8-KMaterial AgreementsExhibits & Filings

Aon plc 8-K Report, Material Agreement (May 24, 2006)

Filed May 24, 2006For Securities:AON

Summary

This Form 8-K filing by Aon Corporation on May 24, 2006, details significant executive compensation adjustments and amendments to stock incentive plans, approved by the Board of Directors and stockholders. The primary focus is on long-term and annual incentive awards granted to key executives, Michael D. O’Halleran and Andrew M. Appel, tied to specific performance metrics for their respective business segments (Global Reinsurance and Global Consulting). Furthermore, the filing announces stockholder approval of amendments to the Senior Officer Incentive Compensation Plan, significantly increasing the maximum annual payout to executives from $3 million to $5 million. Concurrently, amendments to the Stock Incentive Plan were approved, raising the maximum annual share grant to an individual from 675,000 to 1,500,000 shares. These changes reflect adjustments in Aon's executive compensation strategy and its approach to equity-based incentives.

Key Highlights

  • 1Performance-based long-term incentive award of 83,964 performance share units granted to Senior Executive Vice President Michael D. O’Halleran, valued at $3 million, tied to Global Reinsurance Segment pre-tax net income targets through December 31, 2008.
  • 2Amendment to Michael D. O’Halleran's employment agreement extends his employment to January 1, 2013, sets his base salary at $1,000,000 annually, and provides for an annual discretionary bonus up to 200% of base salary, with the agreement to cease receiving additional contractual award grants from 2007.
  • 3Performance-based annual incentive award of 27,988 performance share units granted to Aon Consulting Worldwide CEO Andrew M. Appel, valued at $1 million, tied to Global Consulting Segment pre-tax net income targets for the 2006 calendar year.
  • 4Stockholders approved an amendment to the Senior Officer Incentive Compensation Plan, increasing the maximum annual payout to any executive officer to $5 million, up from the previous cap of $3 million or 180% of base salary.
  • 5Stockholders also approved an amendment to the Stock Incentive Plan, raising the maximum number of shares issuable per individual in any calendar year from 675,000 to 1,500,000 shares.
  • 6The Organization & Compensation Committee retains discretion to adjust performance results for extraordinary or unusual items.

Frequently Asked Questions

The filing highlights new performance-based incentive awards for Michael D. O’Halleran and Andrew M. Appel, tied to specific segment performance targets. It also details amendments to Mr. O'Halleran's employment agreement, extending his tenure and adjusting salary and bonus potential. Additionally, significant increases were made to the overall limits of the Senior Officer Incentive Compensation Plan and the Stock Incentive Plan, affecting potential payouts and equity grants to executives.

The incentive awards for both Mr. O’Halleran and Mr. Appel are performance-based, tied to achieving specified pre-tax net income targets for their respective business segments: the Global Reinsurance Segment for Mr. O'Halleran and the Global Consulting Segment for Mr. Appel. The performance score can range from 0% to 150% of the target.

The company's Stock Incentive Plan has been amended to increase the maximum number of shares of common stock that can be awarded to an individual in any calendar year from 675,000 shares to 1,500,000 shares. This was approved by the stockholders at the 2006 Annual Meeting.

The amendment to the Senior Officer Incentive Compensation Plan increases the maximum amount payable in any calendar year to any executive officer to $5 million, a substantial increase from the previous limit of the lesser of $3 million or 180% of the executive's base salary. This change was also approved by the company's stockholders.