UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): September 13, 2010

 
Aon Corporation
(Exact Name of Registrant as Specified in Charter)

Delaware	 	1-7933	 	36-3051915	
(State or Other Jurisdiction
of Incorporation)	 	(Commission File Number)	 	(IRS Employer
Identification No.)	

200 East Randolph Street, Chicago, Illinois
 (Address of Principal Executive Offices)	 	60601
 (Zip Code)	
 
Registrant’s telephone number, including area code: (312) 381-1000
 
Not Applicable
 (Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
x           Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
Item 8.01.              Other Events.
 
As previously disclosed, on July 11, 2010, Aon Corporation, a Delaware corporation (“Aon”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Hewitt Associates, Inc., a Delaware corporation (“Hewitt”), Alps Merger Corp., a Delaware corporation and wholly owned subsidiary of Aon, and Alps Merger LLC, a Delaware limited liability company and wholly owned subsidiary of Aon (the “Merger”).
 
In connection with the Merger, Aon and Russell P. Fradin, Hewitt’s current Chief Executive Officer, have agreed to the key financial terms of an employment agreement to be entered into that, when completed, will be contingent and will only become effective upon consummation of the Merger (the “Closing”).  The principal financial terms of the employment agreement are set forth in a Summary of Key Financial Terms of Employment by and between Aon and Mr. Fradin, dated September 13,  2010 (the “Term Sheet”).  Mr. Fradin will serve as Chairman and Chief Executive Officer of Aon Hewitt LLC reporting to Greg Case, Chief Executive Officer of Aon.  The term of the employment agreement will be for five years from closing of the Merger.  Mr. Fradin’s annual base salary will be $1,000,000 and his target bonus amount will equal 150% of base salary (with a maximum of 450%), which 150% will be the guaranteed minimum for the period beginning at Closing and ending December 31, 2011.  Mr. Fradin will also be awarded (1)  upon the Closing, approximately $2,000,000 in Aon restricted stock units, which will vest over five years, (2) in March 2011, approximately $2,000,000 in performance shares under the Aon Leadership Performance Program, which will vest in March 2014, at an amount between 0-200% based on Aon performance from 2011 through 2013, and (3) in March 2011, approximately $2,000,000 in performance shares under a separate performance plan for Aon Hewitt to be established after the Closing.  Mr. Fradin will also be eligible for benefits customarily available to Aon’s U.S.-based executives.  The Term Sheet also contemplates reaching agreement on restrictive covenants and termination severance provisions.
 
Mr. Fradin has agreed to convert approximately $5,000,000 otherwise payable to him upon his departure from Hewitt (or its successor) in a change-in-control transaction pursuant to Hewitt’s Amended and Restated Change-in-Control Executive Severance Plan into Aon restricted stock units, all of which will be distributed upon Mr. Fradin’s termination of employment with Aon.  In addition, Mr. Fradin has agreed to retain at least until the end of 2011 (or earlier termination of employment) shares of Aon common stock or securities exercisable for Aon common stock with an aggregate value (using Black-Scholes methodology with regard to valuing stock options) of approximately $5,000,000, which include approximately 230,000 options to purchase Hewitt common stock that at Closing will automatically vest and become exercisable for Aon common stock and restricted shares of Hewitt common stock valued at approximately $500,000 that will vest at Closing, and future equity grants (net of any taxes and exercise prices that are paid) until departure from Aon.
 
The foregoing summary of the Term Sheet is qualified in its entirety by the terms and conditions of the Term Sheet, which is filed as Exhibit 99.1 to this report and is incorporated in this report by reference.
 
2 

 
On September 13, 2010, Aon issued a press release regarding its agreement with Mr. Fradin.  A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated in this report by reference.
 
Item 9.01.                                           Financial Statements and Exhibits.

(a)-(c)	Not applicable.	
 	 	
