate in the full Performance Cycle, retroactive to January 1, 2012.

 

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

 

Award Components — Performance Share Units

 

At the outset of participation in the Program, each participant will receive 100% of his or her Award “value” as target Performance Share Units of the Company’s common stock.  If the Award is denominated by the Committee in US dollars, the number of such target units will be derived by dividing the Award by the Fair Market Value of a share of the Company’s common stock on the Grant Date.

 

Rules Applicable to Performance Share Units

 

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

 

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

 

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

 

4.                                       The Performance Share Units will pay out in shares of the Company’s common stock issued under, and subject to, the limitations of the Stock Plan, provided that the pay

 

 

out in shares shall take place in the calendar year following the end of the Performance Cycle.

 

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

 

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

 

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

 

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

 

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

 

	
Reason for
   Employment
   Termination
    	
 
    	
Impact on Vesting of Performance Share Units
    
	
Retirement   or termination by Company without Cause
    	
 
    	
Performance   Share Units will vest pro rata through the date of termination or Retirement,   and the vested Performance Share Units will pay out in accordance with   rule 4 above. The Committee’s determination regarding the vested portion   and payout will occur after the close of the Performance Cycle. The number of   units earned will be calculated based on the actual achievement of the target   cumulative earnings per share for the performance period, and then the result   will be prorated as of the last full calendar quarter preceding the   participant’s termination or Retirement date, as follows:

 

Target   Shares X (EPS at end of quarter preceding date of termination/ EPS at end of   performance period) X Performance Factor = Number of Pro-Rata Shares ( 1,000   x 6/10.52 x 150%= 885 shares)

 

In   the event a participant has an employment agreement with the Company or any   of its subsidiaries providing for “good reason” termination, a termination of   the participant’s employment for good reason will be treated in the same   manner for purposes of this Program only as a termination by the Company   without cause.
    

 

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Reason for
   Employment
   Termination
    	
 
    	
Impact on Vesting of Performance Share Units
    
	
Death   or Total and Permanent Disability
    	
 
    	
If   death or permanent disability occurs in the first or second calendar years of   the Performance Cycle, the Performance Share Units will become immediately   vested at the target award level and the vested Performance Share Units will   pay out as soon as administratively feasible following such death or   disability. If death or permanent disability occurs in the third calendar   year of the Performance Cycle, the Performance Share Units will become vested   at the greater of (i) the target award level or (ii) the number of   units earned based on the actual achievement of the cumulative earnings per   share for the entire Performance Cycle, and the vested Performance Share   Units will pay out in accordance with rule 4 above.
    
	
 
    	
 
    	
 
    
	
Voluntary   Resignation
    	
 
    	
Performance   Share Units will be forfeited in their entirety.
    
	
 
    	
 
    	
 
    
	
Termination   by Company for Cause
    	
 
    	
Performance   Share Units will be forfeited in their entirety
    
	
 
    	
 
    	
 
    
	
Termination   due to Change in Control
    	
 
    	
If   a successor to the Company assumes and continues this Program substantially   in its current form after a Change in Control, the Performance Share Units   will be subject to the following rules: (1) if the participant’s   employment is terminated by the Company without Cause after the Change in   Control but prior to the end of the Performance Cycle, the participant will   become immediately vested in the greater of the target Performance Share   Units or the number of units that would be earned based on the proportion of   achievement of the target cumulative earnings per share as of the last full   calendar quarter preceding the participant’s termination date, and the vested   Performance Share Units will pay out in accordance with rule 4 above;   and (2) if the participant’s employment is terminated by the Company for   Cause, by the participant in a voluntary resignation, or by reason of the   participant’s death or Total and Permanent Disability, or if the   participant’s employment is continued through the end of the Performance   Cycle, the rules of the Program shall continue to apply to the   Performance Share Units as if the Change in Control had not occurred.

 

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

 

10.                                 Notwithstanding the rules set forth in paragraph 9 above, in the event an employment agreement or other binding arrangement between a participant and the Company provides (a) for more favorable vesting of performance share units upon termination of employment, (b) an alternate definition (such as “cause” or “retirement”), and/or (c) an alternate restrictive covenant that is specifically intended to apply to awards under this Plan, the provisions of such employment agreement or arrangement will

 

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control if such provisions are approved by the Committee on or before the Grant Date.

 

11.                                 The time and form of payment of Performance Share Units shall be made in accordance with rule 4 above, provided that with respect to any payment upon the participant’s “separation from service” (as such term is defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), the payment at such time can be characterized as a “short-term deferral” for purposes of Code Section 409A or as otherwise exempt from the provisions of Code Section 409A, or if any portion of the payment cannot be so characterized, and the participant is a “specified employee” under Code Section 409A, such portion of the payment shall be delayed until the earlier to occur of the participant’s death or the date that is six months and one day following the participant’s termination of employment (the “Delay Period”).  Upon the expiration of the Delay Period, all payments delayed pursuant to this section shall be paid to the participant in accordance with rule 4 above.  For purposes of the Program, the terms “retirement,” “termination of employment,” “terminated,” “termination,” and variations thereof, as used in this Program, are intended to mean a termination of employment that constitutes a “separation from service” under Code Section 409A.

 

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

 

Performance Measure for Performance Share Units

 

The performance measure for the Performance Share Units will be cumulative adjusted Earnings per Share for the Performance Cycle, for which the Committee has established a target of $13.01.

