8-KLeadership ChangesExhibits & Filings

Aon plc 8-K Report, Executive Changes (Dec 13, 2010)

Filed December 13, 2010For Securities:AON

Summary

This 8-K filing by Aon Corporation on December 13, 2010, details significant changes to the employment agreement of Stephen P. McGill, Chairman and CEO of Aon Risk Solutions. The most notable aspect is Mr. McGill's permanent relocation to the United States, transitioning from an expatriate role. This move entails a new, five-year employment agreement commencing November 18, 2010, with a base salary of $1,100,000 and an increased target bonus potential of 175% of base salary. Further investor-focused information includes a substantial additional long-term incentive award valued at $6 million under the Leadership Performance Program, reflecting confidence in his continued commitment and performance. A one-time transfer payment of $2.5 million is also provided to offset the elimination of expatriate benefits and relocation costs. Additionally, the terms surrounding noncompetition, termination severance, and change-in-control provisions have been updated, generally strengthening Aon's position by reducing certain financial protections for Mr. McGill in specific scenarios, such as excise tax gross-ups and capping change-in-control payments.

Key Highlights

  • 1Stephen P. McGill, Chairman and CEO of Aon Risk Solutions, has permanently relocated to the United States and entered into a new 5-year employment agreement.
  • 2Base salary increased to $1,100,000 annually, with a target bonus potential rising from 150% to 175% of base salary.
  • 3Mr. McGill will receive an additional long-term incentive award of $6 million under the Leadership Performance Program, for the performance period January 1, 2011, to December 31, 2013.
  • 4A one-time transfer payment of $2.5 million is being provided to Mr. McGill to account for the elimination of expatriate benefits and relocation expenses.
  • 5The noncompetition and nonsolicitation periods have been extended from one year to two years following employment termination.
  • 6Severance and change-in-control agreements have been modified, notably eliminating Aon's obligation for excise tax gross-up payments and capping certain change-in-control benefits.

Frequently Asked Questions

The primary driver is Mr. McGill's permanent relocation from an expatriate status to directly becoming an employee of Aon Corporation in the United States, effective November 18, 2010. This transition necessitates a new employment agreement that supersedes his prior arrangement.

His annual base salary is set at $1,100,000, and his target bonus potential has increased to 175% of his base salary. Additionally, he will receive a significant $6 million award under the Long-Term Incentive Compensation plan (Leadership Performance Program) for a future performance period.

Yes, Aon is providing Mr. McGill with a one-time transfer payment of $2.5 million. This payment is intended to compensate him for the elimination of expatriate benefits (like housing allowance), forfeiture of certain UK benefits (car allowance, pension contributions), and to cover relocation costs associated with his permanent move to the U.S.

The new Change in Control Agreement significantly reduces Aon's financial exposure. Key changes include the complete elimination of Aon's obligation to provide gross-up payments for excise taxes imposed by the IRS, and a cap on total payments and benefits to the greater of the 'safe harbor' amount under Code Section 280G or an amount that outweighs the tax consequences to Mr. McGill.