(d)	Exhibits:	

99.1	Summary of Key Financial Arrangements between Aon Corporation and Russell P. Fradin, dated September 13, 2010	
 	 	
99.2	Press release dated September 13, 2010	
 
Safe Harbor Statement
 
This communication contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: the possibility that the expected efficiencies and cost savings from the proposed transaction will not be realized, or will not be realized within the expected time period; the ability to obtain governmental approvals of the merger on the proposed terms and schedule contemplated by the parties; the failure of stockholders of Hewitt to approve the proposal to adopt the merger agreement; the failure of the stockholders of Aon to approve the proposal to approve the issuance of shares of Aon common stock to Hewitt stockholders in the merger; the loss of key Aon or Hewitt employees following the merger; the risk that the Aon and Hewitt businesses will not be integrated successfully; disruption from the proposed transaction making it more difficult to maintain business and operational relationships with customers, partners and others; the possibility that the proposed transaction does not close, including, but not limited to, due to the failure to satisfy the closing conditions; general economic conditions in different countries in which Aon and Hewitt do business around the world; changes in global equity and fixed income markets that could affect the return on invested assets; fluctuations in exchange and interest rates that could impact revenue and expense; rating agency actions that could affect Aon’s ability to borrow funds; changes in the funding status of Aon’s various defined benefit pension plans and the impact of any increased pension funding resulting from those changes; Aon’s ability to implement restructuring initiatives and other initiatives intended to yield cost savings, and the ability to achieve those cost savings; the impact on risk and insurance services commission revenues of changes in the availability of, and the premium insurance carriers charge for, insurance and reinsurance products, including the impact on premium rates and market capacity attributable to catastrophic events; the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws; the
 
3 

 
impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries; the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions and ERISA class actions; the cost of resolution of other contingent liabilities and loss contingencies, including potential liabilities arising from error and omissions claims against Aon or Hewitt; the extent to which Aon and Hewitt retain existing clients and attract new businesses; the extent to which Aon and Hewitt manage certain risks created in connection with the various services, including fiduciary and advisory services, among others, that Aon and Hewitt currently provide, or will provide in the future, to clients; the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which Aon and Hewitt operate, particularly given the global scope of Aon’s and Hewitt’s businesses and the possibility of conflicting regulatory requirements across jurisdictions in which Aon and Hewitt do business; and the ability to realize the anticipated benefits to Aon of the Benfield merger.  Further information concerning Aon, Hewitt, and their business, including factors that potentially could materially affect Aon’s and Hewitt’s financial results, is contained in Aon’s and Hewitt’s filings with the Securities and Exchange Commission (the “SEC”).  See Aon’s and Hewitt’s Annual Reports on Form 10-K and Annual Reports to Stockholders for the fiscal years ended December 31, 2009 and September 30, 2009, respectively, and other public filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our businesses. Neither Aon nor Hewitt undertakes, and each of them expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.
 
Additional Information
 
This communication does not constitute an offer to sell or the solicitation of an offer to buy our securities or the solicitation of any vote or approval.  This communication is being made in respect of the proposed transaction involving Aon and Hewitt.  In connection with the proposed merger, Aon filed with the SEC a definitive joint proxy statement, which also constitutes a prospectus of Aon.  The joint proxy statement/prospectus was mailed to Aon stockholders and Hewitt stockholders on or about August 19, 2010. Before making any voting or investment decision, investors and stockholders are urged to read carefully in their entirety the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed by either Aon or Hewitt with the SEC when they become available because they contain and will contain important information about the proposed transaction.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website ( www.sec.gov ), by accessing Aon’s website at www.aon.com under the heading “Investor Relations” and then under the link “SEC Filings” and from Aon by directing a request to Aon at Aon Corporation, 200 E. Randolph Street, Chicago, Illinois 60601, Attention: Investor Relations, and by accessing Hewitt’s website at www.hewitt.com under the heading “Investor Relations” and then under the link “Reports & SEC Filings” and from Hewitt by directing a request to Hewitt at Hewitt Associates, Inc., 100 Half Day Road, Lincolnshire, Illinois 60069, Attention: Investor Relations.
 
