8-KLeadership ChangesExhibits & Filings

Aon plc 8-K Report, Executive Changes (Nov 17, 2009)

Filed November 17, 2009For Securities:AON

Summary

This 8-K filing by Aon Corporation (AON) reports on significant amendments to the employment agreement of its President and CEO, Gregory C. Case. The key takeaway for investors is the extension of Mr. Case's tenure by five years, running through April 2015. While his base salary remains unchanged, his potential bonus structure has been enhanced, with a higher target and maximum bonus percentage. Notably, a significant long-term incentive award valued at $10 million under the Leadership Performance Program has been granted, reflecting his performance and commitment to the extended term. Furthermore, the filing details modifications to the change in control agreement, which now reduces the financial protection for Mr. Case in such events by eliminating gross-up payments for excise taxes and capping payments to the IRS Section 280G safe harbor amount. These adjustments signal a shift in executive compensation and severance arrangements, emphasizing performance-based incentives and revised change-in-control protections.

Key Highlights

  • 1CEO Gregory C. Case's employment agreement extended by five years, to April 3, 2015.
  • 2Base salary of $1,500,000 remains unchanged.
  • 3Target bonus increased from 150% to 200% of base salary, with maximum bonus increased from 250% to 300% of base salary (subject to a $5 million cap).
  • 4CEO to receive an additional long-term incentive award valued at $10 million under the Leadership Performance Program (LPP) for the 2010-2012 performance period.
  • 5The requirement for an annual grant of $1.8 million in non-qualified stock options is removed.
  • 6Change in Control agreement modified to eliminate gross-up payments for excise taxes and cap payments to the Section 280G safe harbor amount.
  • 7Retiree medical program eligibility expanded for Mr. Case if employment terminates after age 50 for any reason other than cause.

Frequently Asked Questions

This 8-K filing primarily announces the amended and restated employment agreement for Aon's President and CEO, Gregory C. Case, extending his tenure and adjusting his compensation and incentive structure. It also details modifications to his change in control agreement.

The CEO's potential bonus structure has been enhanced. His target bonus has increased from 150% to 200% of his base salary, and his maximum bonus has increased from 250% to 300% of his base salary. However, these payments remain subject to the existing $5 million cap under the Company’s Senior Officer Incentive Compensation Plan.

The $10 million award under the Leadership Performance Program (LPP) is a substantial long-term incentive granted to the CEO, reflecting his performance and commitment to the extended employment term. This award is subject to the same performance criteria and weightings as those for other LPP recipients and covers the performance period from January 1, 2010, to December 31, 2012.

The change in control agreement has been significantly modified to reduce the financial protection for the CEO in such events. Specifically, the company's obligation to provide a 'gross-up' payment for excise taxes under Section 4999 of the Internal Revenue Code has been eliminated. Additionally, cash and non-equity award payments in a change in control scenario are now capped at the 'safe harbor' amount defined by Section 280G of the Code.