 

Following the end of the Performance Cycle, the Committee will determine in its sole discretion the payout, which determination shall be final and binding.  Performance Share Units will be subject to complete forfeiture if the Company’s performance for the Performance Cycle does not meet or exceed a minimum cumulative adjusted Earnings per Share of $12.49, and the payout for performance at or above that level will be calculated as follows:

 

	
2012-2014 Cumulative Adjusted EPS
    	
 
    	
% of Targeted Units Earned
    	
 
    
	
$12.49
    	
 
    	
50
    	
%
    
	
$12.75
    	
 
    	
75
    	
%
    
	
$13.01
    	
 
    	
100
    	
%
    
	
$13.27
    	
 
    	
125
    	
%
    
	
$13.53
    	
 
    	
150
    	
%
    
	
$13.79
    	
 
    	
175
    	
%
    
	
$14.19 or higher
    	
 
    	
200
    	
%
    

 

The Performance Share Units will pay out linearly between each set of data points based on relative penetration within the range.  The number of Performance Share Units settled and paid will be rounded.  For example, where cumulative EPS is $13.20, the calculation would be:

 

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[ ($13.20 - $13.01 )
    	
/
    	
( $13.01— $13.27 ) ]
    	
 
    	
 X   25%
    	
 
    	
+ 100%
    	
 
    	
= 118%
    
	
The actual cumulative EPS less next lowest defined data point 
    	
 
    	
To calculate basis for penetration in the full range above the actual   lowest data point achieved.
    	
 
    	
Multiplied by the full spread of the corresponding range (125% - 100%   in this case)
    	
 
    	
The achievement for the next lowest defined data point
    	
 
    	
Resulting calculation with decimal places truncated (not rounded)
    

 

Adjustments to Performance Measures or Results

 

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

 

Nominal Value and Adjustments to Shares

 

On January 13, 2012, the Company announced that its corporate headquarters will move to London, in the United Kingdom, and its place of incorporation will move from Delaware (US) to the United Kingdom.  As a result of this transaction, which is subject to the approval of the Company’s stockholders on March 15, 2012, the Company’s stockholders will receive one Class A Ordinary Share of the new U.K. holding company in exchange for each share of common stock of Aon Corporation, the Delaware corporation.  Awards under this Program are subject to adjustment as set forth in Section 5.2 of the Stock Plan on account of the corporate change, and certain terms (such as the identity of the shares in which the Awards under this Program will settle) will be adjusted accordingly if the stockholders approve the transaction.  Further, if the transaction is approved by the Company’s stockholders, at the time of settlement of Awards under this Program, such Awards may be subject to the Participant’s payment of a Nominal Value (as determined in the sole discretion of the Company and in accordance with the U.K. Companies Act 2006, as amended from time to time), and such obligation may be satisfied by the Participant in any manner to be established by the Company in its sole discretion.

 

Restrictive Covenants

 

The following restrictive covenants will apply to all awards under this Program; provided, however, that if such restrictions are modified to comply with local (non-U.S.) law and are set forth in the performance award certificate issued in connection with this Program to, and accepted by, the Participant, the provisions in the performance award certificate will govern.

 

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The Company is in the business of providing insurance brokerage, reinsurance brokerage, benefits consulting, compensation consulting, human resources consulting, managing underwriting and related services including accounting, claims management and handling, contract wording, information systems and actuarial services.  An essential element of its business is the development and maintenance of personal contacts and relationships with clients.  Because of these contacts and relationships, it is common for the Company’s clients to develop identification with the employee who services its insurance needs, rather than with the Company itself.  The personal identification of clients of the Company with a Company employee creates potential for the employee’s appropriation of the benefits of the relationships developed with clients on behalf of and at the expense of the Company.  Since the Company would suffer irreparable harm if the employee left its employ and solicited the insurance or other related business of clients of the Company, it is reasonable to protect the Company against solicitation activities by the employee for a limited period of time after the employee leaves the Company so that the Company may renew or restore its business relationship with its clients.  Therefore, as consideration for participation in this Program, each participant will be bound by the following restrictive covenants:

 

Covenant Not to Solicit

 

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

 

Covenant Not to Hire

 

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

 

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

 

Assignment of IP

 

The employee also agrees to assign to the Company the employee’s entire right, title and interest in and to all discoveries and improvements, patentable or otherwise, trade secrets and ideas and writings and copyrightable material, which are conceived, developed, reduced to practice, or acquired by the employee (collectively “IP”) during the employee’s employment and which relate to the business of the Company or any of its affiliates, parent companies, or subsidiaries.  The employee further acknowledges that all original works of authorship which are made by the employee (solely or jointly with others) within the scope of and during the period of his/her employment with the Company and which are protectable by copyright are “works made for

 

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hire”, as that term is defined in the United States Copyright Act.  The employee agrees to disclose promptly, fully and in writing all such IP to the Company. The employee will 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.

 

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.

 

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

 

CEO:  the Company’s Chief Executive Officer.

 

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

 

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

 

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(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.

 

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

 

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

 

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

 

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

 

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

 

Program or LPP:  the Leadership Performance Program, effective January 1, 2012.

 

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

 

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

 

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

 

Stock Plan:  the Aon Corporation 2011 Incentive Plan, as approved by the Company’s stockholders at the 2011 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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