Aon and Hewitt and their respective directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of
 
4 

 
proxies in respect of the proposed transaction. You can find information about Aon’s directors and executive officers in its definitive proxy statement filed with the SEC on April 7, 2010. You can find information about Hewitt’s directors and executive officers in its definitive proxy statement filed with the SEC on December 16, 2009. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the definitive joint proxy statement/prospectus filed by Aon with the SEC and will be contained in other relevant materials to be filed by Aon or Hewitt with the SEC when they become available. You can obtain free copies of these documents from Aon and Hewitt using the contact information above.
 
5 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	Aon CORPORATION	
 	 	 	
 	By:	/s/ Jennifer L. Kraft	
 	 	Jennifer L. Kraft	
 	 	Vice President and Secretary	
 	 	 	
 Date: September 13, 2010	 	 	
 
6 

 
EXHIBIT INDEX

99.1	Summary of Terms of Employment by and between Aon Corporation and Russell P. Fradin, dated September 13, 2010	
 	 	
99.2	Press release dated September 13, 2010	
 
7 

Exhibit 99.1
 
Russ Fradin: Key Financial Arrangements
 
Position:    Chairman & CEO, Aon Hewitt
Executive Committee Member
Section 16 Officer
 
Contract length: 5 years (subject to earlier termination provisions); Tier 1 Change in Control Agreement, without excise tax gross-up but inclusive of “best of” provision
 
Base:      $1,000,000
 
Annual Incentive: Executive Incentive Plan with target 150% Base Salary. Range to 450%. Incentives currently paid 65% in cash and 35% in restricted stock (RSUs) over 3 years. Dividend equivalents paid on RSU portion. Guaranteed minimum incentive of $1,500,000 for 2011 only (covers15 month period to bridge Hewitt 9/30 year end)
 
Stock: Total target award of $6 million. Proposed components as follows:
 
·    $2.0 million time vested RSUs awarded on closing
Stock vests over 5 years (0%,25%,25%,25%,25%). Continued vesting if retires, terminates without Cause or terminates for Good Reason after three years. Pro rata vesting prior to three years.
 
·    $2.0 million Aon-wide Performance Plan award (LPP) in March 2011.
The LPP award is granted 100% in Performance shares. Actual Performance share vesting is 0% to 200% of the initial value based on results. The Performance Shares vest in March 2014 based on cumulative EPS of Aon Corporation 2011-2013.  Pro rata vesting for retirement at or after age 55.
 
·    $2.0 million Aon Hewitt Performance Plan award (AHPP) in March 2011.
The AHPP would be base on the performance of Aon Hewitt through integration and the first 3 years of performance (2011-2013). Specific conditions to be agreed but will be similar to the LPP plan above, including pro rata vesting for retirement at or after age 55.
 
Benefits: Standard US benefits including DC pension plan, vacation, medical, dental, life insurance, executive benefits for health screening and financial planning.
 
Transition Stock: $5.0 million
Represents approximate Hewitt Change in Control departure payment otherwise payable upon departure from Hewitt (or successor) pursuant to Hewitt’s Amended and Restated Change-in-Control Executive Severance Plan.  Granted in fully vested RSUs that will be distributed only upon departure from Aon. Will be awarded as of Close.  In addition, he will hold stock options for approximately 230,000 shares that vest on Closing and approximately $500,000 of restricted stock that similarly vests until the end of 2011 or earlier termination and future equity grants (net of any taxes and exercise prices that are paid) until departure from Aon.
 
Future Long Term Awards :  Discretionary and subject to applicable plans agreed from time to time.

 
Other:  Restrictive covenants and termination contractual provisions to be agreed.

Exhibit 99.2
 
News from Aon
 
Aon and Russell P. Fradin Agree on Key Financial Terms of Five-Year Employment Agreement
 
·                   Fradin makes commitment to retain Aon stock
·                   Senior leadership of Aon Hewitt is announced
 
CHICAGO, IL — September 13, 2010 - Aon Corporation (NYSE: AON) today announced that in connection with the proposed merger of Hewitt Associates with Aon Corporation, Aon and Russell P. Fradin, Hewitt’s current Chief Executive Officer, have agreed on the key financial terms of a five-year employment agreement that, when completed, will be contingent and will become effective upon consummation of the merger.  Selected highlights of the key financial terms include:
 
·                   Mr. Fradin will serve as Chairman and Chief Executive Officer of Aon Hewitt reporting to Greg Case, President and Chief Executive Officer of Aon;
·                   The term of the employment agreement will be for five years from closing of the merger;
·                   Mr. Fradin has agreed to take a substantial portion of his change in control compensation in Aon restricted stock units that will be distributed only when he ceases to be employed by Aon;
·                   Mr. Fradin has also agreed to retain all future granted equity compensation awards (net of any amounts necessary to pay taxes and exercise prices) until he ceases to be employed by Aon.
 
Fradin commented “it is a privilege for me to join the executive team at Aon and I am extremely excited to lead Aon Hewitt.  We have already made significant progress as integration planning is well underway and my senior leadership team is fully in place.”
 
The following leaders will join the Aon Hewitt leadership team:
 
·                   Baljit Dail will become CEO of the Consulting business.  He is currently the CEO of Aon Consulting and COO of Aon Benfield;
·                   Kristi Savacool will become CEO of the Benefits Administration business. She is currently Senior VP of Large Market Benefits Outsourcing for Hewitt;
·                   Jim Konieczny will become CEO of the HR Business Process Outsourcing (BPO) business.  He is currently President of HR BPO for Hewitt;
·                   Greg Besio is leading the overall Aon Hewitt integration.  He is currently Aon’s Chief Administrative Officer;
·                   Scott Ordway will become the CFO of Aon Hewitt.  He is currently VP of Finance and Operations for Aon;
·                   David Baruch will become the CIO of Aon Hewitt.  He is currently the CIO of Hewitt;
·                   Neela Seenandan will become Global Head of HR for Aon Hewitt.  She is currently Global Head of HR for Aon Benfield;
·                   Mark Sproat will become Chief Counsel-Aon Hewitt.  He is currently the Associate General Counsel for Hewitt Outsourcing.

 
“We are thrilled that Aon over the long-term will benefit from Russ’s strong leadership,” commented Case.  “I look forward to working with Russ and his senior leadership team as Aon Hewitt strengthens its position as a global leader in human capital solutions.”
 
About Aon
 
Aon Corporation (NYSE: AON) is a leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 36,000 colleagues worldwide, Aon delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon’s industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world’s best broker by Euromoney magazine’s 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance’s listing of the world’s largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007, 2008 and 2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon’s global partnership and shirt sponsorship with Manchester United.
 
Safe Harbor Statement
 
This communication contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: the possibility that the expected efficiencies and cost savings from the proposed transaction will not be realized, or will not be realized within the expected time period; the ability to obtain governmental approvals of the merger on the proposed terms and schedule contemplated by the parties; the failure of stockholders of Hewitt to approve the proposal to adopt the merger agreement; the failure of the stockholders of Aon to approve the proposal to approve the issuance of shares of Aon common stock to Hewitt stockholders in the merger; the loss of key Aon or Hewitt employees following the merger; the risk that the Aon and Hewitt businesses will not be integrated successfully; disruption from the proposed transaction making it more difficult to maintain business and operational relationships with customers, partners and others; the possibility that the proposed transaction does not close, including, but not limited to, due to the failure to satisfy the closing conditions; general economic conditions in different countries in which Aon and Hewitt do business around the world; changes in global equity and fixed income markets that could affect the return on invested assets; fluctuations in exchange and interest rates that could impact revenue and expense; rating agency actions that could affect Aon’s ability to borrow funds; changes in the funding status of Aon’s various defined benefit pension plans and the impact of any increased pension funding resulting from those changes; Aon’s ability to implement restructuring initiatives and other initiatives intended to yield cost savings, and the ability to achieve those cost savings; the impact on risk and insurance services commission revenues of changes in the availability of, and the premium insurance carriers charge for, insurance and reinsurance products, including the impact on premium rates and market capacity attributable to catastrophic events; the outcome of inquiries from regulators and investigations related to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws; the impact of investigations brought by U.S. state attorneys general, U.S. state insurance regulators, U.S. federal

 
prosecutors, U.S. federal regulators, and regulatory authorities in the U.K. and other countries; the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions and ERISA class actions; the cost of resolution of other contingent liabilities and loss contingencies, including potential liabilities arising from error and omissions claims against Aon or Hewitt; the extent to which Aon and Hewitt retain existing clients and attract new businesses; the extent to which Aon and Hewitt manage certain risks created in connection with the various services, including fiduciary and advisory services, among others, that Aon and Hewitt currently provide, or will provide in the future, to clients; the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which Aon and Hewitt operate, particularly given the global scope of Aon’s and Hewitt’s businesses and the possibility of conflicting regulatory requirements across jurisdictions in which Aon and Hewitt do business; and the ability to realize the anticipated benefits to Aon of the Benfield merger. Further information concerning Aon, Hewitt, and their business, including factors that potentially could materially affect Aon’s and Hewitt’s financial results, is contained in Aon’s and Hewitt’s filings with the Securities and Exchange Commission (the “SEC”). See Aon’s and Hewitt’s Annual Reports on Form 10-K and Annual Reports to Stockholders for the fiscal years ended December 31, 2009 and September 30, 2009, respectively, and other public filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our businesses. Neither Aon nor Hewitt undertakes, and each of them expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in their respective expectations, except as required by law.
 
Additional Information
 
This communication does not constitute an offer to sell or the solicitation of an offer to buy our securities or the solicitation of any vote or approval.  This communication is being made in respect of the proposed transaction involving Aon and Hewitt.  In connection with the proposed merger, Aon filed with the SEC a definitive joint proxy statement, which also constitutes a prospectus of Aon.  The joint proxy statement/prospectus was mailed to Aon stockholders and Hewitt stockholders on or about August 19, 2010. Before making any voting or investment decision, investors and stockholders are urged to read carefully in their entirety the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed by either Aon or Hewitt with the SEC when they become available because they contain and will contain important information about the proposed transaction.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website ( www.sec.gov ), by accessing Aon’s website at www.aon.com under the heading “Investor Relations” and then under the link “SEC Filings” and from Aon by directing a request to Aon at Aon Corporation, 200 E. Randolph Street, Chicago, Illinois 60601, Attention: Investor Relations, and by accessing Hewitt’s website at www.hewitt.com under the heading “Investor Relations” and then under the link “Reports & SEC Filings” and from Hewitt by directing a request to Hewitt at Hewitt Associates, Inc., 100 Half Day Road, Lincolnshire, Illinois 60069, Attention: Investor Relations.
 
Aon and Hewitt and their respective directors and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. You can find information about Aon’s directors and executive officers in its definitive proxy statement filed with the SEC on April 7, 2010. You can find information about Hewitt’s directors and executive officers in its definitive proxy statement filed with the SEC on December 16, 2009. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the definitive joint proxy statement/prospectus filed by Aon with the SEC and will be contained in other relevant materials to be filed by Aon or Hewitt with the SEC when they become available. You can obtain free copies of these documents from Aon and Hewitt using the contact information above.
 
#

Investor Contact:	 	Media Contact:	
Scott Malchow	 	David Prosperi	
Vice President, Investor Relations	 	Vice President, Global Public Relations	
312-381-3983	 	312-381-2485